As the holiday shopping season approaches, we are considering a number of issues that employers of seasonal workers might be facing. Primary among these is whether employers are required to provide health care coverage to seasonal workers. Last year, we covered the significant problems for employers involved with hiring seasonal workers as a result of the new requirements of the Affordable Care Act. Here are three of the most significant issues to consider, including tips on handling these issues, incorporating the most recent developments regarding the ACA in 2014:
Do the company’s seasonal employees in 2014 push it into “large” employer status for 2015 so that because of the seasonal workforce the company must offer health care coverage to substantially all full-time employees in 2015?
Under the Affordable Care Act, “large” employers must offer health care coverage to substantially all “full-time” employees and their children. For 2015, under special transitional rules, an employer is considered a “large” employer if it employed an average of 100 or more employees, including full-time equivalents during 2014. An employer may determine its status by reference to any six consecutive calendar months during 2014. An employer that is considered a “small” employer during 2014 (i.e., one that is employing more than 50 employees but less than 100 employees and that meets certain additional conditions) will not be subject to the employer mandate in 2015. Seasonal workers that work 120 or fewer days during all of 2014 are not counted for purposes of determining whether the company is a large or small employer in 2015. Thus, employers can exclude certain seasonal workers from this calculation if they manage the work schedules of such workers carefully.
If you have a large seasonal workforce, and you will employ 100 or more employees during 2014 on average solely because of your seasonal workers, be sure that your seasonal workers work less than 120 days during 2014 so that you can exclude them from the count and potentially be considered a “small” employer for 2015.
Must “large” employers offer health care coverage to seasonal employees who work full time for a few weeks or months during the busy season?
Starting in 2015 (or 2016), large employers—even after excluding seasonal workers who worked less than 120 days—must offer health care coverage to substantially all “full-time” employees and their children. Full-time employee status is measured month by month. So, a “seasonal employee” who works in retail for an average of 30 hours per week during the month of December would be a full-time employee during the month of December and must be offered health care coverage for the month of December unless the employer takes certain actions.
“Large” employers that are subject to the employer mandate to offer health care coverage to substantially all “full-time” employees, may adopt a “measurement period” longer than a month to measure the “full-time” status of seasonal employees. For instance, large employers can adopt a policy that measures the “full-time” status of seasonal employees over 12 months, instead of over one month.
Note that “seasonal employees” are not the same as “seasonal workers.” “Seasonal employees” are employees who may work a full-time (or more) schedule but who are employed for less than six months during the year. Since seasonal employees only work up to six months during the year, they will generally not average 30 hours per week over 12 months because they will have very few or even zero hours for many of those months. Employers that adopt this special “measurement period,” will not have to offer health care coverage to many, if any, of their seasonal employees because these employees will not be considered to be “full-time” employees measured over the longer “measurement period.”
“Large” employers also may adopt a 90-day waiting period for eligibility, so that only employees who work full-time for 90 days are eligible to enroll in the health care coverage. Employers will not be subject to a penalty for imposing a 90-day waiting period.
Will the employer mandate rules be different after 2015?
Yes. After the 2015 transitional year, an employer will be a “large” employer for a year if it employs an average of 50 full-time employees, including full-time equivalents, during the previous year. So, what an employer does in 2015 will determine whether it is a “large” employer in 2016 and, consequently, whether it must offer health care coverage to its seasonal employees in 2016. So, 2015 is the year to put a plan in place for dealing with seasonal employees.
Employers that employ close to 50 employees should pay attention to their employee headcount in 2015, understand the “large employer” calculations, and, if possible, in light of staffing needs, adopt a strategy to avoid the employer mandate in 2016. The size of an employer’s workforce in 2015 will determine whether it is subject to the mandate in 2016.
In addition, if the employer uses a measurement period to determine full-time status, the hours that an employee works in 2015 will determine whether the employee is a full-time employee in 2016 who must be offered health coverage. Employers that are clearly “large” should adopt the appropriate measurement period and manage the hours of their seasonal employees during 2015 so that in 2016—when they look back at their employee’s 2015 hours—the seasonal employees are not considered “full-time” employees.