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. For employees found not full-time, no longer than the measurement period.
The three things to know.
Full-Time Result
At least six months, and at least as long as the measurement period.
Not Full-Time Result
No longer than the measurement period.
Why Both Rules
They prevent a design that keeps people in a status for longer than the data justifies.
Sources: 26 CFR § 54.4980H-3. General information, not legal advice.
A worked example.
A Six-Month and a Twelve-Month Pair
An employer uses a six-month window ending April 30 with a stability period from July 1 to December 31, and a second six-month window ending October 31 with a stability period from January 1 to June 30.
What the Rule Produces
Each stability period is six months, the minimum for a full-time result, and no shorter than its window. The calendar covers the year with no gaps.
Four steps to apply it.
1. Set the window length
Three to twelve months.
2. Set the stability period
At least six months for full-time.
3. Check the part-time rule
No longer than the window.
4. Test the calendar
Look for gaps.
Where it goes wrong. Making the stability period shorter than the window for full-time results.
The questions that come up next.
What if the plan year differs?
Aim for alignment, but legality turns on the length rules.
Can it be two years?
The rules set minimums for full-time results and a maximum for part-time results. Check the full-time rule for upper limits with counsel.
Does it include the administrative period?
They are separate periods. Do not shorten the stability period to fit the administrative period.
Can the stability period be one month?
Not for a full-time result. The minimum is six months.
What happens after it ends?
A new status from the next window takes over.
Plan-specific questions belong with ERISA counsel, and we will bring them in.
Related pages on the look-back method.
What happens if hours change during the stability period?
The short answer: nothing, for penalty purposes.
Does the look-back method decide whether we are a large employer?
The short answer: no.
The Full Look-Back Guide
Every rule, example and source behind this page, in one place.
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