Employer Update 2013 R. Edward Johnson, ASA, MAAA Stanley, Hunt, DuPree & Rhine

Transcription

1 Employer Update 2013 R. Edward Johnson, ASA, MAAA Stanley, Hunt, DuPree & Rhine August 7,

2 Who is Stanley, Hunt, DuPree & Rhine (SHDR)? Benefits Administration FSA, HSA & HRA COBRA Administration Retirement Plan Administration Compliance and Administrative Filings Benefits Consulting Healthcare Actuarial Retirement ERISA Compensation Healthcare and Retirement Actuarial Consulting and Flex 2

3 Benefits Consulting & Administration Services SHDR Value Proposition Healthcare Actuarial Traditional Service PPACA Flexible Benefits Administration FSA, HSA, HRA, TSA COBRA and Premium Billing Retirement Defined Benefit Post-retirement Medical ERISA Compliance and Administrative Consulting 3

4 SHDR Value Proposition Manage Costs Employer Funding Financial Accounting Fees Mitigate Risk Fiduciary Compliance and Regulatory Reduce Administrative Burden Optimize Employee Benefit Program The Perfect Client Experience Controllable Client Retention above 98% since

5 Disclaimer Before we get started August 7, 2013 Our presentations provide general information. This is not legal advice. Guidance on many provisions of PPACA are outstanding. New Guidance could be issued regarding PPACA, or more generally, changes to statutes, rules or regulations could be forthcoming that changes the content of this presentation or alters the answers to some questions. Keep this in mind as you listen back to any recordings. Guidance and interpretations relating to these matters are being released on a regular basis. Stanley, Hunt, DuPree & Rhine and BB&T Insurance Service are not providing legal or tax advice. To insure compliance with requirements imposed by the IRS, any discussion of U.S. tax matters contained in this communication (including any attachments) is not intended (and cannot) be used by anyone to avoid IRS penalties. This material is for informational purposes only. 5

6 Health Care Reform: Employer Update 2013 Fines, Fees, Forms And Taxes 6

7 New Exchange Notice Temporary Guidance Model exchange notice Must provide by October 1, 2013 ALL employers subject to FLSA Regardless of plan enrollment status or part time or full time status ALL New Hires At the time of hiring, beginning Oct 1, 2013 Current Employees No later than Oct 1,

8 Now Called Marketplace 8

9 Change to COBRA Notice According to the DOL, some qualified beneficiaries may want to consider and compare health coverage alternatives to COBRA continuation coverage that are available through the Exchanges. Qualified beneficiaries may also be eligible for a premium tax credit for an Exchange plan. Health Care The DOL updated model COBRA election notice is available now. 9

10 SBC New FAQ April 2013 Updated Template For plans beginning on or after and before Includes new statement of whether the plan provides MEC Minimum essential coverage. Includes statement whether the plan meets the MV requirements (minimum value). On page 6 plan or issuer should indicate in designated entry on SBC if plan does or does not provide MEC and meet MV. 10

11 Potential Financial Fee Impact Basis of Assessment Fully Insured Self-Funded Patient Centers Research Institute (PCORI) Fee Insurer Fee Reinsurance Fee $1 PMPY in Year 1 $2 PMPY in Year 2 $2+inflation PMPY in year 3 Begins with PY ending on or after 10/01/12 & before 10/01/19 Fees assessed on earned health insurance premiums, allocated by market share Transitional reinsurance fee to stabilize individual market 2014: $12B 2015: $8B 2016: $5B Carrier should remit payment on behalf of plan 2014: $8B 2015: $11.3B 2016: $11.3B 2017: $13.9B 2018: $14.3B (ongoing fee) Employer will likely have to report on IRS Form 720 (beginning 07/2013) Does not apply Rules issued November 30, : $63 PPPY 2015: $42 PPPY (estimation) 2016: $26 PPPY (estimation) 11

12 HCR Summary Fees & Taxes Tax Basis of Assessment Fully Insured Self-Funded FFE Exchange User Fee 3.5 % of monthly premiums on plans offered through the exchange where the federal government will be operating the exchanges Begins January 1, 2014 Small Group Only Does not apply Risk Adjustment User Fee Fee to support operation of risk adjustment program in States with FFE exchange. Assessed per enrollee in covered plans in exchanges Begins January 1, 2014 Estimated to be no more than $1 per enrollee per year Does not apply High Cost Insurance Tax (Cadillac Tax) Begins January 2018 and beyond Intended to discourage high premiums plans which it is argued tend to encourage overuse of medical plans 40% excise tax on ALL health plans that cost more than $10,200 for single coverage and $27,500 for family coverage annually 12

13 Employer Shared Responsibility Do We Pay or Play? 13

14 One Year Implementation Delay Decision announced Tuesday, July 2 to delay Employer 6056 reporting until 2015 reporting is voluntary in Thus they also delayed enforcement of the Employer Penalty Postpones a major feature of the law and hands ammunition to critics who contend it is unworkable. If employers have no obligation to report coverage, how will the exchanges or the IRS verify that coverage is unaffordable or inadequate? Tim Jost, W&L Law School For a year, Consumers will be on the HONOR System for attesting to income affordability and minimum value offers of insurance by employers 14

15 DELAY of Employer Penalty Officially Transition Relief Continuing to Implement the ACA in a Careful, Thoughtful Manner The Administration is announcing that it will provide an additional year before the ACA mandatory employer and insurer reporting requirements begin. We recognize that this transition relief will make it impractical to determine which employers owe shared responsibility payments (under section 4980H) for Accordingly, we are extending this transition relief to the employer shared responsibility payments. These payments will not apply for Any employer shared responsibility payments will not apply until During this 2014 transition period, we strongly encourage employers to maintain or expand health coverage. Also, our actions today do not affect employees access to the premium tax credits available under the ACA (nor any other provision of the ACA). Mark J. Mazur is the Assistant Secretary for Tax Policy at the U.S. Department of the Treasury. 15

16 What s Still Required Waiting Period 90 days x No Pre Existing conditions OOPM cannot exceed $6,350/$12,700 Essential Health Benefits -no dollar max New Wellness Requirements Small Business Deductible - $2000/$4000 Gold, Silver, Bronze, Platinum Plans Community Rates in Small Groups PCORI Fees MLR Rebate Distributions SBC Summary of Benefits and Coverage Marketplace notice distributed by October 1, 2013 W2 reporting (over 250 forms filed) Other insurance fees reinsurance, HIT tax, Cadillac Tax x x x X = applies to Large Group 16

17 Employer Shared Responsibility Requirements Should you Pay or Play? Who is a Large Applicable Employer? What are the penalties? What are known safe harbors? Share some examples Understand more about subsidies and penalties Offer = Opportunity to enroll or decline Review New Guidance and Definitions change in the ground rules 17

18 PPACA Implementation- Shared Responsibility Employer Penalties If < 50 PPACA PPACA looks to part-time employees to determine fulltime employee equivalents² Key considerations: How many employees do you have? PPACA applicability might be a consideration in determining future hiring decisions in advance of the January 1, 2015, effective date for employer mandate penalties If total full-time and full-time equivalent employees >50 Business is subject to PPACA employer mandate penalty and coverage provisions If total full-time and full-time equivalent employees <50 Business is exempt from PPACA employer mandate penalty and coverage provisions 1. Total part-time hours in one month divided by 120 equals full-time employee equivalents (FTEs). Important: you cannot be penalized for FTEs: it is only relevant to applicability. 18

19 I m a Large Employer -- Now What? Fails to offer coverage to full-time employees and their dependents or Offers coverage to full-time employees that does not meet the law s affordability or minimum value standards Dependent means a child of an employee who has not attained age 26. Dependent does not include the spouse of the employee. Note: This definition of dependent does not apply for purposes of any other section of the Code Source: Shared Responsibility for Employers Regarding Health Coverage; Proposed Rule, Department of the Treasury, January 2,

20 Employer play or pay mandates NO OFFER of minimum essential coverage to full-time employees (and dependents) and at least one employee obtains subsidized exchange coverage Applicable large employer 50 or more full-time equivalent employees Employer offers coverage but minimum essential standards or affordability standards are not met and at least one employee obtains subsidized exchange coverage NEW ** No penalty if offered to at least 95% of all Applicable Large Employer full time employees EXCISE TAX $2,000 annually: Sledgehammer ($ per month) per total number of full-time employees Exclude first 30 FT employees $3,000 annually: Tackhammer ($250 per month) per each full-time employee that receives premium tax credit/ cost-sharing reduction from an exchange (but penalty capped at level as if no minimum essential coverage offered) Source: Shared Responsibility for Employers Regarding Health Coverage; Proposed Rule, Department of the Treasury, January 2,

21 How to determine Minimum Value? Treasury & HHS have provided four options for determining MV MV Calculator Safe Harbor Checklist Actuarial Certification Small Group Market Metal Categories 21

22 Non Calendar Year Transition Relief Non Calendar Year Plans (Still in Play???) Must Have the Fiscal Year Plan Year as of December 27, First, no potential penalty for 12/27/2012 eligibles until the first day of the fiscal plan year starting in Second, if (a) plan was offered to at least one third of the employer s employees (full-time and part-time) (b) the plan covered at least one quarter of the employer s employees, then no penalty if comply on first day of fiscal year. ***Note: guidance has not been issued clarifying if the transitional relief has also been delayed a year. Source: NesxenPruet 22

23 How to determine Affordability? Affordability general rule. Employee s share of the self-only premium for the employer s lowest-cost plan that provides minimum value cannot exceed 9.5% of household income or the employee may be eligible for a premium tax credit to purchase Exchange coverage Safe harbors. Employers can demonstrate they offer coverage meeting the affordability standard by showing the employee premium share for self-only coverage under their lowestcost plan that meets the minimum value standard utilizing the following safe harbors: Form W-2 safe harbor. Employee premium share does not exceed 9.5% of the amount required to be reported in Box 1 of Form W-2. The proposed regulations provide guidance for using the W-2 safe harbor for an employee who was not a full-time employee for the entire calendar year. Application of this safe harbor is determined after the end of the calendar year and on an employee-by-employee basis, taking into account the employee s Form W-2 wages from the employer and the employee contribution. Rate of pay safe harbor. Employee premium share does not exceed 9.5% of the product of multiplying the hourly rate of pay (either each employee s individual rate of pay or the lowest rate of pay paid by a large employer that is a single entity or a large employer member) by 130 hours per month (the benchmark for full-time status for a month under IRC 4980H). Federal poverty line safe harbor. Employee premium share does not exceed 9.5% of the Federal poverty line for one person. The calculation could be done using the most recently published federal poverty guidelines as of the first day of the plan year for the plan offered by a large employer that is a single entity or a large employer member. 23

24 NEW: Affordability and Wellness New Guidance on Wellness MV & Affordability MV -- Recognizing that certain individuals inevitably will face barriers to participation in [in wellness programs] and fail to qualify for rewards, the proposal does not consider reduced cost sharing in wellness programs as counting toward MV with ONE exception: MV may be calculated assuming that every individual satisfies the terms of a nondiscriminatory program aimed at the prevention or reduction of tobacco use. Affordability -- wellness incentives that reduce premiums, however, will not be considered in increasing affordability except, again, that the affordability of plans for tobacco users will be determined on the premiums charged to tobacco users who complete a non-discriminatory wellness program related to tobacco use. 24

25 Affordability Calculation Contribution Planning Federal Poverty Limit - FPL 2013 FPL Approximate Hourly Rate W2 and not Household Income Premiums per 9.5% FPL 1 Unit based on 40 hrs week (2080) Self ONLY 100% $11,490 Medicaid - Possible $91/mo 133% $15,282 Medicaid - Possible $120/mo 200% $22,980 $11.05/hr 9.5% $181/mo 300% $34,470 $16.57/hr 9.5% $272/mo Think Smart. Think Big. Think Better. 400% $45,960 $22.10/hr 9.5% $363/mo (if no Medicaid expansion) $11,310 $7.25 min.wage 9.5% $89/mo at 30 hours 25

26 Employer Mandate Pay or Play Start Pay Play Does the employer have at least 50 fulltime equivalent employees? YES Does the employer offer coverage to > 95% of all full-time employees? YES Does the insurance pay more than 60% of covered health care expenses? AND Do all full-time employees pay less than 9.5% of income for coverage? YES No Penalty as affordable coverage is offered NO NO NO No Penalty for small employers Do any full-time employees obtain subsidized coverage on an Exchange? YES Recheck Monthly Do any full-time employees obtain subsidized coverage on an Exchange YES Recheck Monthly Full-time = 30 or more hrs/wk Full-time equivalents = full-time ee s + (all part-time hrs / 120) $2,000 PENALTY Not offering coverage $3,000 PENALTY Unaffordable coverage Total Penalty* = $2,000 x (full-time EE count - 30) Total Penalty* = $3,000 x each full-time employee receiving subsidized Exchange coverage *Penalties are calculated and assessed monthly ($2000 will be $166.67/mo, $3,000 is $250/mo.). The maximum penalty is the lesser the two penalties. Penalties are expected to increase each year by the growth in insurance premiums. 26

27 Full-Time Status Determination NEW employee is hired Is employee expected to be full-time? (30 hours of service per week/130 hours service per month) If YES, then If unknown, cannot be reasonably determined then Offer coverage to employee within 90 days of hire Start the Initial Measurement Period (IMP) to determine if the employee averages 30 or more hours per week Did the employee average 30 hours in the IMP? If YES, then If No, then Offer coverage for stability period or potentially pay a penalty No offer of coverage is required 27

28 90 day Waiting period When does the 90 day WP apply & to whom? Clear in the text waiting period may not extend beyond 90 days Apply to plan years beginning on or after January 1, Apply to both Grandfathered and Non GF group plans and issuers offering coverage. Cumulative hours of service 1200 hours can be used ( the Departments are confident this is rare) Example: March renewal. In 2013 your policy was a 6 month WP. Adam begins work full time Nov1, 2013 At March 2014 renewal Adam must be given opportunity to enroll March 1, 2014 ( which is 121 days after Adam s start date.) Why? Because on March 1, 2014 the plan would be applying a waiting period that exceeds 90 days. Source: EBIA webinar March 21,

29 Initial Measurement Period: (IMP) Key Terms Preliminary Period of time lasting between 3-12 months for an employer to determine whether or not a NEW variable hour employee is considered full-time. Voluntary The length of the initial measurement period is at the discretion of the employer Standard Measurement Period (SMP) Period of time lasting between 3 and 12 months for an employer to determine if ongoing employees or new variable hour employees who have passed their IMP will be full time. The length of the initial measurement period is at the discretion of the employer Stability Period (SP) If determined to be a FTE during the MP, then must be offered covered during the stability period of at least 6 months or length of MP, if longer, regardless of the number of hours worked during the SP If measured and not FT during MP, then do not have to be offered coverage during SP that can t be any longer than the MP, regardless of the number of hours worked during the SP SP period for new variable hour employees must be the same length as ongoing stability period Administrative Period (AP) Period of time between MP and SP during which employers determine which employees qualify for benefits during the next SP and conduct enrollment Benefits must be offered to FTE during the administrative period Source: EBIA webinar March 21,

30 Full-time Status Safe Harbor Employers may use Measurement and Stability periods that differ in either 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; and Employees located in different states. Source: IRS Notice , IRS Notice , IRS Notice

31 Example: Variable Hour Employee New Hire Administrative Period May 10, 2015 June 30, 2015 Initial Measurement Period May 10, 2014 May 9, 2015 Stability Period July 1, 2015 June 30, Standard Measurement Period Oct. 15, 2014 Oct. 14, 2015 Stability Period Jan. 1, 2016 Dec. 31, 2016 Ongoing Employee Administrative Period Oct. 15, 2015 Dec. 31,

32 Measurement Periods 32

33 Hours of Service Hourly: Must calculate actual hours of service for hours recorded as worked and hours for which for payment is due for: Vacation, Holidays, Illness, Incapacity (including Disability), Layoff, Jury Duty, Military Duty and Leave of Absence Proposed Rules now define: Rehires Break-in-Service Rules Non-Hourly Employee, hourly calculations Source: Shared Responsibility for Employers Regarding Health Coverage; Proposed Rule, Department of the Treasury, January 2,

34 Planning Ahead Preparation Count Assess Costs Decisions Implement Pending requirements for compliance: SBC distribution, new notices, W2, fees PCORI, HIT or reinsurance, determine affordability and MV. Consider control group rules, current full-time eligibility, safe harbor measurement periods, newly eligible under HCR, understand shared responsibility counting. Forecast Pay or Play options use the BB&T tools and Predictive Modeling to help in the assessment including contribution and plan offerings. Tax implication and workforce restructuring. What is best for your culture? Consider talent recruitment and operations. Implementation: Plan design changes, new offerings CDHP, contributions. Reporting IRS reporting and internal measurements. 34

35 Employer Reporting? Communications with Employees, Exchanges and IRS 35

36 Employer communications with employees, Exchanges and the IRS Step 1 Employer provides employees with information about coverage and availability of Exchanges Step 2 Employee provides Exchange with information to determine eligibility for the premium tax credit Step 3 Exchange verifies information and makes preliminary eligibility determination regarding the premium tax credit Step 4 Exchange notifies employer that employee may receive a premium tax credit Employer has right to appeal Exchange s determination of employee s eligibility within 90 days Step 5 Employer files information with IRS and employee 6056 requirements Employee files personal return Step 6 Assessment of employer tax penalties Employer has right to appeal tax liability to IRS Source: Ernst and Young Washington Council 36

37 Summary of annual employer reporting requirements to Treasury/IRS Provision 9002 (amends IRC 6051) 1502 (IRC 6055) 1514 (IRC 6056) Applies to: Employers who issue at least 250 W2 forms annually Health insurance issuers, government agencies, employers that sponsor self-insured plans, and other persons that provide minimum essential coverage to an individual Large employers who are subject to 4980 Due by: Data elements: 1/31/2013 (first due date, 1/31 each year thereafter) The aggregate cost of applicable employer-sponsored coverage, except that this paragraph shall not apply to For employer-sponsored coverage: o o Contributions to Archer MSAs or health savings accounts; or Contributions to a flexible spending arrangement. Note: Guidance requires employers to include in reporting: Major medical Health Flexible Spending Arrangement for the plan year in excess of employee s cafeteria plan salary reduction for all qualified benefits Hospital indemnity or specified illness (insured or self-funded), paid through salary reduction (pre-tax) or by employer Domestic partner coverage included in gross income 1/31/2016 (first due date, 1/31 each year thereafter) 1/31/2016 (first due date, 1/31 each year thereafter) Name, address, tax ID number of insured and all others covered under the policy Dates of coverage during the calendar year Whether coverage is a qualified health plan (QHP) offered through an Exchange For QHPs offered through an Exchange, the amount of cost-sharing subsidies or premium assistance tax credits received For employer-sponsored coverage: o Name, address and employer ID number of the employer maintaining the plan o The portion of the premium paid by the employer o If the coverage is a QHP in the small group market offered through an Exchange Statements to individuals: o Name and address of the person required to submit the return, including phone number of the information contact o Information included in return with respect to the individual Notification of non-enrollment: Not later than June 30 of each year, the Secretary of the Treasury, acting through the IRS and in consultation with the Secretary of HHS, shall send a notification to each individual who files an individual income tax return and who is not enrolled in minimum essential coverage. Such notification shall contain information on the services available through the Exchange operating in the State in which such individual resides. Name, date and employer ID number of the employer Certification as to whether the employer offers full-time employees and their dependents the opportunity to enroll in minimum essential coverage offered under an eligible employer-sponsored plan o Length of any waiting period o Months during the year for which coverage was available o Monthly premium for the lowest-cost option under the plan o Applicable large employer s share of total allowed cost of benefits under the plan The number of full-time employees for each month during the calendar year The name, address, and TIN of each full-time employee during the calendar year and the months (if any) during which such employee (and any dependents) were covered under any such health benefits plans, and Such other information as the Secretary may require Statements to individuals: o o Name and address of the person required to submit the return, including phone number of the information contact Information included in return with respect to the individual 37 Source: Ernst and Young Washington Council 37

38 Think Smart. Think Big. Think Better. 38

39 2014 Marketplace CIGNA 39

40 ACA Implementation: Interaction of 2014 Provisions Cost-sharing Subsidies* Premium Subsidies* * Only Available in Individual Market Transitional Reinsurance* Premiums/Cost of Coverage Modest Incentives to Purchase Coverage Premium Tax Essential Benefit Age Changes Rating Compression Source : AHIP March

41 EHBs in 2014 CIGNA 41

42 Inside and Outside Exchange

43 Outstanding Regulations & Unknowns On the Horizon Auto-enrollment groups over (H) non discrimination rules Exchanges will they work as intended Reporting requirements process for employers in 2015 Source: HHS 43

44 Now is the Time to: Review current eligibility rules, offer to 95% of your workforce Consider if groups traditionally excluded must be eligible (e.g.: W2 temp employees, per diems, adjunct professors) Determine how you track hours if you have variable or seasonal employees Choose a measurement period for variable or seasonal employees Consider current plan s employee costs and affordability Consider adding options to produce affordability if needed, including a high deductible option Redefine health insurance eligibility as those employees averaging 30 hours of service per week Revise plans to include all mandated categories of children ( Biological, Step, adopted, foster, legal wards) Consider if hiring or retention standards need to be changed with respect to Think temporary Smart. Think hire Big. and Think other Better. groups that are not part of your stable workforce. Amend policies so that no employee has a waiting period for health coverage in excess of 90 days. Consult with unions regarding necessary changes to CBA s ( if employees participate in multi-employee plans ensure plan terms comply) Source: Nixon Peabody. 44

45 Thank You! R. Edward Johnson, ASA, MAAA Vice President and Consulting Actuary, Any estimates presented here have been calculated prior to all regulations being issued for the Patient Protection and Affordable Care Act (PPACA). Future regulations may include clarifications, technical corrections or guidance on complex calculations that may be required. As such, these estimates are not actuarial opinions. Financial and design decisions should only be made after careful consideration and not only on the estimates presented here. Additionally, financial and design decisions are the sole responsibility of the company or client attending this presentation. SHDR and its representatives do not offer tax advice. The information provided should not be considered tax or legal advice. Please consult with your individual tax advisor and/or attorney regarding your individual circumstances. 2013, Stanley, Hunt, DuPree and Rhine. All rights reserved. Guidance and interpretations relating to these matters are being released on a regular basis. SHDR is not providing legal or tax advice. To insure compliance with requirements imposed by the IRS, any discussion of U.S. tax matters contained in this communication (including any attachments) is not intended (and cannot) be used by anyone to avoid IRS penalties. This material is for informational purposes only. 45