Records That Hold Up
Keep the hours report for each window, the status list, the notices and the offers, with dates. These are the file you would use to show the IRS the 95% offer test was met.
The three things to know.
The Core File
Hours-of-service data, the method and equivalency used, a status for each employee and month, and the dates of every offer and waiver.
Plan Document and Notices
Your plan document, summary plan description and the notices you sent, with dates, show that the design was real and communicated.
Keep It Where Auditors Can Find It
A single, dated location, with access for the people who prepare the forms, saves days during a letter response.
Sources: 26 U.S.C. § 4980H. General information, not legal advice.
A worked example.
An IRS Letter Two Years Later
An employer receives an IRS letter proposing a payment for a month two years ago, asserting that an employee was full-time and not offered coverage.
What the Rule Produces
Because the employer kept the hours report, the status list and the dated offer, it shows the employee averaged 27 hours a week over the measurement period and was not full-time. The letter is answered with the file.
Four steps to apply it.
1. Create the file
Set up one folder per period.
2. Store the data
Keep hours reports and status lists.
3. Keep notices
Retain offers and waivers.
4. Restrict access
Limit who can edit.
Where it goes wrong. Overwriting hours data when payroll systems change.
The questions that come up next.
How long should we keep records?
Keep them at least as long as the relevant statute of limitations runs. Ask your tax advisor for the period that fits your facts.
What if our payroll system changes?
Archive the old data and your method description before migrating.
Who is responsible?
The employer. Vendors can maintain records, but the plan sponsor is responsible for them.
How long do we keep it?
At least as long as the relevant limitation period. Ask your tax advisor.
Can a vendor keep it?
Yes, but you remain responsible for it.
Plan-specific questions belong with ERISA counsel, and we will bring them in.
Related pages on the look-back method.
Stability Shorter Than Measurement
For employees found full-time, the stability period must be at least as long as the measurement period and no shorter than six months.
Administrative Period Creep
The 90 days include every gap between a new hire’s start date and the first offer of coverage, other than the measurement period itself.
The Full Look-Back Guide
Every rule, example and source behind this page, in one place.
Talk it through with someone who runs this every year.
We help you choose the design, document it and reconcile the hours before the numbers reach your reporting.
An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.
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