The Ultimate Guide to Seasonal Employees and the ACA – 2023

The Affordable Care Act (ACA) was enacted in 2010 and has greatly influenced the health insurance landscape of the US since. The ACAs Employer Mandate has greatly impacted employers of all kinds but how does it affect employers that have many part-time and seasonal employees? 

It’s imperative that these employers know the intricacies of the ACA to ensure that they’re meeting all requirements. 

This guide aims to assist employers in figuring out and complying with the ACA. We will focus on:

  • How the ACA impacts seasonal employees and their employers,
  • Penalties for non-compliance of the ACA,
  • Who is considered a seasonal employee under the ACA, and more.

What is the ACA Employer Mandate? 

Under the ACA Employer Mandate, Applicable Large Employers (ALEs) must offer minimum essential coverage (MEC) that provides minimum value to 95% of their full-time employees and dependents.

Helpful Definitions:

  • Applicable Large Employer (ALE) – An employer that has 50+ full-time and full-time equivalent employees
  • Full-time employee – An employee that has 130 hours of service per month
  • Minimum Essential Coverage (MEC) – Health insurance coverage that satisfies the ACA’s shared responsibility provision, including:
    • Employer-sponsored plans,
    • Tricare,
    • Medicare,
    • CHIP, and others. 
  • Minimum Value coverage – The plan covers at least 60% of the total allowed cost of benefits that are expected to be incurred.

ACA Penalties

Not complying with the ACA mandates can lead to large penalties. Under the ACA, ALEs must:

  • Offer MEC to at least 95% of their full-time employees and their dependents
  • Ensure that the offered coverage is affordable based on one of the methods for calculating affordability provided by the IRS

Employers that do not meet these requirements can face severe penalties, such as:

4980H(a) Penalty 

This penalty is assessed if the employer:

  • Doesn’t offer MEC to at least 95% of its full-time employees (and their dependents) for any month, and 
  • If at least one full-time employee received a Premium Tax Credit (PTC)

For tax year 2023, the 4980H(a) Penalty is $240 per employee monthly or $2,880 per employee annually. 

4980H(b) Penalty

This penalty is assessed if the employer:

  • Offers coverage that is not affordable or that does not provide minimum value (or both), and 
  • If at least one employee receives a PTC. 

For tax year 2023, the 4980H(b) Penalty is $360 per employee monthly or $4320 per employee annually.

Other Penalties

There are also separate ACA penalties that employers can for failure to file information returns and failure to furnish employee statements. These penalties are $290 per failure and increase to $580 if failure was due to intentional disregard. 

Thus, businesses must be diligent not only in providing appropriate coverage but also in accurately documenting their compliance.

Seasonal Employees

There are certain specifications that make an employee considered “seasonal” according to the ACA. To be considered a seasonal employee for ACA purposes, an employee cannot work more than 120 days (approx. 4 months) per year. 

Due to this distinction, many temporary and part-time employees do not qualify as seasonal employees. For example, a company that hires a temporary intern for six months would not be considered seasonal, even if they didn’t work full-time hours. 

ACA and Seasonal Employees

The employer obligation under the ACA stipulates that companies must extend health insurance to their full-time employees. However, there is some flexibility concerning seasonal employees.

Companies with a significant number of seasonal workers can exclude these employees from their tally of full-time staff, given they work fewer than 120 days in a year. As a result, it isn’t required to offer them health insurance coverage.

The Takeaway

In conclusion, the ACA introduces various requirements and penalties that impact businesses and their employees, including those hired on a seasonal basis. Although the legislation can seem complex, understanding its provisions – particularly as they relate to seasonal employees – can help businesses avoid penalties and make informed decisions about employee health coverage.

Learn more about ACA filing today!

BoomTax, The Boom Post, and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors prior to engaging in any transaction.

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