Close and Total the Hours
Pull hours for every employee in the window, apply your equivalency method consistently, and apply the special unpaid leave averaging rules where they apply.
The three things to know.
Pull the Data
Export hours of service for each employee for the full measurement period from your record system.
Apply Your Method
Use actual hours for hourly staff, and your chosen equivalency for non-hourly staff, applied the same way for everyone in the category.
Handle Leave
Exclude special unpaid leave weeks or credit them at the employee’s average, as your design says.
Sources: 26 CFR § 54.4980H-3. General information, not legal advice.
A worked example.
An Employer With a Mid-October Close
An employer’s 12-month window ended October 14 and HR now exports hours for 85 employees.
What the Rule Produces
Seven employees are within 50 hours of the 1,560-hour line, so HR reviews them one by one, checking paid leave and special unpaid leave before classifying anyone.
Four steps to apply it.
1. Export
Pull data for every employee.
2. Apply the method
Use actual hours or the equivalency.
3. Review edge cases
Check those near the line.
4. Sign off
HR and payroll approve.
Where it goes wrong. Skipping the review of employees near the line.
The questions that come up next.
What if hours are missing?
Fix them before totaling. Gaps can move employees across the line.
What is the threshold?
An average of 30 hours per week, which is 1,560 hours for 12 months.
Who signs off?
HR and payroll jointly.
What counts as near the line?
Anyone within a few weeks of 1,560 hours is worth a second look.
Who signs off?
HR and payroll jointly.
Plan-specific questions belong with ERISA counsel, and we will bring them in.
Related pages on the look-back method.
Notify and Offer
Tell employees found full-time that coverage is available for the stability period, and complete enrollment before January 1.
Test Anyone Still in an Initial Period
Hires from the last year may be partway through an initial measurement period and due their first standard test.
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.
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