Step 5: Audit Mid-Window
Check halfway through that hours are landing in the right employee records and that new hires are in the right measurement group.
The three things to know.
Spot-Check Hours
Compare a sample of employees’ hours across systems and fix mismatches while the window is open.
Check New Hires
Confirm each new hire has the right classification and a start date for their initial period.
Review Edge Cases
List employees close to 30 hours and those on leave, and confirm the treatment for each.
Sources: 26 CFR § 54.4980H-3. General information, not legal advice.
A worked example.
A Midyear Spot-Check
At the six-month mark HR compares 25 employees’ hours across payroll and the time clock and finds that a department’s overtime was coded to the wrong cost center, and missing from the benefits feed.
What the Rule Produces
The error would have understated nine employees’ averages. Fixing the coding while the window is still open means the final totals are right.
Four steps to apply it.
1. Sample employees
Pick a spread across groups.
2. Compare systems
Check hours in each.
3. Fix mismatches
Correct codes and records.
4. Re-check
Verify before the window closes.
Where it goes wrong. Waiting until the window closes before looking at the data.
The questions that come up next.
How often should we audit?
At least once mid-window and once at close.
Who runs the audit?
HR with payroll. A reporting vendor can help.
What do we fix?
Records, classifications and notices before the window closes.
How many employees should we check?
Enough to cover each group and each source system.
Who should run it?
HR with payroll.
Plan-specific questions belong with ERISA counsel, and we will bring them in.
Related pages on the look-back method.
Step 6: Close, Notify and Enroll
Total the hours, classify each employee, notify and enroll them inside the administrative period, and keep prior-period coverage running meanwhile.
Step 7: Test New Hires and File
Run the second test for variable-hour hires, then carry the status months forward into Forms 1094-C and 1095-C.
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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