A common question on the mind of business owners in 2014 is, “Do I have to offer health insurance to my employees?” This question is due to the Affordable Care Act (ACA) and its Employer Shared Responsibility provision. While many employers know whether or not they are subject to the Employer Shared Responsibility provision, the line becomes a little blurred for employers with a lot of seasonal employees.
This article shows how employers calculate seasonal employees for the sake of the ACA’s Employer Shared Responsibility (ESR) provision.
What is the Employer Shared Responsibility Provision?
The Employer Shared Responsibility provision, also called ESR or the employer mandate, is the requirement for larger employers (with 50+ FTE employees) to either offer health insurance to employees, or pay a fee if/when an employee buys subsidized health insurance through the Marketplace.
2015 is a "phase-in" year for the employer mandate, as there is transition relief available for some employers with 50-99 full-time equivalent (FTE) employees.
How Are FTE Employees Calculated?
First, an employer calculates the number of full-time employees. A full-time employee is defined as working on average at least 30 hours of service per week in a given month.
Next, the employer factors in part-time employees. To calculate the full-time equivalent of part-time employees, add the number of hours worked by part-time employees in a given month and divide the total by 120.
Finally, the sum of the full-time employees and the full-time equivalent of the part-time employees is the number used to determine whether an employer is subject to the ESR.
Do Seasonal Workers Count in FTE Employees?
According to the IRS, seasonal workers are counted towards an employer’s full-time equivalent employees. However, if an employer employed 50 or more full-time employees on average during the preceding calendar year, they are subject to the employer shared responsibility provision for the current calendar year. An employer is not subject to the provision if if the employer:
Employed less than 50 full-time employees on average during the previous calendar year, or
Employed more than 50 full-time employees no more than 120 days during the previous calendar year due to a seasonal workforce.
In other words, seasonal workers’ hours are counted towards the hours of service in determining whether an employer is subject to the ESR. However, if seasonal employees who worked less than 120 days were the cause of the employer pushing the FTE threshold, the employer would not be subject to the ESR.
Do you have any questions about the Employer Shared Responsibility provision?