By Jennifer Carsen, JD, Legal Editor

A “Limited Non-Assessment Period” (LNAP) is the IRS’s fancy way of describing one or more months that don’t really count for purposes of the play-or-pay penalties under the Affordable Care Act (ACA).

Here are six situations that may qualify as LNAPs. The first five qualify as LNAPs only if the employee is offered health coverage by the first day of the first month following the end of the period, and they are LNAPs for section 4980H(b) purposes only if the offered health coverage provides minimum value.

1. First part of first year as ALE: January through March of the first calendar year an employer counts as an ALE = LNAP, but only for an employee who was not offered health coverage by the employer at any point during the prior calendar year. If you were considered an Applicable Large Employer (ALE) in 2014 (even though there were no play-or-pay penalties issued for 2014), then 2015 is not considered your first year as an ALE.
2. Waiting period under monthly measurement method: If you’re looking month to month to determine full-time status, the period beginning with the first full calendar month in which the employee is first otherwise eligible for health coverage—but for the waiting period—and ending no later than 2 full calendar months after the end of that first month = LNAP.M/li>
3. Waiting period under look-back measurement method: If you’re using the look-back method to determine full-time status, and you reasonably expect the employee to be full-time, the period beginning on the employee’s start date and ending no later than the end of the person’s third full calendar month of employment = LNAP.
4. Initial measurement period + administrative period under look-back measurement method: If you’re using the look-back method to determine full-time status, and the employee is variable-hour, part-time, or seasonal, the initial measurement period plus the administrative period immediately following = LNAP.
5. Change in status under look-back measurement method: This one applies if you’re using the look-back method, as above, for a variable-hour, part-time, or seasonal employee, but the employee shifts to full-time at some point during the initial measurement period.
   
   In this case, the LNAP would start with the date of the switch and run through the end of the third full calendar month following the change.
   
   If the employee is full-time based on the initial measurement period, and the associated stability period starts sooner than the end of the third full calendar month following the change, the LNAP ends 1 day prior to the start of that stability period.


6. First calendar month of employment: If the employee starts work on a day other than the first of the month, then that first partial month = LNAP. (And remember from above—if you don’t eventually offer health coverage, then this situation is the only one of the six in this list that qualifies for LNAP status.)