Look-Back Period Basics: What You Need to Know

Employers with 50 or more full-time employees (including full-time equivalent employees) are considered Applicable Large Employers (ALEs) under the Affordable Care Act (ACA). ALEs must offer Minimum Essential Coverage to at least 95% of their full-time employees (those averaging 30+ hours per week) and their dependents (children up to age 26). Failure to comply will result in an Employer Shared Responsibility payment (penalty)—per employee, per month. Employers may determine full-time status using either the monthly measurement method or the look-back measurement, which allows a measurement period of 3-12 months. 2026 ACA Employer Mandate Penalties for 2026¹ have been published at the following amounts: 

• Section 4980H(a) - $3,340 per full-time employee (minus the first 30).
• Section 4980H(b) - $5,010 per full-time employee who receives a premium tax credit. 

Note: These amounts are indexed annually by the IRS with 2026 set to 9.96%. Always verify the current figures before plan year projections. 

Who Needs to File? 

Employers with 50 or more full-time employees, or ALEs, health insurance issuers, Multi-employer plans, and Government employers are all responsible for reporting the type and period of coverage to the IRS, as well as furnishing a statement to the covered individuals. The reporting is also used for determining whether the coverage offered meets affordability and minimum value criteria for determining employer penalties.  ALEs fulfill this reporting obligation through IRS Forms 1094-C (the transmittal filed with the IRS) and 1095-C (the statement furnished to each full-time employee). Both are due annually and serve as the primary evidence of compliance with the employer mandate. 

How Long Should Employers Retain Look-Back Period Records? 

H.R. 3801 established a 6-year statute of limitations for IRS ESRP assessments, measured from the due date of an employer's ACA information returns or the date those returns were filed, whichever is later. This means employers now have a defined window and a concrete records retention requirement, rather than open-ended liability. 

How Do I Use the Look-Back Period to Determine the Number of My Employees? 

To determine the full time status of the employee based on hours worked, the look-back period method may be used. First, determine whether your employee is ongoing or a new hire.  

• For an ongoing employee, you may choose a timeframe between three and 12 months for your look-back period. The length is up to you, but most employers choose twelve months.
• For a new hire, you may use the look-back period method between three and 12 months that begins on the hire date or the first day of the next month.  (Note: all time periods chosen must be consecutive.)  

How Is the Look-Back Period Structured? 

The look-back period is comprised of three stages:  

• The Measurement Period 
• The Administrative Period 
• The Stability Period  

The measurement period portion of the look-back period is at least 3 months, but more often 12 months, during which you monitor an employee to assess whether an employee has worked 30 hours or more a week on average—which is considered to be full-time.  

The administrative period is used to determine if an employee is an FTE and to notify them of their status and eligibility. It may not be longer than 90 days and can’t shorten the stability period.  

The stability period is an amount of time at least as long as the measurement period during which an employee’s status is fixed, based on your calculations. In other words, if you determined someone was full-time during the measurement period, they’re considered full-time during the stability period, even if their hours change.  

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