Do Seasonal Employees Count in Obamacare?

Date: August 15, 2013

Yes, but not always, and regulators may still tweak the details.

As most small business owners have discovered by now, the Affordable Care Act is riddled with nooks and crannies, subtle areas and apparent shades of gray that seem to make staying within the law a major challenge for even the most savvy.

One such minefield: Seasonal workers. Are they part of your overall workforce for the purposes of Obamacare?

"Businesses with more than 50 full-time or full-time equivalent (FTE) employees must provide healthcare coverage or pay penalties of up to $3,000 per employee," says Sandra Malone of The Malone Agency, an insurance agency in Englewood, Florida. "As with part-time employees, seasonal workers count toward the business’s full-time equivalent employee number."

That’s the easy answer: Seasonal workers count toward the magic 50 full-time employee number. But then there are the details to consider.

Who is what?

First there is the matter of definitions. What exactly constitutes a seasonal worker? Right now the government is taking your word for it, says Kevin Kuhlman, NFIB's manager of legislative affairs. At least through 2014, employers may make a "reasonable and good-faith" stab at classifying seasonal employees, but the Departments of Labor and Treasury may fine-tune the rule in subsequent years. One starting point: The Labor Department lays out some guidelines for seasonality in retail and agriculture. A small business might look to those definitions as a guide, Kuhlman says.

How to count?

Seasonal workers will be counted toward the 50 FTE that pushes a business above the Obamacare threshold. To figure out a seasonal worker's contribution to the FTE, tally hours by month (not week) and stop when you hit 120 hours, Kuhlman says. One-hundred-twenty hours per month equals one FTE, and a seasonal worker’s extra hours won’t change the FTE total. That is, a worker who puts in 200 hours a month is still just one FTE.

Note the exception.

So, you always have to count seasonal workers toward the FTE—except when you don’t. The escape clause kicks in when seasonal workers are the only reason the business tops the 50 mark. Imagine a business that is under 50 people all year, except for four months during the tourist surge. For that period, headcount tops 50, but only because of the seasonal help. Under this scenario, "the employer can seasonally rise above the 'large employer' threshold without being required to provide affordable coverage or pay penalties," Kuhlman says.

Tread with caution.

Given the costs that come with being classified as a large employer, some small business owners may be tempted to micro-manage headcount to stay below the threshold. Kuhlman warms against this. "You obviously have to respond to the business or service and how you treat your customers. That has to be the primary focus, and you can adapt to the law after that," he says. Nonetheless, if you are just barely skirting 50, it’s worth taking a close look at what kind of staffing is essential. "You don’t want to be penalized when it isn't necessary."

Follow the action.

Obamacare is by no means a finished product. Around the nation, a range of professionals—from CPAs to insurances agencies to HR executives—is waiting for final regulations to be formulated. If and when rules and guidelines finally are written, the IRS and other federal agencies reserve the right to make changes going forward. Follow what is happening and get an early jump. Rather than wait until 2015, Kuhlman advises, small business owners should treat 2014 as a trial run. Follow the impending law as best you can, and you’ll have a running start when the real thing comes around.

How Are Seasonal Workers Counted Under the Affordable Care Act?

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