Do employers need to offer coverage to summer interns?

June 18, 2024

The ACA’s employer mandate does not have special rules for interns. The same rules covering other employees will apply here too. However, there is a window within which an employer is not penalized if it doesn’t offer coverage to an employee who works less than three months, and seasonal employees (who meet the definition under the rules) may be exceptions too.

Generally, an employee who is hired to work 30 or more hours per week is considered full-time and therefore must be offered coverage under the employer mandate. This would also include even a temporary, contract, or short-term employee if they are working or are expected to work 30 hours or more per week. Such employees must be offered coverage by the first day of the fourth full month.

The rules expressly state that an employer may not consider that employment will end during the initial measurement period, even if the employee has a short-duration employment contract. For example, if an employee is hired to work 30 hours per week but is expected to be laid off at some point, the employee could not be treated as part-time.

However, the employer mandate allows for a limited non-assessment period, which basically means that the employer would not be penalized if coverage is not offered to a full-time employee for the first three months, so long as that employee is offered coverage by the first day of the fourth month following hire. In other words, the employer has about a three month break to offer coverage after a full-time employee is hired.

So, if an employee works less than three months, the employer would not have to offer that employee coverage (even if that employee is a full-time employee — working 30 hours per week). Beyond that third month, though, the employer needs to offer coverage to that employee. For example, if any temp employees who work 30 or more hours are employed for five months, the employer must offer coverage for that fourth and fifth month in order to avoid a penalty. Accordingly, employers must offer coverage to any temporary employees employed for more than three months by the first day of the fourth month following hire.

Keep in mind, though, that the client would still need to consider their plan document terms. Specifically, if the plan document indicates that employees are generally eligible for coverage immediately or on the first of the month following 30 or 60 days, then the employer should make all full-time employees eligible on that timeline (including temporary employees if not specifically excluded). So, if an employer would like to take advantage of the full limited non-assessment period for certain classes of employees, they will need to ensure that their plan document reflects that. In other words, while there may not be a problem with waiting to offer coverage under the employer mandate, the employer still needs to administer the plan according to their plan terms.

There are two important exceptions to these rules. First, if an employee’s hours vary above and below 30 hours per week, and there is no reasonable expectation that they will always work full-time hours, then they could be placed in a look-back measurement period ranging from three months to 12 months. They would only be offered coverage prospectively if they averaged full-time hours during the measurement period. However, if an employee is reasonably expected to work full-time hours (based on determinative factors such as comparable full-time positions, how it was advertised in a job description and so on), they should not be placed in a look-back measurement period and instead should be offered coverage after completing the normal new hire waiting period.

Second, a “seasonal employee” under the employer mandate is specifically one whose customary annual employment does not exceed six months and whose work begins at approximately the same time each year. Generally, the work or the business need is seasonal in nature. Employees meeting this definition may also be placed in a look-back measurement period and not offered coverage until the completion of such period and if they averaged full-time hours. If the employees are not, in fact, seasonal for this purpose, the only way they could be placed in a look-back measurement period is if they were hired as working variable hours (as opposed to working 30 or more hours per week).

So an employer will need to determine if their seasonal employees actually meet the definition of seasonal under the employer mandate. Otherwise, if they will be working 30 hours or more per week just for a short duration, they’re probably not actually variable-hour employees, and they’re likely not seasonal employees either. As such, the employer would be at risk of an employer mandate penalty if they fail to offer full-time employees affordable, minimum-value coverage by the first day of the fourth month.

If they are, indeed, seasonal employees (as defined under the rules), or if they leave employment before the limited non-assessment period is up and are not eligible, a Form 1095-C would not need to be generated for such employees. But, again, an employer would need to make sure these employees are actually considered either “seasonal” employees or variable-hour employees, and not full-time eligible employees.