Seasonal Employees Under the PPACA

June 14, 2011 ( - How are seasonal employees treated for purposes of the PPACA "play or pay" mandate that requires employers to pay penalties if they do not provide health coverage to full-time employees?


New Internal Revenue Code section 4980H, as added by PPACA, generally requires employers with an average of at least 50 full-time employees (“applicable large employers”) that do not offer the opportunity to enroll in minimum essential coverage to full-time employees and have at least one employee receive a federal tax credit for coverage through an Exchange to pay a $2,000 annual fee for each full-time employee (minus the first 30), as calculated on a monthly basis. 

In addition, applicable large employers that offer minimum essential coverage to full-time employees and have at least one full-time employee receive a federal tax credit for Exchange coverage (because the employer coverage does not provide minimum value or is unaffordable), are required to pay the lesser of $3,000 for each full-time employee receiving the credit or $2,000 per employee for each full-time employee, after subtracting the first 30.  The Department of Treasury and IRS recently issued Notice 2011-36 (the “Notice”), which outlines potential approaches for determining full-time employee status and requests comments on these approaches. 

Neither Code section 4980H nor the Notice provide an explicit exclusion for seasonal employees.  In fact, the Notice indicates that a full-time employee (generally one that averages at least 30 hours per week or works 130 hours or more per month) may include seasonal employees.  However, it is possible that if an employer elects a 12-month look-back/measurement period under the possible safe harbor described in the Notice, seasonal employees could fall out of the full-time employee definition.  This is because the seasonal employee’s hours worked during the months employed would be averaged over a period that includes certain months in which they performed little or no services. 

In addition, the Notice states that an employer offering coverage to substantially all of its full-time employees generally is not subject to the $2,000 annual penalty for each full-time employee (minus 30).  The Notice requests comments on challenges employers may face in offering coverage to certain categories of employees and whether there are appropriate exceptions that should be provided under the shared responsibility provisions.  It indicates that seasonal employees are one such possible exception and requests comments on how any proposed exception would be consistent with the structure and purpose of the employer mandate penalties.

The Notice also provides that all employees (including seasonal employees) not meeting 30 hours per week/130 hours per month threshold generally will be included in calculating full-time equivalent employees ("FTEs") for purposes of the "applicable large employer" definition.  It then describes the special rule in Code section 4980H that provides that where an employer's workforce exceeds 50 FT employees for 120 days (or 4 months) or fewer and excess employees employed during 120 day/4 month period were seasonal employees, the employer is not an applicable large employer.  Code section 4980H and the Notice define "seasonal employee" for this purpose as one who performs labor or services on a seasonal basis as defined by DOL, including—

  • Agricultural workers working during certain seasons or periods of year; and
  • Retail workers employed exclusively during holiday seasons.


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Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C.  She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare.  She represents employers designing health plans as well as insurers designing new products.  Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.

Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.

PLEASE NOTE:  This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.