How ACA regulations impact summer interns

Employers may not be aware of how the ACA requirement of offering health coverage to full-time employees impacts its seasonal interns.

For a great many employers, the bottom line is that interns should just be treated like other employees–but there are exceptions. (Photo: Getty)

It’s an age-old tradition: every summer, employers hire interns. Internships come in many varieties including paid and unpaid for-credit programs. However, employers may not be aware of how the Affordable Care Act requirement of offering health coverage to full-time employees impacts its seasonal interns.

The ACA requires employers who have 50 or more Full-Time Equivalent employees (FTEEs) in the prior year to offer ACA compliant health insurance or pay a penalty. These are Applicable Large Employers (ALEs). Full-time under the ACA means those employees who at the time of hire are reasonably expected average at least 30 hours or more each week. Full-time employees generally are not measured and are not subject to a look-back period. Additionally, eligible employees of ALEs need to be offered health coverage no more than 91 days after date of hire.

Interns are just employees by another name

Importantly, the IRS’s view is that ALEs should offer health insurance to interns that are reasonably expected to work 30 hours or more each week (like any other employee).

Related: Hot summer hiring expected for second year straight

If the intern is not full-time, the intern’s hours should be calculated over a measurement period, just as the ALE would do for any variable-hour or part-time employee. If an employee does not average 30 hours or more each week during the measurement period, the employer does not have to offer coverage to that employee.

There are several nuances to the measurement period rules that are beyond the scope of this article. Practically, however, most employers pick a long measurement period. That way, even if an intern happens to work enough to be considered full-time, they will usually have left the company (because the internship has ended) before coverage has to be offered.

For a great many employers, the bottom line is that interns should just be treated like other employees.

What about seasonal employees?

There is a narrow, fact-specific exception for seasonal employees. A “seasonal employee” is customarily employed for six months or less. Additionally, the period of employment should begin each calendar year at approximately the same time, such as summer or winter.

Note that “in certain unusual instances,” (such as an extension of the season) the IRS says, the employee can still be a seasonal employee even if the employment is extended in a particular year beyond six months. (Confusingly, the ACA has a different definition for “Seasonal Workers,” which may be used in determining whether an employer is an ALE.)

If a full-time employee (including an intern) is a seasonal employee, then they do not have to be offered coverage within 91 days after date of hire. Instead, they are treated like a variable-hour employee, and the employee’s hours are measured over the measurement period.

Are your interns really seasonal?

Is the customary annual employment for your interns six months or less? If every year interns (whether or not they are the same people) work more than six months, the “seasonal employee” exception probably doesn’t apply. For example, if an employer has interns that perform the same or similar work year-round, then the intern position is probably not seasonal, even if different individuals fill the internships at different times of the year.

Do your internships, by the nature of the job, begin each calendar year in approximately the same part of the year, such as summer or winter? This requirement specifically focuses on the reoccurring nature of the position. If some or all of your interns are hired only during the same time of year (say summer or tax season), this requirement could possibly be met. An intern is far more likely to be a seasonal employee if they are hired in response to seasonal business needs.

An intern may also be seasonal if the internships are only available during a certain time of year due to other external factors. For example, law firms typically hire law students during the summer as part of the law firm’s regular recruiting calendar because law school is out. These “summer associates” may be seasonal, if they meet the other requirements.

If, on the other hand, an employer just happens to need extra help one summer, or needs a temporary employee to fill in for an employee on maternity leave, calling these employees “interns” would not make them seasonal employees.

Regardless, the analysis of whether interns are seasonal employees is very fact-specific. In many cases, interns will not qualify because the nature of the position does not require them to start at the same time every year or work for six months or less.

Proceed with caution

Why not simply classify all interns as seasonal? Being wrong can be costly! The ACA employer mandate requires that ALEs offer coverage to at least 95 percent of their full-time workforce or pay a penalty of up to $2,320 (for 2018) per year for each full-time employee (minus the first 30 full-time employees). Therefore, if interns are a significant part of your full-time workforce, and you fail to offer them coverage, you can trigger a penalty. Even if full-time interns are a small part of your workforce, you could still be liable for a penalty if you fail to offer coverage to an intern who should have been offered coverage.

Practical tips

Carrie Cherveny is the senior vice president of strategic client solutions in Hub International’s Risk Services division.

Cory Jorbin is the Central Region compliance officer for global insurance brokerage Hub International’s employee benefits practice.

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