Match Stability to the Plan Year
A stability period of 12 months that runs with the plan year keeps eligibility and the benefit calendar in step, and avoids offering coverage for part of a plan year.
The three things to know.
Why Alignment Helps
Employees found full-time are offered coverage for the whole plan year. Employees found not full-time are not offered it for that year. The enrollment calendar and the status calendar agree.
The Six-Month Floor
The shortest stability period for an employee found full-time is six consecutive calendar months, and it can never be shorter than the measurement period.
A Short Window Limits the Choice
A six-month stability period is only available with a measurement period of six months or less, because the stability period for full-time employees cannot be shorter than the measurement period.
Sources: 26 CFR § 54.4980H-3. General information, not legal advice.
A worked example.
A Calendar-Year Plan
An employer sets a 12-month measurement period ending October 14 and a stability period from January 1 to December 31.
What the Rule Produces
Full-time employees found in October are offered coverage for the whole plan year, and part-timers are not offered it for that year. Eligibility and the benefit calendar change on the same date, so mid-year eligibility changes are rare.
Four steps to apply it.
1. Match the dates
Make the stability period equal the plan year where you can.
2. Check the floor
Confirm full-time results hold for at least six months and no shorter than measurement.
3. Note the part-time limit
Part-time results cannot be held longer than the window.
4. Document it
Write the dates into the plan document.
Where it goes wrong. Using a six-month stability period with a 12-month measurement period, which does not satisfy the rules for full-time results.
The questions that come up next.
Can the stability period straddle two plan years?
Legally it can, but it complicates open enrollment and plan changes. Most employers avoid it.
What if we change plan year?
The measurement design should move with it. A mid-stream change needs transition planning, so involve counsel and your broker before the change.
Does the stability period include dependents?
The offer for a full-time employee must also reach dependent children, so the stability period governs the offer to employees and their dependents.
What if the plan year changes?
Move the measurement design with it and plan the transition with counsel.
Can a stability period be longer than 12 months?
Check the regulation and your design with counsel. Most employers use twelve months or less.
Plan-specific questions belong with ERISA counsel, and we will bring them in.
Related pages on the look-back method.
Different Rules for Different Groups
You can vary the measurement period, stability period and administrative period, or choose between the two methods, for certain categories of employees.
Write It Into the Plan
Your measurement, administrative and stability periods, and your rules for breaks in service, belong in the plan document and the summary plan description, applied uniformly within each category.
The Full Look-Back Guide
Every rule, example and source behind this page, in one place.
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