Many employers have struggled to apply the rules discussed in the Affordable Care Act (ACA), often complaining that the rules are too complex and create too much work. We understand that initially the rules can be burdensome and hard to apply. However, we have great news for employers with seasonal employees. Seasonal employees are almost always going to be treated the exact same way and no Form 1095-C will need to be reported for the typical seasonal employee.
A seasonal employee is defined as an employee who is hired into a position for which the customary annual employment is six months or less. The preamble to the final regulations provides further context to the definition saying the period that is six months or less should begin in approximately the same part of the year, such as summer or winter.
The seasonal employee definition can be broken into the following two factors:
The position must typically last for a period of six months or less; and
The position must begin in roughly the same part of the calendar year.
The seasonal employee is unique compared to part-time, variable hour, and full-time employees (the only other classification options for new employees under the ACA) because it does not factor in an employee’s hours of service. A seasonal employee could work 80 hours a week and still be classified as a seasonal employee so long as the two factors listed above are true. However, and importantly, an employer should not try to manipulate an employee to fit under the seasonal employee definition if the two factors listed above are not satisfied. If an employee is classified as a seasonal employee, the employee is placed into an initial measurement period and treated the same way as a part-time or variable hour employee.
A seasonal employee placed in an initial measurement period will be in what is referred to as a limited non-assessment period. This is significant because the instructions to the Form 1095-C make it clear that an employee in a limited non-assessment period is not considered a full-time employee for purposes of Form 1095-C reporting. Therefore, if an employer properly sets up its look back measurement method (which should be documented) for a 12 month period, seasonal employees will soon create a perfect ACA rhythmic beat. Consider the following example to illustrate this point.
Suppose there is a tomato farmer in California who plants hundreds of acres of tomato plants each year. The planting can be done with machinery but the harvesting of the ripe tomatoes must be performed by hand. Therefore, the tomato farmer has a high need for employees during the harvest season which can last up to five months. The employees specifically hired for the harvest could be classified as seasonal employees as their position will typically last for a period of six months or less and begin in roughly the same part of the calendar year.
An employer in this situation should be utilizing the look back measurement method as it can save an employer the burden of offering its seasonal employees health coverage. It is often not understood that an employer not offering an employee coverage can be beneficial to the employee, as an employer’s offer of coverage to an employee frequently makes the employee and his/her dependents ineligible for the extremely valuable premium tax credits. The employer in this scenario, along with a vast majority of the employer population, should have an initial measurement period that lasts 12 months. The 12 month initial measurement period should begin on the first day of the calendar month following the employee’s start date (or on the employee’s start date if the employee’s start date is on the first day of a calendar month) to make it so the employer only has to track up to 13 measurement periods.
Suppose the tomato farmer hires 500 seasonal employees to pick tomatoes in the middle of June. The employees work 50 hours per week and leave when the harvest is complete in the middle of November. One of the employees, named McGee, is hired on June 14, 2015 for the harvest season. McGee is classified as a seasonal employee. McGee’s initial measurement period would run from July 1, 2015 until June 30, 2016. However, McGee’s employment ends on November 13, 2015 when the tomato harvest is complete. McGee returns to the farmer the following June and is again hired for the seasonal tomato harvest on June 12, 2016.
The first pertinent question is how McGee should be coded for the 2015 calendar year. For the entire 2015 calendar year McGee is either not an employee of the tomato farmer or in a limited non-assessment period. McGee is not an employee of the tomato farmer until June 14, 2015. So for the months of January, February, March, April, and May, McGee would hypothetically be coded with the 1H (no offer of coverage) and 2A (not employed during the month) code combination. In the month of June 2015, McGee is employed for part of the month which would mean McGee could be placed into the first calendar month limited non-assessment period and the 1H/2D code combination could be used. For the months of July, August, September, October, and November, McGee would be in an initial measurement period, and, thus, would be in a limited non-assessment period. Therefore, the 1H/2D code combination would still be appropriate. Finally, for the month of December, McGee is again no longer an employee of the tomato farmer so the 1H/2A code combination would be appropriate. As the passage above shows, for the entire 2015 calendar year McGee is either not an employee of the tomato farmer or in a limited non-assessment period. Therefore, for the 2015 calendar year no Form 1095-C would need to be filed for McGee.
As is frequently the case with seasonal employees, McGee is rehired for the 2016 calendar year. However, when McGee is rehired on June 12, 2016, the tomato farmer will be able to treat McGee as a new employee and place him in an initial measurement period. McGee would be able to be treated as a new employee because he would not have been credited with any hours of service for a period of at least 13 consecutive weeks immediately preceding the resumption of service with the tomato farmer. A lapse in service of at least 13 weeks will always be the case for a seasonal employee rehired by the employer during the next season because to be classified as a seasonal employee the employment period must typically be six months or less. This would typically leave 26 weeks until the beginning of the next season. When McGee is rehired in 2016, his hypothetical Form 1095-C would look identical (or close to identical) to his 2015 Form 1095-C. And, again, McGee would either not be an employee of the tomato farmer or be in a limited non-assessment period for the entire 2016 calendar year. Therefore, for the 2016 calendar year, no Form 1095-C would need to be filed for McGee. This is what we consider the beautiful rhythmic beat of all seasonal employees.
Processing seasonal employees, like many aspects of the Affordable Care Act, is repetitive, with key patterns reappearing in almost every scenario. While the volume of data necessary to accurately file the Form 1094-C and Form 1095-C can be daunting, with properly coded software, efficiencies are quickly realized. These efficiencies can assist employers with events that could occur after coverage is offered and the Forms are filed such as HHS appeals, TIN solicitations, or IRS audits. Employers who are tracking ACA data in Excel will eventually be overwhelmed by the sheer volume of information. Sophistication, data organization and management, and automated processes can make the ACA more manageable. Many employers are quickly realizing proper ACA software is a necessity rather than a convenience.
About the author – Ryan Moulder serves as General Counsel at Accord Systems, LLC and is a Partner at Health Care Attorney's P.C. Ryan received his LL.M. from Georgetown University Law Center and his J.D. from Saint Louis University School of Law. He has distinguished himself as a leader in the newly created Affordable Care Act arena and has written and spoken on a variety of ACA topics as it relates to compliance for companies.
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