Navigating ACA compliance is complex — especially when determining which employees qualify as full-time. The Look-Back Measurement Method (LBMM) is one of two IRS-approved methods employers can use to identify full-time employees under the Affordable Care Act (ACA). This method helps employers streamline administration, reduce the risk of penalties, and stay compliant with the employer mandate.
In this post, we explain how the Look-Back Measurement Method works and how to apply it across different employee types.
Purpose of the Look-Back Measurement Method (LBMM)
The Look-Back Measurement Method gives employers a consistent way to determine full-time status for employees with variable hours. Instead of reviewing hours on a monthly basis, this method uses a longer evaluation period, making eligibility decisions more predictable and manageable.
Why it matters for ACA compliance
To comply with the ACA, employers must identify and offer coverage to full-time employees—those working 30 or more hours per week. The LBMM provides a structured approach for making these determinations and helps avoid costly compliance errors.
Applicability for applicable large employers (ALEs)
Employers with 50 or more full-time and full-time equivalent employees are classified as Applicable Large Employers (ALEs). These organizations must offer health insurance to a certain portion of their workforce. The LBMM supports that obligation by providing a repeatable process for identifying eligible employees.
Overview of the ACA employer mandate
The ACA requires ALEs to offer affordable, minimum value health coverage to at least 95% of their full-time employees and their dependents. Employers must also maintain detailed records and submit IRS reports to confirm compliance. Failing to meet these requirements can trigger significant financial penalties.
What is the Look-Back Measurement Method?
The LBMM allows employers to track employee hours over a defined measurement period to determine full-time status. Once an employee qualifies as full-time, the employer must offer health coverage for a stability period—even if the employee’s hours later decrease.
When to use LBMM vs. the monthly measurement method
LBMM works best for employees with unpredictable schedules—such as part-time, seasonal, or on-call staff. For employees with regular hours, the Monthly Measurement Method may be a better fit, since it evaluates eligibility based on each calendar month’s actual hours worked.
Benefits of using the Look-Back Measurement Method
LBMM brings consistency to coverage decisions. Employers can rely on a clear framework rather than adjusting coverage month to month based on fluctuating hours.
This method also reduces the administrative burden of tracking eligibility in real time. Reviewing hours over a longer timeframe simplifies decision-making and reduces the need for frequent changes.
By applying a structured approach, employers reduce the risk of ACA penalties and improve the accuracy of their ACA reporting.
Key components of the Look-Back Measurement Method
Measurement period
This is the timeframe used to track employee hours. For new hires, the initial measurement period typically ranges from 3 to 12 months. For ongoing employees, employers use a fixed standard measurement period—often 12 months—year after year.
Administrative period
This short window (up to 90 days) follows the measurement period. Employers use this time to review hours worked, identify full-time employees, and process health coverage enrollment.
Stability period
Once an employee qualifies as full-time, they must receive coverage throughout the entire stability period—even if their hours later dip below full-time. This rule ensures consistent coverage for eligible employees and must match or exceed the length of the measurement period.
Applying the Look-Back Method across employee types
Ongoing employees
Employers must define a consistent measurement, administrative, and stability period for all ongoing employees within the same classification. If an employee qualifies as full-time, the employer must provide coverage for the full stability period—regardless of any change in hours.
New employees
For new full-time hires, coverage must begin by the first day of the fourth full calendar month of employment. For variable-hour, part-time, or seasonal new hires, employers use an initial measurement period to determine full-time status based on average hours worked.
Rehires and employees returning from leave
If an employee has a break in service lasting 13 weeks or more (26 weeks for educational institutions), the employer may treat them as a new hire and apply a new measurement period. If the break is shorter, the employee retains their previous classification and stability period.
Calculating hours of service
Methods to calculate hours
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- For hourly employees: Track actual hours worked.
- For non-hourly employees: Use a reasonable estimation method such as:
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- Days-worked equivalency: Credit 8 hours for each day the employee worked at least one hour.
- Weeks-worked equivalency: Credit 40 hours for each week the employee worked at least one hour.
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Whichever method you use, apply it consistently across similar roles.
Definition of full-time employee
The ACA defines a full-time employee as someone working at least 30 hours per week or 130 hours per month. Employers must apply consistent tracking methods to determine if employees meet this threshold.
Health coverage obligations
ALEs must offer Minimum Essential Coverage (MEC) to at least 95% of their full-time employees and their dependents. The coverage must meet affordability standards and offer minimum value—covering at least 60% of total allowed benefit costs without exceeding a defined percentage of the employee’s income.
Risks of non-compliance
Failing to meet these requirements can result in:
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- Section 4980H(a) penalty (“A” penalty): Applied if an ALE fails to offer coverage to at least 95% of full-time employees.
- Section 4980H(b) penalty (“B” penalty): Applied if coverage is unaffordable or doesn’t meet minimum value, and a full-time employee receives a premium tax credit through the Exchange.
Handling changes in employment status
If a full-time employee transitions to part-time during the stability period, employers must continue providing coverage. Once full-time status is established, the employee remains eligible for coverage through the end of the stability period, regardless of reduced hours.
IRS enforcement
The IRS enforces ACA compliance through audits and penalty notices like Letter 226J. Using the Look-Back Measurement Method correctly—and keeping accurate records—helps demonstrate compliance and reduce the risk of penalties.
Best practices for employers
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- Apply the same measurement method consistently across all employee categories.
- Document all offers of coverage, waivers, and enrollment decisions.
- Use reliable systems to track hours and prepare ACA reports.
- Create a repeatable process to manage compliance with confidence.
The information contained in this article is provided for informational purposes only and should not be construed as legal advice on any subject matter. The reader should not act or refrain from acting on the basis of any content included in this article without seeking tax, legal, or other professional advice. The contents of this article contain general information and may not reflect current legal developments or address the reader’s situation. ebm disclaims all liability for actions the reader takes or fails to take based on any content within this article.
