The Affordable Care Act (ACA) is a law that increases access to health insurance for those who are uninsured. Under this reform law, large employers are required to provide health insurance to their full-time employees. However, ACA has different guidelines for companies that staff seasonal employees, including those who work full-time.
In this guide, we’ll define ACA seasonal employees to help you better understand the rules and regulations surrounding this segment of the workforce.
ACA and Seasonal Employees: The Basics
To understand ACA and seasonal employees, it’s important to first grasp how the ACA defines full-time employees. Applicable large employers (ALEs) are organizations with 50 or more full-time employees. These full-time employees are defined as employees who work 30 hours per week or 130 hours a month. If an ALE has 50 or more full-time employees, they must provide health insurance coverage.
However, there’s an exception to the ACA mandate when it comes to seasonal employees. Below, we’ll dive into the ACA rules for seasonal employees, so you can ensure health insurance is given to your eligible employees and that you complete your year-end forms for payroll correctly.
How are Seasonal Employees Defined?
When it comes to ACA and seasonal employees, it’s important to know the definition to ensure your employees are classified correctly. To be defined as an ACA seasonal employee, the following conditions must be met:
- The duration of the employment is six months or less
- The job is performed around the same approximate time each year
For example, a ski instructor at a ski resort is often classified as a seasonal employee, as this job is performed during the same time each year — the winter. When it comes to the approximate period, a ski instructor may only work from November to February one year, but from November to March another year when there was more snowfall that allowed the ski resort to stay open longer.
Other common examples of seasonal employees include summer lifeguards, retail workers during busy holiday seasons, and agricultural workers harvesting during the summer and fall.
Employees Not Considered Seasonal
Knowing the difference between seasonal and non-seasonal employees is important, as it helps ensure you’re remaining compliant with applicable ACA and other federal laws and regulations. Examples of employees that are not considered seasonal are those that work full-time for more than six months. So, a company that hires interns for a one-year period would be required to provide health insurance even though new interns are brought in annually.
There are also scenarios where an employee might not be classified as a seasonal employee even if they work six months or less. For example, hiring a consultant to work on a four-month project wouldn’t be classified as a seasonal employee, nor would a software engineer hired for a one-month project. This is because the employees in these examples aren’t hired for jobs around the same time each year. Working with an employer services organization like Experian can help you properly classify your employees to avoid non-compliance and penalties.
Penalties for ACA Non-Compliance
Because ACA rules for seasonal employees don’t require organizations to provide them with health insurance, some companies may try to misclassify certain staff to avoid paying for these benefits. However, businesses that misclassify employees can face serious penalties that can impact their finances and reputation. Penalties for ACA non-compliance include:
- Failure to File Penalty: Employers that fail to file correct ACA information returns by the mandatory deadline can face a failure to file penalty, which is $280 for each return for the 2022 tax year. The filing deadline is March 31, 2023 to avoid this penalty. August 1, 2023 is the final filing date.
- 4980H(a) Penalty: As stated, ALEs must offer health insurance coverage to their full-time employees. Failing to provide coverage to less than 95% of your full-time employees and their dependents, or having an employee who receives a Premium Tax Credit for buying coverage through the Marketplace, can result in this penalty. The 4890H(a) penalty is equal to $229.17 a month or $2,750 a year for each employee.
- 4980H(b) Penalty: Also known as the Employer Shared Responsibility Penalty, the 4980H(b) penalty is given to employers who fail to provide health insurance coverage that meets affordability and Minimum Value (MV). For 2022, this penalty is $343.33 a month or $4,120 a year for each employee.
When Should I Offer Coverage to Seasonal Employees?
Now that you know ACA rules for seasonal employees, you may be wondering when you should offer health insurance coverage to your seasonal employees. You can use a look-back measurement period to determine whether an ACA seasonal employee should be offered health insurance coverage.
With this method, you can use an initial measurement period between three and 12 months to track your employees’ hours to determine whether they’d be considered full-time employees. During the initial measurement period, employers don’t need to provide coverage to their seasonal employees. However, if your seasonal employees end up working for more than six months and 30 hours per week, you would need to provide health insurance coverage.
How Experian Employer Services Makes ACA Compliance Easy
If you’re an employer hiring ACA seasonal employees, you must remain in compliance. When drafting your year-end forms for payroll, all employees must be classified correctly to avoid penalties and fines that can damage your business. Experian Employer Services can work with you to prepare your ACA and year-end tax statements.
Schedule a free demo today to see how Experian Employer Services can help you abide by all ACA rules for seasonal employees. In addition to remaining compliant with ACA, you and your organization can benefit from our suite of tools to improve legality and efficiency, such as I-9 administration, unemployment management, and more. With our workforce management solutions on your side, you can improve your ROI and employee satisfaction.