Seasonal Workers and the ACA Shared Responsibility Penalty

If your organization employs seasonal workers or part-timers for the holidays, take note: The IRS has issued a Health Care Tax Tip on how these individuals affect whether your business is subject to the shared responsibility provisions of the Affordable Care Act (ACA).

Background

The ACA requires applicable large employers (ALEs) to report the health care coverage they offer to full-time employees (individuals who work on average at least 30 hours a week). The ALE determination is made each calendar year, based on hours of service in the previous calendar year. ALEs generally have at least 50 full-time employees (including full-time equivalent employees) in that year.

This reporting requirement is used to administer the employer shared responsibility provisions in the tax code and to assist in determining eligibility for the premium tax credit that individuals can claim for purchasing health care coverage.

For 2015 and later, ALEs may be liable for a shared responsibility payment (or penalty) if any full-time employee receives a premium tax credit for purchasing individual coverage on one of the insurance exchanges.

Seasonal Workers and the ALE Determination

When determining if your organization is an ALE, you must measure your workforce by counting all your employees. However, there’s an exception for seasonal workers. Employers aren’t considered ALEs if their workforce exceeds 50 or more full-time employees in a calendar year because they employed seasonal workers for 120 days or fewer. A “seasonal worker” for this purpose is someone who performs labor or services on a seasonal basis, such as employees who work for retailers exclusively during the holiday season. For this purpose, the IRS adds, “employers may apply a reasonable, good faith interpretation of the term seasonal worker.”

The IRS explains that the terms seasonal worker and seasonal employee are used in the employer shared responsibility provisions in two different contexts. Only the term seasonal worker is relevant for determining whether an employer is an ALE subject to the employer shared responsibility provisions. (A seasonal employee is hired for a position that customarily lasts six months or less and begins at approximately the same time each calendar year, such as summer or winter.)

The Affordable Care Act (ACA) imposes demanding information reporting responsibilities on employers starting with the 2015 calendar year.

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