6 Limited Non-Assessment Periods for ALEs

Determining when full-time employees should be offered health coverage can be one of the biggest challenges for Applicable Large Employers (ALEs) under the ACA Employer Mandate.

ALEs who do not immediately offer coverage to full-time employees may be protected by using certain grace periods provided by the IRS, which are called Limited Non-Assessment Periods.

What is the ACA Employer Mandate?

Under the Affordable Care Act (ACA) Employer Mandate, Applicable Large Employers (ALEs) must offer Minimum Essential Coverage (MEC) to at least 95% of full-time employees and any applicable dependents, the coverage must be of Minimum Value (MV), and the coverage must be affordable by IRS standards.

These employers must also report the offered coverage to the IRS using Form 1095-C, Part II – Employee Offer of Coverage. This is broken up as follows:

  • Line 14, Offer of Coverage – This must be completed using the correct IRS code to show the type of coverage that was offered.
  • Line 15, Employee Required Contribution – This must be completed when certain codes are entered in Line 14.
  • Line 16, Section 4980H Safe Harbor and Other Relief – This should be completed with the applicable IRS codes to indicate any pertinent safe harbors that can be used.

Completing Line 16 is especially important for months in which the employer did not offer coverage. This could be due to a variety of reasons, most commonly for months in which an employee was not yet hired, or if the employee was in a waiting period or other Limited Non-Assessment Period for coverage.

Form 1095-C - Part II, Employee Offer of Coverage
Image of Form 1095-C – Part II, Employee Offer of Coverage

If you’d like a more in-depth break down of Form 1095-C, then take a look at our essential guide: Mastering Form 1095-C.

What is a Limited Non-Assessment Period?

A Limited Non-Assessment Period (LNAP) generally refers to a period of time in which an Applicable Large Employer (ALE) Member will not be subject to certain ACA penalties for a full-time (FT) employee, regardless of if coverage was offered or not.

Types of Limited Non-Assessment Periods

There are six main types of Limited Non-Assessment Periods. The first five of them refer to LNAPs under Section 4980H(a) and (b), and only apply if the employee is offered coverage by the first day of the month following the end of the LNAP. The first five refer to LNAPs under Section 4980H(b) only if the coverage offered after the LNAP provided minimum value (MV). 

  1. First Year as an ALE Period
  2. Monthly Measurement Method – Waiting Period
  3. Look-Back Measurement Method – Waiting Period
  4. Look-Back Measurement Method – Initial measurement period and associated admin period
  5. Look-Back Measurement Method – Period following change in status that occurs during the initial measurement method for the Look-Back Measurement Method. 
  6. First calendar month of employment.

First Year as an ALE Period

The type of LNAP can only be used during the first year in which a business becomes an ALE.

For the first calendar year of being an ALE, January through March of that year can be claimed as a Limited Non-Assessment Period. This only applies to employees that were not offered health coverage by the employer during the prior year.

Monthly Measurement Method – Waiting Period

This type of LNAP can only be used when the ALE uses the Monthly Measurement Method to determine if an employee is a full-time employee.

The employer may claim this LNAP for the first full calendar month in which the employee is first otherwise (but for completion of the waiting period) eligible for an offer of health coverage.

Look-Back Measurement Method – Waiting Period

This type of LNAP can only be used when the ALE uses the Look-Back Measurement Method to determine if an employee is a full-time employee.

If the employee is reasonably expected to be a full-time employee upon starting, then the period beginning on their first day of employment and ending no later than their third full calendar month of employment can be claimed as a Limited Non-Assessment Period.

Look-Back Measurement Method – Initial measurement period and associated administrative period.

This type of LNAP can only be used when the ALE uses the Look-Back Measurement Method to determine if an employee is a full-time employee.

If the employee is variable hour, seasonal, or part-time, then the initial measurement period for that employee and the administrative period that immediately follows qualify as a Limited Non-Assessment Period.

Look-Back Measurement Method – Period following status change that occurred during the initial measurement method for the Look-Back Measurement Method.

This type of LNAP can only be used when the ALE uses the Look-Back Measurement Method to determine if an employee is a full-time employee.

If an employee is hired as a variable-hour, seasonal, or part-time employee, but has a change in status and can reasonably expect to be full-time, then the period beginning on the date of the status change and ending no later than the third full calendar month following the change can be claimed as a Limited Non-Assessment Period.

First calendar month of employment

If the employee’s first day is not on the first of the month, then the employee’s first full month of employment can be claimed as a Limited Non-Assessment Period.

Conclusion

A significant challenge facing ALEs under the ACA Employer Mandate is when to offer health insurance to full-time employees. Limited Non-Assessment Periods may provide protection to ALEs who fail to immediately offer full-time coverage to their employees.

Using the code for Limited Non-Assessment Periods correctly on Line 16 of Form 1095-C can be critical in avoiding these fines and penalties via IRS Letter 226-J.

Learn more about how Form 1095-C, Line 14 and 16 codes, and become a master at ACA reporting using our downloadable PDF Guide below.

BoomTax, The Boom Post, and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors prior to engaging in any transaction.

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