When it comes to the ACA and seasonal employees, employers need to be aware of pitfalls that can leave businesses out of compliance. Under the ACA, employers with 50 or more full-time and full-time equivalent (FTE) employees are considered applicable large employers (ALEs). The ACA generally requires ALEs to offer health insurance to their full-time employees (defined as those working 30 or more hours per week) and their dependents. If the employer fails to do so they may be required to pay a penalty. These employers must also comply with certain reporting requirements.
But what happens if you hire employees on a seasonal basis, bringing your employee count over 50 for a portion of the year? Does this make you an ALE? Here's what you need to know.
ALE Status and Seasonal Workers
Under the ACA, an employer will not be considered an ALE if both of the following apply:
- The employer's workforce exceeds 50 full-time and FTE employees for 120 days or fewer during the calendar year and;
- Those employees in excess of 50 during the 120-day period are seasonal workers.
For these purposes, a seasonal worker is an employee who performs labor or services on a seasonal basis. Some examples of seasonal workers include employees at ski resorts during the winter months and retail workers employed exclusively during a holiday season.
To qualify as a seasonal worker, the position must occur at roughly the same time each year and be expected to last for six or fewer months. Seasonal employees can work 30 hours or more per week, but not more than 120 days in a year.
You can use the lookback measurement system to determine if you qualify for the seasonal employee exception under the ACA. For each employee, look over a 12-month period and calculate the numbers of hours worked to figure out which employees are full-time, part-time, variable hour or seasonal. Remember, seasonal employees can work more than 30 hours per week as long as it's for a period of less than or equal to six months.
However, caution should be taken, especially where a business is close to the 50 employee threshold. Be sure to keep reliable records of hours worked by all employees, whatever their status, to ensure the accuracy of the lookback system.
Misclassifying employees as seasonal workers can result in penalties under the ACA. For example, the term "seasonal" does not apply to many outdoor, weather-related positions, such as some of those in construction, where individuals are hired at the outset for longer than six months. In this case, such workers are regular (full-time or part-time) or variable-hour employees.
Generally speaking, only businesses that employ more than 50 people for fewer than 120 days are exempt under the provisions of the ACA. However, the requirement to offer health insurance was lowered from 100 to 50 full-time employees as recently as the beginning of 2016. With the ACA and seasonal employees, employers must remain vigilant to ensure compliance. Going forward, you should carefully monitor further changes to the ACA and its related laws and regulations.
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