ACA responsibilities for companies employing seasonal workers

From tourism and construction to retail, food and even accounting, many industries have a strong seasonal component that requires hiring temporary workers to generate much of their company’s annual revenue. What some employers of seasonal workers aren’t aware of is that seasonal employees may also be eligible for employer healthcare benefits under the Affordable Care Act. In fact, an employer’s hard-earned revenue can be placed at risk of having to cover hefty IRS fines if they don’t follow the law.

What does that mean, exactly, for benefits professionals?

According to ACA regulations, Applicable Large Employers (ALEs – those who employ 50 or more full-time or full-time equivalent workers) must measure all of their seasonal employees for eligibility of offers for employer-sponsored health insurance the same way they do for their permanent employees. And if these seasonal employees are hired to work full-time hours, the employer must offer them health coverage by the first of the fourth month of their employment. As a reminder, the ACA considers a full-time employee to be one who works 30 hours a week or 130 hours in a month.

There is an important caveat to this rule: Small employers – those who have fewer than 50 full-time workers on their payroll but may increase to more than 50 FTEs during their busy season – are excluded from this requirement since employees who are classified as seasonal workers do not have to be counted toward determining if the company is an Applicable Large Employer (ALE). This is one exception that the regulations allow for with seasonal employees.

Let’s consider the implications for a ski resort that is an ALE (employs an average of at least 50 FT or FTEs all year) and also hires seasonal workers during the winter months of November through April. Because the business is considered an ALE, the IRS requires compliance with ACA regulations for the reporting year. That means you must measure hours your employees work – seasonal workers included – and if they’re eligible, you must offer health insurance to your full-time, seasonal workers by the first day of the fourth month of their seasonal employment with you.

For example, an employee is hired in November on a seasonal basis as a hostess in the ski resort’s restaurant. If this employee is expected to work full-time hours (30 hours per week) at the time of hire, they would need an offer of coverage by March 1st, the first day of the fourth month of employment. If seasonal workers are hired as variable hour or part-time, meaning they are not reasonably expected to work 30 hours a week or 130 hours per month at the time of hire, they most likely won’t make it through a measurement period to qualify for eligibility.  Regardless, you still have to apply a measurement period to properly make that determination.

There are two methods that an employer can use to measure for benefits eligibility. The first method is called the monthly measurement method. If an employer chooses to use this method, they will need to track hours on a monthly basis for the entire duration of employment; any month where an employee – seasonal included – works 130 hours in the month, they are eligible for an offer of coverage in that month. This may not be the best option to use for employees whose hours fluctuate from month to month, since the administrative burden of offering and rescinding coverage from month to month isn’t feasible.

Alternatively, employers can choose to use the look-back method to track hours for new variable, part-time and seasonal employees. When using the look-back method, an employer predetermines a duration of time (most often, employers choose a 12 month look-back period) to measure an employee’s hours. When the employee averages 130 hours each month over the entire duration of that pre-defined measurement period, they are considered benefits eligible according to the ACA. Using the look-back method for this classification of employees reduces the possibility of seasonal workers qualifying for benefits since they aren’t expected to work beyond a six month period, and won’t make it to the end of the 12 month measurement period to qualify.

The key things for employers to remember are:

• If you meet the classification of an ALE, you must measure the hours of all of your employees – including seasonal – for eligibility for an offer of health care coverage.
• ALEs must offer coverage to at least 95% of their benefits eligible workforce, eligible seasonal employees included, or face potential 4980H(a) penalties. For tax year 2022, an “A” penalty is $2,750 per full-time employee (minus 30 employees) per year, prorated for each month below the 95% threshold. The fine might apply for only one or two months, but since this penalty applies to the total number of employees who were benefits eligible, it’s still hard-earned revenue that you’ll lose.
• ALEs who offer coverage to at least 95% of their benefits eligible workforce, but fail to offer affordable coverage to some of their employees, face potential 4980H(b) penalties. For tax year 2022, a “B” penalty is $4,120 per eligible employee per year, prorated for each month the employee does not receive an offer of affordable coverage.
• Employers who are not considered an ALE, and increase headcount through hiring seasonal workers for a few months of the year, are excluded from having to comply with the Employer Mandate requirements of the ACA since seasonal workers can be ignored when calculating ALE status.

Understanding the complexities around your ACA responsibilities can be a real challenge, especially when it comes to seasonal employees. Take more of the guesswork out and better manage your potential risk of incurring expensive fines by working with a knowledgeable and experienced ACA solutions service. Ensure your ACA service has capabilities to help measure eligibility of all employees, including seasonal employees.

Christy Abend, director of product strategy for Equifax, has 20 years of experience working in Human Resources with a concentration in the health and welfare benefits and compliance arena. She has her SHRM-SCP certification as well as her GBA certification through CEBS and has become an industry leader pertaining to the Affordable Care Act. Contact us to learn more about our Affordable Care Act Management service to see how we can  work with you, step by step, to help you ensure your ACA program management stays on track every season of the year. For more information, visit the Equifax workforce website.