Question: Our company has a regular full-time workforce of approximately 40 employees. This year, we’re planning to hire about 80 more full-time retail employees in November and December for the holiday shopping season. How do we determine whether doing so will subject us to the Affordable Care Act’s (ACA’s) employer shared responsibility rules?
Answer: To determine whether your company is subject to the ACA’s employer shared responsibility rules — commonly referred to as the “play or pay” provision — you must count all of your employees. But, as we’ll explain, there are special rules for seasonal workers.
Determining ALE status
Under the play-or-pay provision, an “applicable large employer” (ALE) may be subject to penalties for failure to offer adequate health coverage to enough of its full-time employees (and their dependents).
An ALE is generally an employer that employed 50 or more full-time employees (including full-time equivalents) during the previous year. Although seasonal workers must be included when determining whether your workforce exceeds this threshold, you won’t be considered an ALE if:
- You passed that threshold for 120 days or fewer during a calendar year, and
- The employees in excess of 50 who were employed during that period were seasonal workers.
Employers are permitted to apply a reasonable, good faith interpretation of the term “seasonal worker.” But the term generally applies to someone who performs labor and services on a seasonal basis, including retail workers employed exclusively during holiday seasons.
Noting the particulars
It appears you can apply the seasonal worker exception because your workforce exceeds 50 full-time employees for no more than 120 days, and the number of full-time employees would be less than 50 during those months if seasonal workers were disregarded. Note that you must determine your ALE status annually by counting the number of employees during the previous year and measuring the number of days that seasonal workers were actually employed during that preceding year. Once the previous year ends, your ALE status (or lack thereof) is fixed for the current year.
Also be aware that there’s a distinction between the terms “seasonal worker,” relevant when determining ALE status, and “seasonal employee,” relevant — for employers that are ALEs — when determining an employee’s status as a full-time employee under the look-back measurement method (one of the two permissible methods for determining full-time employee status). If you’re not an ALE for a particular year, you don’t need to identify full-time employees using the separate definition of seasonal employee.
Teetering on the edge
It’s good that you’re preparing early to determine the impact of seasonal workers on whether you’ll be subject to the play-or-pay provision. Companies that teeter on the edge of being an ALE are particularly at risk of facing ACA penalties.