By Liliana Salazar
Employers in the agricultural industry may be making some erroneous assumptions when it comes to their responsibilities under the Affordable Care Act (ACA) for seasonal workers who hold H-2A visas. Failure to understand where H-2A visa holders fall under ACA could prove costly.
The agriculture industry relies heavily on seasonal workers with H-2A visas. They routinely work 60 hours a week during a harvest period that can range between four to eight months depending on the number of crops grown.
And the demand for them just keeps growing. Despite rising wages, harvesting is not work that domestic workers want. Therefore, it’s no surprise that in this year’s first quarter, 33,830 positions were requested through the H-2A program for the upcoming October through December period. That’s the highest number of visa holders requested to date for that time period and a 17 percent increase from 2017.
What defines a seasonal worker and why does that matter?
The Internal Revenue Service (IRS) defines a seasonal worker under the ACA Employer Shared Responsibility or “Play or Pay Mandate” as an employee who is hired to work during the same time of the year for 30 hours or more a week, but whose period of employment is not more than six consecutive months.
Strictly speaking, seasonal employees who work six months or less for an employer in a year may never need to be offered benefits as outlined in the ACA. However, in order to avoid penalties for failure to offer coverage to seasonal employees, employers must comply with the following requirements:
- Implement “look-back measurement periods.” The employer measures the hours worked by seasonal employees during a period of time that spans no less than three months but no more than 12 months. During a measurement period, the employer aggregates the number of hours worked by that seasonal employee to determine if the employee is a full-time per the ACA. During a measurement period, the employer is exempt from offering benefits to that employee and is also exempt from the imposition of penalties under the ACA, if the employee purchases subsidized coverage from an Exchange or Marketplace. Failure to implement and administer measurement periods for seasonal employees, will subject the employer to penalties under the Play or Play mandate of the ACA (IRC 4980H(a) or (b)), if the employee works 130 hours in any given month during their employment, and the employee receives subsidized coverage from an Exchange or Marketplace.
- Monitor breaks in service. The ACA allows the employer to restart the clock when an employee experiences a break in service of 13 weeks or more (no hours are credited to the employee). Noting that if the seasonal employee experiences a break in service shorter than 13 weeks or the rule of parity, the employer must credit the employee with prior hours worked when calculating their status as a full-time employee. If the seasonal employee is employed by a sister or parent company, the employer must aggregate the hours to determine the total number of hours worked by the employee. And, the entity (division, subsidiary, etc.) for whom the employee worked the most hours will be the one required to offer benefits to that employee.
Guidelines to determine if your employee qualifies for benefits
The penalties that are being assessed by the IRS for violation of the Play or Pay mandate can, in some cases, total in the millions of dollars. That makes it essential for agricultural employers to adhere to three key guidelines to determine if their employees are deemed to be full-time and qualify for benefits:
- Understand your employee classifications. If you are hiring workers directly, your classification options are variable hour (hours fluctuate week to week, or are uncertain, which is uncommon in agriculture); part-time (work on average less than 30 hours in a week), full-time, or seasonal. Employees are deemed to be full-time employees if their employment is expected to be continuous and will require them to work 30 hours per week on average. Full-time employees must be offered coverage that is minimal essential coverage, minimum value (at least a bronze), and meets one of the three affordability safe harbors (rate of pay, box 1 of the W-2 Form, or 100% of the Federal Poverty Level). The offer of coverage must be made no later than 91days from their date of hire.
Seasonal farm workers typically move from harvesting one crop to the next at the same farm, or a neighboring farm over a period of months. The result is a break in employment, but that break doesn’t necessarily disqualify them from being offered benefits, if they are rehired within 13 weeks. If you know your seasonal workers will work for you at least 30 hours a week for more than six consecutive months, you should consider reclassifying them as full-time employees, and making them an offer of coverage no later than 91 days from their date of hire, as described above.
- Implement measurement periods for all other employee classifications (other than full-time), especially seasonal employees and part-time employees, and be mindful of the specified breaks in service. Understanding the ACA and its measurement periods is complicated, but staying the course, without measuring the hours of seasonal employees can prove to be a very costly oversight that may subject you to penalties under the Play or Pay mandate of the ACA.
- If you work with an employment agency or leasing company, acquaint yourself with their practices, so that you are designating and paying a portion of the hourly rate of pay for benefits for any employee they place in your service. Confirm that the staffing or leasing entity is also offering benefits to employees who are deemed to be full-time, or that it has implemented measurement periods to monitor the hours worked by their employees. Some agricultural employers presume that because the employees are technically employees of the staffing agency, that they are relieved them from any liability or penalties under the “Play or Pay mandate” of the ACA. Unfortunately, that is not the case, as the IRS will only exonerate the employer from penalties when contracting for services with a staffing agency or leasing entity, when the employer pays an hourly contribution for the benefits of employees placed in their service.
The agriculture industry is already operating under considerable pressure, with a shortage of labor, rising costs overall, and heightening competition from foreign products that are pushing margins ever tighter. Employers who understand and know how to navigate through the complexities of the ACA will find at least some of that pressure eased.
HUB International’s team of brokers is available to help your organization consider the various considerations and challenges in employee benefits management today.