Questions We Get

How long can the measurement period be?

The short answer: three to twelve months, with start and end dates you choose. The same range applies to the initial measurement period for new variable-hour, seasonal and part-time hires.

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Key Points

The three things to know.

Range

Between three and twelve months, inclusive.

Dates

Any dates you choose, as long as the period is uniform and consistently applied within a category.

Thresholds

For a 12-month window the average of 30 hours a week means 1,560 hours; for six months, 780; for three months, 390.

Sources: 26 CFR § 54.4980H-3. General information, not legal advice.

In Practice

A worked example.

Three Window Lengths

An employer compares a 3-month, 6-month and 12-month measurement period for an employee whose hours run 20 hours a week most of the year and 45 in a busy quarter.

What the Rule Produces

A 3-month window ending in the busy quarter shows 45 hours and full-time; a 6-month window shows about 33, also full-time; a 12-month window shows about 26, not full-time. The same employee gets three different answers.

What to Do

Four steps to apply it.

1. Test the lengths

Run real data.

2. Check the thresholds

390, 780 and 1,560 hours.

3. Weigh stability

Consider how long results hold.

4. Pick one

Document it.

Where it goes wrong. Choosing a short window that happens to end in a busy period.

In More Detail

The full answer.

The Allowed Range

A measurement period can be as short as three months and as long as twelve. The regulation sets both limits, and your choice applies to everyone in the category.

Hours Thresholds by Length

At 30 hours a week the thresholds are 390 hours for three months, 780 for six months and 1,560 for twelve. An employee at or above the threshold for the window is full-time for the stability period.

Standard and Initial Periods

The standard measurement period applies to ongoing employees. New variable-hour, seasonal and part-time hires have an initial measurement period in the same three to twelve month range, measured from their own start date.

Fitting the Calendar

The window should end early enough to leave room for the administrative period before the stability period starts. A calendar-year plan often uses a window ending in mid-October, and the same logic works for any plan year.

Questions We Get

The questions that come up next.

What is the most common length?

Twelve months, ending before open enrollment.

Can it be longer than a year?

No. Twelve months is the maximum.

Does the initial period need the same length?

No. It can differ from the standard period, within the same three to twelve month range.

What is the maximum?

Twelve months.

Is there a minimum?

Three months.

Do measurement periods have to start on the first of a month?

Standard periods are set by you. Initial periods may begin on the start date or the first day of the next calendar month.

Can we use different lengths for different groups?

Yes, for permitted categories, as long as each group uses one length consistently.

Is a longer window safer?

It smooths hours but locks results in for longer. Which is safer depends on your hours pattern and the cost of holding full-time results.

Plan-specific questions belong with ERISA counsel, and we will bring them in.

Keep Reading

Related pages on the look-back method.

How long must the stability period be?

The short answer: for employees found full-time, at least six consecutive calendar months and no shorter than the measurement period.

What happens if hours change during the stability period?

The short answer: nothing, for penalty purposes.

The Full Look-Back Guide

Every rule, example and source behind this page, in one place.

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