Moving Between Methods
When an employee moves from a look-back position to a monthly-method position, an employee in a full-time stability period stays full-time through its end. Specific transition rules cover each direction.
The three things to know.
From Look-Back to Monthly
The employee in a full-time stability period stays full-time through that period. After it ends, the monthly method applies.
From Monthly to Look-Back
The look-back method starts on the employer’s calendar, with the employee’s status set by the first measurement period.
Plan the Transfer Date
The date of the move and the stability period in effect decide who is covered when. Record both.
Sources: 26 CFR § 54.4980H-3. General information, not legal advice.
A worked example.
Hourly to Salaried
An employee measured under a look-back design as an hourly worker is promoted into a salaried category measured monthly. His full-time stability period has five months left.
What the Rule Produces
He stays full-time through the end of that stability period. After it ends, the monthly method applies and his status follows each month’s hours.
Four steps to apply it.
1. Record the transfer date
Capture when the category changes.
2. Note the remaining period
Identify the stability period still in effect.
3. Keep the offer
Maintain coverage through its end.
4. Switch methods
Apply the new method afterward.
Where it goes wrong. Resetting the employee’s status at the transfer date and dropping coverage.
The questions that come up next.
Why would we move people between methods?
A change in role, category or employer design. For example, a salaried promotion from an hourly role.
Do the transition rules limit our design?
They set the limits for when and how an employee’s method may change. Designs that move people around to avoid full-time status are not respected.
Where do I see the detail?
The regulation sets out the rules step by step. Counsel should review any large transfer of employees between categories.
Can we move a whole group between methods?
Yes, with a documented design change and transition planning.
Does the monthly method have a stability period?
No. Status follows each month, apart from transition rules.
Plan-specific questions belong with ERISA counsel, and we will bring them in.
Related pages on the look-back method.
The Part-Time Shortcut
If you have continuously offered minimum value coverage and an employee moves to a position expected to average under 30 hours, you may move that employee to monthly measurement from the first day of the fourth full month.
A Returning Employee Who Declined
If a continuing employee comes back during a stability period after declining an offer for the whole period, you are still treated as having offered coverage.
The Full Look-Back Guide
Every rule, example and source behind this page, in one place.
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