Do Seasonal Employees Need Health Insurance? ACA Rules for Employers

You hire extra people for the holiday rush. They work full-time hours, but you expect them to leave when the busy season ends.

Do you need to offer them health insurance?

Sometimes. Calling someone “seasonal” does not answer the question.

The Affordable Care Act, or ACA, has rules for deciding which employees count as full-time and when employers should offer coverage. Here is what to check before your seasonal hires start.

First, does the ACA employer rule apply to your business?

The ACA employer coverage rules generally apply to businesses that averaged at least 50 full-time employees, including full-time equivalents, during the previous year.

“Full-time equivalents” means combining the hours of employees who are not full-time to help measure the size of your workforce. It does not mean those employees automatically qualify for coverage.

Businesses under common ownership may also need to count their employees together.

There is a special exception for some employers whose workforce grows above 50 only for a short season. We explain that below.

What makes an employee seasonal?

For the ACA’s look-back measurement rules, a seasonal employee generally fills a job that:

• Usually lasts six months or less each year.
• Starts around the same time each year, such as summer or winter.

Think of a ski instructor hired for the winter season or extra retail staff hired for the holiday rush.

A short job is not always a seasonal job. Someone hired for a three-month project in March is not automatically seasonal just because the assignment is temporary.

The employer needs to look at the job itself, not just the label entered in payroll.

What if the employee works 40 hours a week?

That is where your method for tracking ACA full-time status matters.

The ACA generally treats an employee as full-time if they average at least 30 hours of service per week or have at least 130 hours of service in a month. Hours of service can include certain paid time off.

Employers use one of two methods.

The monthly method

You count the employee’s hours each month.

A seasonal employee can count as full-time under this method. Calling the job seasonal does not create an automatic exception.

You still need to check the rules that determine when coverage should begin. Reaching the hours threshold does not, by itself, mean coverage must start that same day.

The look-back method

You count hours over a set period to decide the employee’s ACA status for a later period.

A qualifying new seasonal employee can generally start in an initial measurement period. This is the first period used to track that employee’s hours.

That may allow the employer to measure the employee’s hours before offering coverage, even if the employee works full-time hours during the season. The employer must follow the rules for how long those periods last and when coverage must be offered.

The method matters. Employers must apply their method consistently within the employee categories allowed by the ACA rules. They cannot simply pick whichever answer they prefer for each employee.

Does the 120-day rule mean no insurance is needed?

No. The 120-day rule answers a different question.

It helps determine whether a business is large enough to fall under the ACA employer rules.

An employer may qualify for the seasonal-worker exception if:

• Its workforce exceeds 50 full-time employees, including full-time equivalents, for 120 days or fewer during the year.
• All the workers above that threshold during that time are seasonal workers.

That is not a rule saying every seasonal employee can work for 120 days without a coverage offer.

Remember the difference:

The seasonal-worker exception is about the size of the business. The seasonal-employee rules are about how an employee’s full-time status is measured.

What if you decide to keep the employee?

Review the change when it happens.

An employee hired for holiday help might move into a regular full-time job in January. That change can affect when coverage should be offered.

Do not assume you can keep following the original seasonal timeline without checking the new facts. Changes during an initial measurement period can create an earlier coverage deadline.

Simply working longer than originally expected does not answer every eligibility question, either. Review why the assignment changed, the employee’s new role, and the measurement rules that apply.

What should employers do before hire?

Start with five questions:

1. Is our business subject to the ACA employer rules?
2. Does this job meet the ACA definition of seasonal?
3. Which measurement method applies?
4. Who will track hours and coverage deadlines?
5. Who will review the employee’s eligibility if the job changes?

Also check your health plan’s eligibility rules. Your plan may offer coverage sooner or more broadly than the ACA employer rules require.

Seasonal hiring moves quickly. A clear process helps you know who needs an offer and when to make it.

ACA 360 helps employers track employee hours, review eligibility, and identify coverage deadlines throughout the year.

Hiring seasonal employees? Contact ACA 360 before the busy season begins. Call 614.532.2719 or email compliance@aca360.com.

Sources

This article is based on the following official IRS guidance:

• Identifying Full-Time Employees — Explains the ACA full-time hours threshold, hours of service, and the monthly and look-back measurement methods.
• Employer Shared Responsibility Questions and Answers — Question 26 explains the difference between a seasonal employee and a seasonal worker, including the six-month seasonal-employment definition.
• Determining Whether an Employer Is an Applicable Large Employer — Explains the 50-employee calculation, common ownership, and the seasonal-worker exception.
• Final Employer Shared Responsibility Regulations — Provides the detailed rules for initial measurement periods, seasonal employees, and changes in employment status. See Treasury Regulations §§ 54.4980H-1, 54.4980H-2, and 54.4980H-3.