4 tips when determining how many full-time employee’s under the ACA

  1. First add up the low-hanging fruit.4 Tips FT employees

If an employee is expected to work 30 or more hours per week, he/she is classified as a full-time employee. You can immediately put all of these people in one category.

  1. Decide how you’ll track hours for variable-hour or seasonal employees

An employee is a variable-hour employee if his/her weekly schedule fluctuates above and below 30 hours.

The IRS has proposed a safe harbor method for employers to determine each employee’s full-time status by counting employee hours using a look-back/stability period. There are two types of measurement periods:

  • The initial measurement period for new employees and;
  • The standard measurement period for ongoing employees. The measurement must be between 3 and 12 consecutive calendar months.

If the variable-hour employee averages at least 30 hours per week during the measurement period, then the employee will be considered full-time during the following stability period (which needs to stay consistent with the measurement period). The employee’s status is “locked in,” regardless of the average hours worked during the stability period.

The stability period always begins immediately after the end of the measurement period and must be at least six consecutive months or the duration of the measurement period, whichever is greater. For example, if the employer used a 12-month look-back period, the duration of the subsequent stability period must be 12 months.

  1. Review your company’s eligibility definition 

The ACA full-time employee definition differs from the 40-hour per week full-time eligibility requirement that many companies currently use. Adjust accordingly to make things less confusing for you.

  1. Don’t forget about ERISA while trying to become ACA compliant.

In a class action suit filed by Dave & Buster’s employee, Maria De Lourdes Parra Marin, claims her employer announced that compliance with the ACA would require a cut in hours to reduce the number of full-time employees from 100 to 40 for the purpose of avoiding $2 million in additional health insurance costs. After the employer mandate took effect, she alleges her hours were in fact cut, she lost full-time status, and her insurance was cancelled.

While an employer who reduces employee hours would not violate any specific provision of the ACA, Dave & Buster’s employees are pursuing their claim under ERISA.

“Under Section 510 of ERISA, an employer cannot intentionally interfere with an employee’s right to benefits,” says Lorie Maring an attorney with the Atlanta office of Fisher & Phillips LLP. “What plantiffs are claiming is that by reducing their hours, the company was intentionally interfering with their right to receive health insurance.

How can your clients stay out of trouble and protect themselves? Self-funding health care benefits with FreedomCare can give them peace of mind and control over their health benefits. We have guaranteed ACA compliant solutions available at different rates to meet the needs of most employers. Reach out today.

Disclaimer:

This article is not to be offered as legal or tax advice. Neither Freedomcare nor the publisher are engaged in legal or tax advisory services. For advice on specific tax or legal questions, contact an attorney, CPA or other professional advisor. IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.

Seasonal Workers and Seasonal Employees – Clarifying Misunderstood Terms

Seasonal Workers & Seasonal Employees

Summer is here and that means the agricultural season will soon be in full swing. Unfortunately, we have heard of several non-compliant strategies being implemented throughout the agriculture industry. Part of the confusion is being generated from two terms with distinct meanings under the Affordable Care Act (ACA): seasonal workers and seasonal employees. The purpose of this article is to review the difference between seasonal workers and seasonal employees and to explain when each definition is applicable to an employer.

A seasonal worker is an employee who performs labor or services on a seasonal basis. The final regulations state this definition includes retail workers employed exclusively during holiday seasons and workers covered by 29 CFR 500.20(s)(1). A worker is covered by 29 CFR 500.20(s)(1) if ordinarily, the employment is of the kind exclusively performed at a certain period of the year and which, from its nature, may not be continuous or carried on throughout the year. A worker can still be covered by 29 CFR 500.20(s)(1) (and thus still be considered a seasonal worker) if the worker moves from one seasonal activity to another even if the worker is employed during a major portion of the year. Employees with comparable positions to the two examples included in the final regulations can also qualify as seasonal workers so long as the employer is making a reasonable, good faith interpretation of the term.

Seasonal workers are only applicable for the seasonal worker exception which determines if an employer is an Applicable Large Employer (ALE). Only employers who are ALEs have to comply with the Play or Pay Mandate. For the seasonal worker exception to apply an employer must satisfy two requirements:

  1. The employer must not be in excess of 50 full-time employees (including FTEs) for more than 120 days in the preceding calendar year; and
  2. The employees employed during the period that is no more than 120 days who cause the employer to exceed 50 full-time employees (including FTEs) must be seasonal workers.

If these conditions are satisfied, the employer will not be an ALE despite averaging 50 or more full-time employees (including FTEs) throughout the preceding calendar year. The seasonal worker definition is not relevant for any other determination under the ACA.

A seasonal employee is defined in the final regulations as “an employee who is hired into a position for which the customary annual employment is six months or less.”   The preamble to the final regulations provides further context to the definition saying the period that is six months or less should begin in approximately the same part of the year, such as summer or winter.

The seasonal employee definition can be broken into the following two factors:

  • The position must typically last for a period of six months or less; and
  • The position must begin in roughly the same part of the calendar year.

The seasonal employee is unique compared to part-time, variable hour, and full-time employees (the only other classification options for new employees) because it does not factor in an employee’s hours of service. A seasonal employee could work 80 hours a week and still be classified as a seasonal employee so long as the two factors discussed above are true. If an employee is classified as a seasonal employee, the employee is placed into an initial measurement period and treated the same way as a part-time or variable hour employee.

Employers need to be careful with the distinction between seasonal workers and seasonal employees. Remember, seasonal workers are only relevant for determining if an employer is an ALE. Seasonal employees are only relevant when determining if a new employee can be placed into an initial measurement period. However, make sure an employee classified as a seasonal employee meets the two criteria discussed above. Currently, there are no correction procedures for misclassified employees so an employee who is misclassified as a seasonal employee could trigger huge fines for an employer.