Take note if your organization employs seasonal workers or part-timers for the holidays: 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

Applicable large employers (ALEs) are required by the ACA 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.

ALEs may be liable for a shared responsibility payment (or penalty) for 2015 and later 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

You must measure your workforce by counting all your employees when determining if your organization is an ALE, but there’s an exception for seasonal workers. If the workforce exceeds 50 or more full-time employees in a calendar year because they employed seasonal workers for 120 days or fewer, the employers aren’t considered ALEs. 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 employee and seasonal worker 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 winter or summer.

The process of calculating the number of employees you have for purposes of the Affordable Care Act is complicated. Contact your financial advisor to help with the calculations and help ensure that you comply with the requirements of the law.