The Affordable Care Act: How Do I Calculate if I Am a Large Employer, and What Effects do Seasonal Employees have on my Calculation?

The term “variable hour employees” in the Patient Protection and Affordable Care Act (commonly known as “Obamacare” or “PPACA” or “ACA”) is a source of confusion for employers working to comply with the new law. Variable-hour employees create a challenge for employers to track and identify which of these employees qualify as part-time or full-time employees. This is important, because under the ACA, employers who employed at least 50 full-time employee equivalents (FTEs) during the preceding calendar year must provide affordable health insurance coverage to at least 95% of their full-time employees.

The ACA defines a full-time employee as any employee who works an average of 30 or more hours a week. However, determining who is a Full-Time Employee is not always so simple as calculating the hours worked.  Employers may also identify Full-Time Employees by crediting an employee who works at least one hour a day with eight hours credit or one hour a week with 40 hours for the week. However this is done, it should be consistent for all similarly situated employees. Employers must also count any hours of paid leave, including vacation, holidays, PTO for illness, layoffs, jury duty or military leave.

Additionally, calculating whether or not you have over 50 full time employees is not as easy as it seems. It’s not just a matter of counting who works more than 40 hours a week; instead, you have to add up all of the hours worked of your part-time employees and then divide the total hours by 120 hours per month. Next, you have to add that number to all of the full-time employees you have. You now know how many FTEs you have for the month. Next, you have to add that monthly figure with your calculations for the other 11 months of the preceding year and divide by 12.  Now you have the average number of FTEs for the preceding year. If the average is less than 50, you are NOT a Large Employer. There is transition relief for making your 2014 determination; during 2013, you can use 6 consecutive calendar months instead of 12 months to make your determination.

There is an exception for certain employers who employ a significant number of “seasonal employees”  The definition of a “seasonal employee,” according to the Department of Labor, is:

  • A worker who performs labor or services on a seasonal basis (such as agricultural workers)

  • Retail workers employed exclusively during holiday periods

  • Others as defined by 29 CFR 500.20(s)(1)

For employers whose workforce is only 50 or more for less than 120 days of the calendar year, and the employees in excess of 50 are seasonal employees, the employer avoids being treated as a Large Employer under the ACA.

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