The Affordable Care Act (ACA), can be challenging for employers to interpret in everyday circumstances. The difficulty often becomes more pronounced when seasonal employees enter the picture. Below are some common employer concerns and solutions regarding seasonal employees and ACA compliance.
What is a Seasonal Employee Under the ACA?
A seasonal employee is one whose employment with a company lasts six months or less. The ACA definition of seasonal employee also includes workers in jobs that normally start and end at the same time every year. The definition extends further to include a work season that runs longer than normal due to unpredictable events.
A lifeguard is a common example in the summer while a ski resort worker is a common wintertime example of seasonal worker.
What Does the ACA Require of Employers?
The ACA makes it mandatory for applicable large employers (ALE) to offer employees working 30 hours or more per week the opportunity to purchase health insurance. Any company with 50 or more employees meets the Internal Revenue Service (IRS) definition of ALE.
However, the IRS makes an exception for seasonal employees. Companies that employ 50 or more full-time workers for 120 days or less each year do not meet the ALE definition regardless of whether the 120 days occur consecutively or not. A secondary provision to this exception is when any workers in excess of 50 meet the definition of seasonal worker. The IRS does not classify businesses that meet both of these criteria as ALEs.
Do You Have to Offer Health Insurance to Seasonal Employees?
To answer this question, it is important to understand the ACA look back period for seasonal employees. ALEs should use their initial measurement period even when they expect temporary employees to work more than 30 hours a week. With non-seasonal employees, ALEs must offer health coverage by the first day of the fourth month of employment to remain compliant with the employer shared responsibility portion of the ACA.
The requirement to offer health coverage by the 91st day of employment does not apply to workers who will only remain with the company for six months or less. However, ALEs cannot deliberately misclassify new full-time employees as seasonal workers for the purpose of using the initial measurement period to determine benefits eligibility.
What this means in practice is that ALEs must offer health insurance to temporary employees expected to work at least 30 hours a week for more than six months. Larger employers that use an initial measurement period of 12 months to avoid offering healthcare coverage by the 91st day of employment will face penalties from the IRS. ALEs must issue Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, to all regular and seasonal employees who qualify for employer-provided health insurance.
Companies that use a monthly rather than a look back measurement period would need to offer health insurance for seasonal employees who meet the minimum requirement of working 30 hours per week. This provision also comes with an exception. ALEs that require employees to complete a waiting period before becoming eligible for health insurance may not need to offer it to temporary workers. This is due to the likelihood of them no longer working for the company when the waiting period expires.
What About Seasonal Employees Who Return Every Year?
The setup of popular seasonal businesses like golf courses and resorts requires employers to hire staff each year. Some people prefer this arrangement due to other obligations and return each season to work for the same organization. Health insurance for seasonal employees can become particularly challenging for ALEs to understand in this situation.
The ACA allows large employers to begin a new initial measurement period for returning seasonal employees each year. The caveat is that the seasonal worker had a minimum gap of 13 weeks between stints of employment with the same company. With educational organizations, the minimum gap jumps to 26 weeks. ALEs should start a new measurement period of 12 months on the first day of seasonal employment each year.
A Robust Tracking System is Necessary to Remain Compliant
HR departments for ALEs should track seasonal employee hire dates and hours worked separately from regular employee information. Careful tracking ensures that temporary hires continue to meet the ACA definition of seasonal employee and that the company remains in compliance with ACA in terms of offering or not offering insurance for seasonal workers.