The ACA measurement period is one of the most critical components of healthcare compliance for applicable large employers. While the measurement period determines which employees qualify for health coverage, even small tracking errors during this window can result in significant IRS penalties.
This is especially challenging for employers with variable scheduling, multiple locations, seasonal spikes, or frequent rehiring. When hours and eligibility data live across systems or teams, small tracking gaps can quickly turn into major compliance risks.
This guide walks through the most common measurement period errors and the practical steps you can take to prevent them before they show up in your filing or trigger IRS follow-up.
The measurement period is a defined timeframe (typically 3 to 12 months) during which employers track hours of service to determine full-time status under the ACA look-back method. Employees who average 30 or more hours of service per week (130 hours per month) during that period are considered full-time for the subsequent stability period and should receive an offer of coverage during that time.
This measurement-stability period cycle provides predictability for employers and employees. The measurement period determines eligibility, an optional administrative period (up to 90 days) allows time for processing and enrollment, and the stability period is when coverage must be provided.
For applicable large employers (those with 50 or more full-time equivalent employees), accurate measurement period tracking is non-negotiable. The IRS uses this data to verify compliance with the employer mandate.
Not all hours of service are counted. Many employers focus only on hours physically worked and miss compensable hours that the IRS expects to be included in measurement period calculations. This typically occurs when teams rely on timekeeping reports designed for payroll processing rather than ACA compliance. That is why paid time off, paid holidays, and other paid leave are commonly missed.
When those hours are excluded, employees can be incorrectly classified as part-time when they should be treated as full-time for ACA purposes. This can lead to a missed opportunity for coverage during the stability period and result in additional reporting clean-up later, including a higher risk of IRS follow-up if an affected employee receives subsidized Exchange coverage.
To prevent this, confirm your system is pulling total hours of service, not just worked hours. If your data is spread across multiple systems (timekeeping, payroll, leave), implement a consistent process that rolls all compensable hours into one eligibility view before you finalize full-time determinations. If coverage is not offered when required, penalties can apply. For 2026, the inflation-adjusted annualized amounts are $3,340 under 4980H(a) and $5,010 under 4980H(b), assessed on a monthly basis depending on the situation.
One of the most overlooked ACA requirements happens before measurement periods even begin: determining whether your organization is an ALE. When you have related companies under common ownership or control, the IRS may require you to aggregate employee counts across the group to determine ALE status, even if each legal entity looks below the threshold on its own.
A common error is treating each legal entity separately. Under the employer aggregation rules, employers treated as a single employer under IRC Section 414(b), (c), (m) or (o) are treated as one employer for purposes of ALE determination.
This mistake can create a chain reaction across your ACA program. If you incorrectly determine you are not an ALE, you may:
It is also important to understand how penalty exposure works in an aggregated group. When an ALE is made up of multiple ALE members, the group is aggregated for determining ALE status, but each ALE member is generally responsible for its own employer shared responsibility payment if one of its full-time employees receives subsidized Marketplace coverage and the offer requirements were not met.
This misunderstanding has a ripple effect. Getting aggregation wrong can affect your ALE status, whether you use measurement periods, what coverage requirements apply and how penalties are calculated if the IRS later determines the group should have been treated as an ALE.
Employers have options when it comes to the length of the measurement period, but there are clear limits. Standard measurement periods must fall within a defined range, and problems arise when employers choose a period that is too short, too long, or change lengths mid-year without a consistent approach.
The most common mistakes are using a measurement period shorter than three months, using one longer than 12 months, or switching measurement period lengths mid-year in a way that creates inconsistent treatment across employee classes.
Consistency matters. If you use different measurement period lengths for different groups, your rules need to be applied consistently within each employee class so eligibility is determined fairly and predictably.
For most employers, a 12-month standard measurement period is the simplest and most stable option. It smooths out short-term fluctuations in hours and reduces administrative headaches when it is time to determine eligibility and make offers of coverage.
New variable-hour employees should be tracked separately from ongoing employees. When a new variable-hour employee is hired, they enter an initial measurement period that is tied to their start date. Many employers start it on the hire date or on the first day of the first calendar month following the start date, and it runs independently from the standard measurement period used for ongoing employees.
A common mistake is applying the same measurement period to everyone regardless of hire date. When that happens, new variable-hour employees can fall into a gap where their hours are not evaluated on the right schedule, which increases the risk of missed eligibility decisions.
When the IRS reviews ACA compliance, they want to see how you determined who was eligible. Without comprehensive documentation of your measurement period calculations and eligibility determinations, you can't prove compliance.
The most common error is relying exclusively on payroll data without additional measurement period tracking.
When employees leave and return to work, special rules determine whether they should be treated as continuing employees or as new hires. The 13-week rule governs these situations: if an employee returns after a break of 13 or more consecutive weeks (26 weeks for educational institutions), you can treat them as a new hire. If the break is shorter, they are considered a continuing employee.
One area where employees often make mistakes is failing to properly credit hours during periods of protected leave.
The method for crediting is to average the hours worked during the period immediately preceding the leave and apply that average to the leave period.
Nondiscrimination requirements mean employers must apply the same measurement method to similarly situated employees. The IRS permits different measurement methods for only four specific categories:
Within each category, you must apply consistent rules. The solution is to document your measurement method policy clearly and apply it uniformly.
The administrative period gives employers time to calculate measurement period results, make eligibility determinations, and complete enrollment. The IRS allows up to 90 days for this work, but taking too long creates a coverage gap that triggers penalties.
The timing rules are strict: the measurement period plus administrative period combined cannot exceed 13 months for new hires. For standard measurement periods, the administrative period simply cannot exceed 90 days.
The solution requires careful calendar planning. Map out your measurement period end date, calculate the maximum allowable administrative period, and ensure the stability period starts immediately after. Many employers find that a 60-day administrative period provides adequate processing time while leaving a buffer.
Employee status changes happen all the time. People transfer between departments, move from part-time to full-time schedules, or shift from variable-hour roles into salaried positions. Each of those changes can affect how measurement periods apply, but many employers do not reassess tracking when an employee’s classification or schedule changes.
To reduce that risk, your systems and workflows need to flag status changes automatically so HR and payroll know when to reassess the employee’s measurement period and eligibility approach. Regular audits are also important, especially in organizations with frequent role changes or fluctuating schedules, because they help confirm employee status and measurement period alignment before those gaps become reporting issues.
Measurement period errors can create employer mandate exposure because they affect who is treated as full-time and whether offers of coverage are made on time. When a full-time employee receives a premium tax credit through the Marketplace, the IRS may assess an employer shared responsibility payment. These payments are assessed monthly (the annual figures below are typically shown as “annualized” amounts).
For the 2026 calendar year, the inflation-adjusted penalty amounts are:
Beyond penalties, the fallout is often operational. Teams may spend significant time rebuilding eligibility history, correcting offer records, issuing amended forms and handling employee questions. In more complex situations, it can also create employee relations strain and broader risk if coverage decisions are challenged.
Preventing measurement period mistakes requires proper systems, documented processes, and ongoing monitoring:
Measurement period compliance requires attention to detail and proper systems. The nine mistakes outlined in this guide represent the most common ways employers inadvertently trigger IRS penalties. The good news is that these mistakes are entirely preventable.
With dedicated ACA tracking systems, documented policies, regular audits, and staff training, you can maintain accurate measurement period records that satisfy IRS requirements and ensure your employees receive the coverage they deserve.
Points North's ACA Reporter simplifies measurement period tracking with automated hour calculations, real-time error detection, and comprehensive documentation. Our platform handles the complex rules around new hire tracking, break in service determinations, and controlled group aggregation.
Schedule a demo today to see how we help employers maintain effortless ACA compliance while protecting their organizations from costly measurement period mistakes.