Date: Jan 08, 2014
January 2014: New Seed Variety Issue

Dear Jon,


With all of the changes going on with the Affordable Care Act, I’ve been hearing confusing information about when the large employer mandate goes into effect.  Is it 2014 or 2015?


— Muddled about the Mandate


The large employer mandate penalty has been delayed until January 1, 2015.  That answer seems simple enough, but as you know, the devil is in the details, especially when it comes to government programs.  In fact, the “when” is not the complicated part; the complicated part is determining whether you are a large employer and, if so, what your obligations are.


Large Employer Defined

A large employer is one that has at least 50 full time employees (and full time equivalents) in the prior calendar year.  Full-time employees are defined as individuals with an average of at least 30 hours of service per week or 130 hours of service per month during a calendar year.  Full-time equivalents, on the other hand, are employees that do not work full-time — for example part-time or seasonal workers.

With regard to full-time equivalents, there is an exception for seasonal workers who work 120 days or fewer during a calendar year.  These seasonal workers are not counted for purposes of determining whether an employer is large or small.  The remaining part-time and seasonal workers who are employed more than 120 days have their hours aggregated and divided by 120, which provides their full-time equivalency.

Here’s a quick example: In 2014 ABC Farms, an employer, has 30 employees who work 40 hours per week; 60 employees who work 60 hours per month; and 180 seasonal workers who work March through May.  As a result, ABC Farms is considered a large employer for purposes of the mandate penalty on January 1, 2015, because it employs 60 full-time employees and full-time equivalents.  How did I calculate that?

First, we count full-time employees working an average of 30 hours per week. Here there are 30.  Next, we aggregate part-time employees’ monthly hours and divide by 120: (60 employees x 60 hours/month)/120 = 30 full-time employees.  Finally, we exclude the seasonal workers employed fewer than 120 days.  This leaves us with 60 full-time employees and full-time equivalents (30 + 30 = 60).


Large Employer Obligation: Full-time Employees and Dependents

Because the mandate was delayed, on January 1, 2015, a large employer must either offer qualifying health benefits coverage to substantially all of its full-time employees and dependents or potentially face a penalty for making a non-qualifying offer or failing to offer any coverage.  Dependents are defined as children to age 26, but not spouses.  Employers may offer coverage to spouses, but the law does not require them to do so.

It should be noted that the obligation large employers have under the mandate applies only to full-time employees and their dependents.  Large employers do not owe this obligation to employees that fall into the full-time equivalent classification (i.e. part-time employees and seasonal workers that are not full-time employees).


Preparing for 2015

To prepare for 2015 and the penalty impact, an employer should look to the prior year.  Furthermore, an employer should likely give itself a reasonable amount of time to prepare to offer a benefit plan.  In order to “back-into” January 1, 2015, a large employer that does not offer a health benefit plan might analyze its workforce for a calendar year — for example, between November 2013 and November 2014.  The employer, during this timeframe, would identify full-time employees, full-time equivalents, and whether it had “countable” seasonal workers (again — seasonal workers who worked 120 or more days).  After conducting this analysis, if an employer deems itself as “large” and chooses to offer a benefit plan, it could hold an open enrollment in December of 2014 for a health benefit plan effective date of January 1, 2015, in order to comply with the large employer mandate penalty.

As you can see, it is imperative that an employer understand the relevant compliance dates and whether or not it is a large employer.  For assistance understanding the Affordable Care Act and a large employer’s obligations, contact our health care reform team at or (800) 333-4WGA.

WG Staff Contact

Jonathan Alexander
Vice President & PCMI Compliance

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