Seasonal Employees and the Health Reform Law. NAHU Compliance Corner Webinar May 2, 2013

Transcription

1 Seasonal Employees and the Health Reform Law NAHU Compliance Corner Webinar May 2, 2013

2 What is a Seasonal Employee?

3 Unfortunately, There s No Clear Federal Definition Fair Labor Standards Act (FLSA) Does not define full-time employment or part-time employment. This is a matter generally to be determined by the employer. Whether an employee is considered full-time or part-time does not change the application of the FLSA. The FLSA also imposes no restrictions on the scheduling of employees Employee Retirement Income Security Act (ERISA) An employee who works 1,000 hours or more for a company during a calendar year is treated exactly in the same way as a full-time employee for purposes of qualifying for retirement coverage. Patient Protection and Affordable Care Act (PPACA) 4980H(c)(2)(B)(ii) provides that seasonal worker, for the purposes of determining the applicability of the employer mandate ONLY means a worker who performs labor or services on a seasonal basis, as defined by the Secretary of Labor, including (but not limited to) workers covered by 29 CFR (s)(1) and retail workers employed exclusively during holiday seasons. According to IRS and DOL guidance, through at least 2014, employers are permitted to use a reasonable, good faith interpretation of the term seasonal employee

4 What PPACA Does Not Cover PPACA DOES NOT address how the term seasonal employee is defined for any other purpose other than if an employer has to comply with the employer mandate. There is no seasonal worker standard or exemption for determining if an employee qualifies as full time and has to be offered coverage for the employer to avoid a penalty under 4980H.

5 Basic Coverage Rules for Large Employers Fails to offer coverage to full-time employees and their dependents Large employers may be subject to an excise tax if at least one full-time employee whose household income is between % of FPL level receives a premium tax credit for Exchange coverage and the employer either: Offers coverage to full-time employees that does not meet the law s affordability or minimum value standards

6 Counting Employees The Basics for Mandate Applicability The employer responsibility requirements apply in a calendar year if the company averages at least 50 full-time or full-time equivalent employees during the prior calendar year FT = working least 30 hours per week on average a month PT employees count towards the total on a pro-rated basis. You divide the total hours of service of all employees who are not fulltime for the month by 120 All members of a controlled group count when determining the applicability of the ER requirement

7 Determining Full-Time Employee Status Generally, an employee who was employed on average at least 30 hours of service per week or 130 hours of service per month is considered full-time. When calculating hours of service, the following rules apply: The common law definition of employee is used. All hours of service an employee performs for members of the controlled group are counted. Each hour for which an employee is paid, or entitled to payment, for performance of duties for the employer is counted including vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence Hours of service generally do not include hours of service worked outside of the U.S. There is specific guidance for commission employees, adjunct faculty, airline pilots and similar positions, and employers must use reasonable methods for counting hours in these unusual cases until further guidance is issued.

8 Counting Employees is Key!!!

9 Seasonal Worker Exemption Seasonal employees count towards the total for determining employer mandate applicability unless the group s workforce exceeds 50 full-time employees for 120 days or fewer during a calendar year and those seasonal employees put the employer over the threshold.

10 Do You Have to Offer Coverage to Variable Hour or Seasonal Employees? Under Notice , the Department of Treasury provided a lookback/stability period safe harbor to allow for a measuring period for employees where it cannot be determined if the employee is reasonably expected to work on average at least 30 hours per week over the course of the year. Many seasonal workers do not work an average of 30 hours a week over the course of the whole year, even if they fall outside of the bounds of the 120 days of employment rule used to calculate overall mandate applicability. If the employee is determined to be full time during either the initial or standard measurement period, then the employee is treated as full time during a subsequent stability period during which coverage must be offered. After the initial measurement period, the associated stability period for newly hired variable hour or seasonal employee must be the same length as the stability period for ongoing employees.

11 Who is eligible? Employer would calculate each employee s full-time status by looking back at a measurement period of at least three but not more than 12 consecutive calendar months determine if the employee worked an average of 30 hours per week during this measurement period. If yes, the employee is considered a full-time employee during a subsequent stability period, regardless of the number of hours worked during that subsequent period. The measurement period is defined by the employer. The employer will establish an ongoing employee measurement period that is the same for that category of employee each year New employees will first enter an initial measurement period based on their date of hire

12 Who is eligible (continued) Employers may use measurement periods and stability periods that differ either in length or in their starting and ending dates for the following categories of employees: Collectively bargained employees and non-collectively bargained employees Salaried employees and hourly employees Employees of different entities Employees located in different states

13 Transition Relief for Determining Mandate Applicability The proposed employer responsibility rules gives limited transition relief to employers that may be close to the 50- FTE threshold and aren t sure if the mandate will apply in For this year only, employers in this situation may measure using any six-consecutive-month period in It s advisable to do this counting early in the year to have time to analyze the results and plan accordingly, because there is no relief if the employer figures out that they are subject to the mandate on December 31, A compliant plan would still need to be in place on January 1 to offer to all eligible FT employees, or the employer would be subject to penalty under 4980H.

14 Transitional Measurement Periods The proposed employer regulations provide transitional relief for employers intending to adopt a 12-month measurement period and then a 12-month stability period. The rules provide that employers may adopt a transition measurement period that is shorter than 12 months but that is no less than 6 months long and that begins no later than July 1, 2013 and ends no earlier than 90-days before the first day of the plan year beginning on or after January 1, The maximum administrative period is 90-days. This transition relief is solely for stability periods beginning in However, employers who adopt a full-12-month measurement period are not required to begin the measurement period by July 1, 2013

15 Holiday Photo Case Study Acme Holiday Photo Group has 5 full-time employees who work year round for 40 hours a week. They also employ 300 people who serve as Santas, Elves, Easter Bunnies Photographers and Cashiers for eight weeks each November and December and for four weeks a year. Santa and his friends all work 40 hours per week at various malls in the region during their 12 weeks of annual employment. Is Acme Holiday Photo Subject To the Employer Mandate?

16 Holiday Photo Case Study Does The Mandate Apply? Is Acme Holiday Photo Subject To the Employer Mandate? When the employer makes the average monthly employee calculation (305x 3 months =915 5x9 months = =960/12 months) their monthly average is 80 FTEs HOWEVER, they are put over the threshold by employees who work less than 120 days or four months a year since for 3 months out of the year they employ an average of 305 employees, for 9 months a year they employ only 5. The seasonal worker exemption applies and the seasonal workers are not included in the employer s total Acme Photo is NOT Subject to the Mandate!

17 Country Club Case Study A country club employs what we would today consider 13 full-time employees. They have 130 seasonal hourly employees for 6 months out of the year. 90 of these employees work an average of 40 hours a week. 40 of these employees work an average of 20 hours a week (90 a month) Would this employer be subject to the mandate? Do the seasonal employees have to offered coverage?

18 Country Club Case Study Does The Mandate Apply? Is There Employer Mandate Applicability? When the golf course takes the total hours of the part-time employees (40x90=2700) and divides by 120 (3,600/12=30) the part-time workers equal 30 FT equivalents. For six months of the year the golf course has 13 FT employees For the other six months of the year the course has 103 FTEs (13 yearround, 60 FT seasonal and 30 FTE Seasonal) 13 X 6 = 78 and 103 X 6 = = /12 months equals an average 58 FTEs per month Yes, Since the golf course s seasonal workers work more than 4 months a year, they do not qualify for the exception. Therefore, the employer mandate applies.

19 Country Club Case Study Who Has to Be Offered Coverage? In this example, the 13 FT year-round employees must be offered affordable and minimum value employer coverage or the employer could be subject to penalties under 4980H. But what about the other seasonal employees? Assume the golf course elects a 12 month measurement period for the seasonal employees. 90 employees average 40 hours a week for 24 weeks a year and zero hours for 24 weeks, making their weekly total 960 hours each. 960/52 weeks = hours a week average each 40 employees average 20 hours a week 24 weeks a year and zero hours for 24 weeks, making their annual total 480 hours each. 480/52 weeks = 9.23 hours a week average each. None of the seasonal employees need to be offered employer coverage.

20 Other Unique Issues of Employees Who Are Not U.S. Citizens Legal Residents Individual Mandate Applies to all U.S. citizens and those lawfully present in the U.S. Beginning in 2014, individuals must have minimum essential coverage Exchanges Undocumented workers are not eligible for coverage through the health insurance exchanges.

21 Other Unique Issues of Employees Who Are Not U.S. Citizens Legal Residents H2A and H2B Visa programs nonimmigrant program permits employers to hire foreign workers to come temporarily to the U.S. and perform temporary services or labor on a one-time, seasonal, peak-load or intermittent basis. It is unclear whether or not these workers need to be factored into employer mandate calculation s at all. Treasury asked for comments on this issue in its proposed employer responsibility rule, but we do not have a final determination at this time.

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23 Thank You! Jessica Fulginiti Waltman Senior Vice President, Government Affairs National Association of Health Underwriters