March 28, 2012 Holly Claghorn Senior Attorney, TASB Legal Services

Transcription

1 March 28, 2012 Holly Claghorn Senior Attorney, TASB Legal Services

2 PPACA overview Who is responsible for what? What decisions are out of your hands? What should you worry about?

3 Signed into law March 23, 2010 o Multiple effective dates State exchanges Individual mandate Plan responsibilities o Insurance in Texas school districts Employer responsibilities

4 Exchanges will provide eligible individuals and small businesses with access to private plans o Exchanges themselves will not be insurers o Similar to Travelocity or Expedia, which are not airlines but provide access to available flights and fares in a comparable way. States are expected to create insurance exchanges by January 1, 2014 o Federal government may take over if it determines, by January 1, 2013, that a state will not create an exchange by the deadline

5 Coverage for self and dependents (2014) o Penalty for noncompliance o Low-income tax credit Automatic enrollment (2015?) o Employers with > 200 employees o Employees can opt out

6 Financial exceptions: o Low income o Self-only coverage > 8% of household income o Other hardship (determined by HHS) Categorical exceptions: o Religious beliefs o Short term gaps

7 Greater of: Monthly Penalty: o Percent of applicable income (difference between household income and filing threshold) Annual Penalty: o Flat amount for each taxpayer and any dependents

8 Two adults, two minors, $40,000 income $21,300 applicable income Monthly penalty method (annualized): o $2,556/yr (2014), $5,112/yr (2015), $6390 (2016) Annual penalty method: o $285/yr (2014), $975 (2015), $2085 (2016)

9 Districts are required to provide health insurance Maintenance of Effort (MOE): Minimum $225 per month ($2700 per year) o District: $150 per employee ($1,800 per year) o State funding: $75 per employee

10 TRS-ActiveCare: 90% of ISDs o Mandatory: 500 or fewer employees o Optional for larger districts Who is the plan sponsor? Plan year: September 1 to August 31

11 Plan changes: o Coverage of dependents to 26 o Pre-existing conditions covered to age 19 o No-cost preventive care o Prohibition on lifetime coverage limits o Claims appeal process Grandfather status

12 Nondiscrimination Affordability Administrative responsibilities Flexible spending accounts Cadillac tax

13 Tax preference for highly compensated employees o Top 5 highest-paid officers; or o Top 25% highest-paid employees o Reverse discrimination is permitted Preferential benefits must be treated as taxable income Example: District pays superintendent s entire health insurance premium

14 Self-Insured (1978) Penalty on employee 40% excise tax on preferential benefits Fully-Insured (soon) Penalty on employer $100 per day per employee discriminated against

15 Large employers Affordable health insurance Penalty if employee purchases insurance through state exchange IRS is considering a safe harbor

16 Large employer: 50 full-time and full-time equivalent employees o Full-time employee: 30 hours or more per week o FTE employees: all hours worked in a month by employees who are not full-time, divided by 120 Full-Time Employees Full-Time Equivalents 50

17 Example: District A has 56 employees: 42 full-time and 14 part-time Part-time employees work a total of 1,200 hours in a month 1,200 hours/120 = 10 FTEs 42 full-time + 10 FTEs = 52 District A is a large employer

18 Insurance is not affordable if the cost to the employee is more than 9.5% of household income o Premiums for lowest tier of TRS-ActiveCare o Coverage applicable to employee s family situation o Deduct MOE and any other amount paid by district/state (at least $2,700)

19 Example 1: Teacher: $40,000/year x 9.5% = $3,800 Tier 1 employee only premium: $3,900 per year Cost to employee: $3,900 - $2,700 (MOE) = $1,200 Insurance is affordable

20 Example 2: Custodian: $15,000/year x 9.5% = $1,435 Tier 1 employee & family premium: $9,804 Cost to employee: $9,804 - $2,700 (MOE) = $7,104 Insurance is not affordable

21 Penalty: If district is a large employer; and Insurance is not affordable; and Employee purchases insurance through the state exchange; and Employee receives a tax credit

22 Penalty: Excise tax of the lesser of: o $3,000 per employee who receives a credit; or o $2,000 per full-time employees, less 30

23 Example: District is a Large Employer with 42 full-time employees Five full-time employees receive premium credits for obtaining insurance through the state exchange Penalty is the lesser of: $3,000 x 5 = $15,000; or $2,000 x (42-30) = $24,000

24 Increase Premium Subsidy? Estimate $5k per employee: $5,000 x 5 = $25,000 Existing MOE obligation: $1,800 (MOE) x 5 = $9,000 Total annual cost: $34,000 Pay Penalty? Affordability penalty: $15,000 Savings to district (MOE): - $9,000 Total annual cost: $6,000

25 Proposed safe harbor: IRS Notice o Affordability based on employee s wages from that employer (W-2, Box 1) Calendar year determination Self-only coverage o Guidance will also address partial-year employment Effective date: o January 1, 2014

26 2012: Uniform summary of benefits (TRS) 2013: o Notice to new employees about state exchange o Flexible spending account changes o W-2s issued for 2012 earnings must include cost of employer-sponsored coverage 2014: Report to HHS on health insurance plan Certify to IRS that coverage is offered TBD (2014?): Automatic enrollment (with opt out) if 200 or more employees

27 Prescription required for over-the-counter medications Effective 2013: employee contribution is limited to $2,500 annually Start planning now

28 Effective 2018 Health plan administrator is subject to 40% excise tax on value of employer-provided coverage exceeding thresholds o $10,200 for employee-only coverage o $27,500 for other coverage

29 Example 1: TRS-ActiveCare Tier 3 premium: $584/mo. x 12 = $7,008 $10,200 - $7,008 = $3,102 Premium would have to increase 45.5% by 2018 to be subject to Cadillac tax

30 Example 2: TRS-ActiveCare Tier 3 premium: $1,461/mo. X 12 = $17,532 $27,500 - $17,532 = $9,968 Premium would have to increase 57% by 2018 to be subject to Cadillac tax

31 Now: Nondiscrimination (regulations are coming) Flexible spending accounts (2013) W-2 disclosures (2013) Later: Administrative responsibilities (2014) Affordability (2014) Cadillac tax (2018)

32 Pay or Play Plan design changes (TRS-ActiveCare districts) Grandfather status (TRS-ActiveCare districts) Early retiree reinsurance

33 Thank you!