It is the sweet, simple things in life which are the real ones after all.. CPAHU October CE Meeting

Transcription

1 It is the sweet, simple things in life which are the real ones after all.. CPAHU October CE Meeting

2 Heidi M. Bianco, CEBS, CHRS Director of Compliance and HR Consulting AIA/Benefits Resource Group October 14,

3 . It is the sweet, simple things in life which are the real ones after all. 3 The contents of this presentation should not be construed as legal or tax advice, or a legal or tax opinion on any specific facts or circumstances. These materials are intended for general information purposes only, and you are urged to consult a lawyer or tax counsel concerning your own situation and any specific legal questions you may have.

4 Review of ACA Mandates Other Provision Additional Notices and Fees What is yet to come Questions. 4

5 Individual Mandate What and when Employer Shared Responsibility Pay or Play Determining ALE When must employer comply Counting Variable Hour Employees It is the sweet, simple things in life which are the real ones after all. 5

6 All US citizens must have MEC by 1/1/2014 Individual Mandate: must procure MEC coverage - kinda MEC = Minimum Essential Coverage Group plans, Medicaid, Tri-Care, Medicare, CHIP, Exchange plans Adults who fail to obtain coverage Penalty / Tax / Shared Responsibility greater of : $95 or 1% of household MAGI : $325 or 2% : $695 or 2.5% - Indexed thereafter Penalty for dependents too It is the sweet, simple things in life which are the real ones after all. 6

7 It is the sweet, simple things in life which are the real ones after all. 7 When can individual enroll? Only during the exchange open enrollment (on or off the exchange) /1/2013 3/31/ /15/2014 2/15/ maybe follow Medicare OE? Special Enrollment - Life events see Life Event Comparison - COBRA cannot drop COBRA coverage to enroll in exchange outside of OE. Notice additional permitted election changes for section 125 plans

8 Pay or Play Review Applicable Large Employers (ALE) must offer adequate and affordable coverage to full time employees and their dependents or pay a penalty (or two) Employee certified for subsidy to trigger any penalty It is the sweet, simple things in life which are the real ones after all. 8

9 It is the sweet, simple things in life which are the real ones after all. 9 PAY PENALTY Minimum Essential Coverage Offered to at least 95% of FT employees and dependents (FT = 30 hours per week) Can use look back for variable hour employees Failure + subsidy certification yields monthly penalty COUNT: All FT employees SUBTRACT: = = % = % = 2016 MULTIPLY: $ each month ($2,000 per year)

10 It is the sweet, simple things in life which are the real ones after all. 10 PLAY PENALTY Adequate: at least 60% actuarial value AND Affordable: Based on lowest cost, single only coverage, EE contribution may not exceed - 9.5% of Household Income (HHI) Most likely one to use Safe Harbors - W2, Rate of pay, Federal Poverty Level (FPL) Failure + subsidy certification yields monthly penalty COUNT: All affected FT employees MULTIPLY: $ each month ($3,000 per year) May not exceed Pay penalty

11 Aggregate employer per IRC 414 Count employees in previous calendar year FT + FTE per month AVERAGED over the year FT > 30 hours /week FTE = add all non FT hours divide by 120 If annual average > 50 then ALE For 2015 only can use any consecutive 6 month period in 2014 See Determining ALE Status It is the sweet, simple things in life which are the real ones after all. 11

12 Originally 1/1/2014 Delayed until 1/1/2015 February 12, 2014 additional transition relief Employers in the ALE group must comply 1/1/2016 Employers in have some relief in 2015 only - Must offer MEC to 70% not 95% - Penalty for not offering MEC is FT less 80 rather than 30 Fiscal Plan Year Transition Relief applies See Transition Relief Summary It is the sweet, simple things in life which are the real ones after all. 12

13 In pay or play must offer coverage to FT employees = 30 hours per week Must know who meets this to avoid penalty To determine FT status for variable hour employees two options Look at them each month either in or out Use look back method It is the sweet, simple things in life which are the real ones after all. 13

14 Measure employees over a period of time to determine if FT or not. Apply an admin period to do the calculation. That classification is set for a period of time called a stability period. Measurement periods can be from 3 to 12 months Administrative periods can be no longer than 90 days Stability periods can be from 6 to 12 months. The measurement period cannot be longer than the stability period Employers have choices should document these decisions See Determining FT Employees It is the sweet, simple things in life which are the real ones after all. 14

15 Allows employer to adopt two additional reasons to permit election changes under section 125 Fiscal plan years and special enrollment Individuals in their stability period who s hours drop below 30 per week It is the sweet, simple things in life which are the real ones after all. 15

16 90 day waiting period 30 hour = full time employee Dependents covered to age 26 EHB Deductible limits gone Elimination of annual limits Maximum out of pocket FSA limited to $2,500 for medical It is the sweet, simple things in life which are the real ones after all. 16

17 Effective first day of plan year on or after 1/1/2014 Waiting period cannot exceed 90 days from day of eligibility Waiting period = period that must pass before coverage is effective for otherwise eligible employee or dependent. Eligibility Waiting Period. 17

18 Permissible eligibility conditions are not waiting periods Offering coverage to full time employees Offering coverage to employees at a certain location Cumulative hours of service eligibility permitted Must be no more than 1,200 hours of service One time only, cannot be imposed each year. 18

19 Existing waiting periods expire if more than 90 days has run by the effective date (first day of plan year in 2014) Must allow entry by 91 st day. Can not use first of the month if using the full 90 day period. 19

20 This rules applies to three different sections of ACA In determining ALE In determining which employees must be offered coverage to comply with pay or play. So to comply would need to apply the 30 hour FT equivalent in 2015 for ALE in the 100+ range and in 2016 for ALE in range SHOP coverage requires offering coverage to FT employees where FT = 30 hours It is the sweet, simple things in life which are the real ones after all. 20

21 Effective 1/1/2014 all group plans (grandfathered and non-grandfathered) which offer dependent coverage must cover dependents to age 26. Employers must cover dependents for the entire month to count as having offered them coverage caution for terminating dependents when reaching age 26. It is the sweet, simple things in life which are the real ones after all. 21

22 Applies to small fully insured plans (nongrandfathered) Deductible limits ($2,000/$4,000) REPEALED! Elimination of Annual/Lifetime Limits 1/1/2014 Only limits on EHB Limits on dollar amount of benefits Visit limits are still permissible Caution combining visit-per-year limit with dollarper-visit limit on same benefit is not allowed It is the sweet, simple things in life which are the real ones after all. 22

23 Applies to all plans small and large group Maximum out of pocket (MOOP) - Includes deductibles, co-insurance and co-pays - Indexed each year NOT the same as QHDHP OOP - See Table of Limits It is the sweet, simple things in life which are the real ones after all. 23

24 FSA for medical limited to $2,500 Employers can choose between Grace Period Carry-over up to $500 Nothing Caution FSA can impact HSA eligibility It is the sweet, simple things in life which are the real ones after all. 24

25 SBC and Uniform Glossary Marketplace Notice Health Insurance Exchange Update COBRA notices include Marketplace Grandfathered plans notice W-2 reporting (over 250) Informational Reporting in 2015 PCORI, Transitional Reinsurance It is the sweet, simple things in life which are the real ones after all. 25

26 Effective the first plan year on or after 9/23/12 Distribution During OE, to newly eligible, upon request Must be prominent can t bury it Electronic Distribution rules apply Carriers prepare and provide to employers for distribution for fully insured. Self funded TPA or plan sponsor Ultimately Plan Sponsor responsibility It is the sweet, simple things in life which are the real ones after all. 26

27 Required to be distributed to all employees by October 1, 2013, new hires within 14 days No guidance on updating the notice Would be best practice to update when medical benefit plans change Good faith compliance no penalties Model notice: It is the sweet, simple things in life which are the real ones after all. 27

28 Update COBRA notices and election forms to include information on the Marketplace All employers should be utilizing the update forms to be fully compliant It is the sweet, simple things in life which are the real ones after all. 28

29 It is the sweet, simple things in life which are the real ones after all. 29 Grandfathered plans are required to provide a statement that they are intended to be grandfathered each year with all distributed materials ons/grandfatheredhealthplans.html

30 Employers that filed at least 250 W-2 s in the previous year must include aggregate benefit costs in box 12. For detailed information on what to include and how to calculate see the IRS link: Employer-Sponsored-Health-Coverage It is the sweet, simple things in life which are the real ones after all. 30

31 Two reporting requirements 6055 Reporting MEC coverage - Exchanges (Marketplace) will report - Carriers will report for insured plans - Employer will report for self-funded plans 6056 Applicable Large Employers (ALE) - reporting adequate and affordable coverage - full time employees and dependents Reported on a calendar year basis First reporting year will be 2015, so report in January/February

32 Final regulations allowed combined reporting for employee statement filed by January 31 Self-insured, ALE plans will file a combined 6055 and 6056 report of Form 1095-C Fully-insured, ALE plans will file on Form 1095-C but will only complete 6056 section. Form 1094-C for transmittal to IRS (2/28 or 3/31 if electronic) 6055 reporting entities that are NOT ALE will file on Form 1095-B and 1094-B (transmittal). 32

33 Draft forms, instructions and Q&A s released this summer Links to the draft forms It is the sweet, simple things in life which are the real ones after all. 33

34 It is the sweet, simple things in life which are the real ones after all. 34

35 It is the sweet, simple things in life which are the real ones after all. 35

36 It is the sweet, simple things in life which are the real ones after all. 36 PCORI Fee Due July 31 of the year following the plan year end. $1 first year, $2 the second year, $2.08 in the third year, indexed thereafter Self-funded plans including HRA s Transitional Reinsurance fee Report Enrollment data by 11/15/14. Then HHS will bill in two installments (12/15 and 4 th Q of the following year Self-funded group health plans Carrier files both of these for fully insured plans See Fees Compliance Sheet

37 Cadillac Tax SHOP with choices Sunset of fees Sunset of Non-compliant plans Small group definition 50 to 100 HPID Health Plan Identifier It is the sweet, simple things in life which are the real ones after all. 37

38 Beginning in 2018, a 40 percent excise tax will be imposed on the value of health insurance benefits exceeding a certain threshold. The thresholds are $10,200 for individual coverage and $27,500 for family coverage (indexed to inflation). The thresholds increase for individuals in high-risk professions and for employers that have a disproportionately older population. It is the sweet, simple things in life which are the real ones after all. 38

39 Still no regulatory guidance Applies to insured and self-insured plan, plans for self-employed, health FSAs, MSAs, HRAs, and (probably) pre-tax HSA contributions. Does not apply to stand alone insured dental / vision plans It is the sweet, simple things in life which are the real ones after all. 39

40 SHOP small employers purchasing group coverage on the Marketplace Originally included small employers being able to offer choices That was delayed from 2014 into 2015 and has been delayed one more year in 18 States - Alabama, Alaska, Arizona, Delaware, Illinois, Kansas, Louisiana, Maine, Michigan, Montana, New Hampshire, New Jersey, North Carolina, Oklahoma, Pennsylvania, South Carolina, South Dakota, West Virginia It is the sweet, simple things in life which are the real ones after all. 40

41 GOOD NEWS PCORI fee ends for plan years ending after September 30, 2019 Transitional Reinsurance Fee ends after 2016 It is the sweet, simple things in life which are the real ones after all. 41

42 Small group market transition relief allows non-compliant plans to continue through Non-compliant Plans means plans that are not age-based, or meet EHBs Extended for policies years beginning on or before 10/1/2016 It is the sweet, simple things in life which are the real ones after all. 42

43 It is the sweet, simple things in life which are the real ones after all. 43 Small Group Definition In ACA regulations defined as 100, but States permitted to define until 2016 PA defined small group as 1-50 ATNE (average total number of employees) Effective 2016 groups up to 100 will be considered small group and subject to the small group underwriting requirements. NOTE do not confuse with ALE definition that doesn t change! -> large group for pay or play and small group for underwriting!

44 Health Plan Identifier (HPID) Required for self-funded plans Large plans = claims over $5 million must apply for HPID by November 5, 2014 Small plans have until November 5, 2015 Here is the link to CMS for more information and how to apply Simplification/Affordable-Care-Act/Health-Plan-Identifier.html It is the sweet, simple things in life which are the real ones after all. 44

45 It is the sweet, simple things in life which are the real ones after all. 45

46 April 2014 Determining Applicable Large Employer Status Applicable Large Employers (ALE) are subject to the employer shared responsibility under the Affordable Care Act. Determining large employer status is the first step to compliance with the employer shared responsibility provisions. Controlled Group/Aggregation Employers subject to the IRC 414 controlled group regulations must aggregate all employers under common ownership in determining ALE status. As the 414 regulations are complex, legal or tax counsel are recommended to determine if the controlled group or aggregation rules apply. Counting The employer shared responsibility rules apply to employers who are determined to have 50 or more Full Time Equivalent (FTE) employees in the previous calendar year. This calculation is always performed on the previous calendar year, regardless of the employer s plan year for benefits purposes. Remember to aggregate employers subject to the controlled group rules. The calculation is performed monthly and then averaged over the entire year. Employees who work 30 or more hours per week are considered full time and count as one. A full time equivalent calculation is utilized for employees who work less than 30 hours per week (part time). Part time employees have their hours capped at 120 hours for the month. All of the part time hours are added together and then divided by 120 to determine a part time equivalent. The number of full time employees is added the part time equivalent for a total FTE for the month. This calculation is performed for each month of the year keeping all fractions. The final step is to average the monthly totals over the full 12 months, dropping any fractions. If the average over the year is 50 or more, the employer is considered to be an Applicable Large Employer. Seasonal Employees Seasonal workers are taken into account in determining the number of average employees. However, an employer is not considered to employ more than 50 full-time employees if: 1. The employer's workforce exceeds 50 full-time employees (including FTEs) for 120 days or fewer during a calendar year, and 2. The employees in excess of 50 employed during such 120-day period are seasonal workers. Compliance Corner, provided by AIA Benefits Resource Group, provides you with the most up-to-date information regarding industry news as well as legislation and regulatory activities affecting your benefits plan offerings. This communication is not intended to be legal advice and should not be construed as legal advice. If you have any legal questions or concerns about your plan, AIA recommends seeking counsel from an ERISA attorney.

47 Summary of Calculation For each month: Add all full time employees (work 30 or more hours per week) Add all the part time hours (work less than 30 hours per week, capped at 120 per month) divide by 120 = full time equivalent Add the full time and the full time equivalent for a monthly total Annual Average Add each month s total and divide by 12 for the annual average Check for Seasonal Exemption Transition Relief The employers shared responsibility provisions were effective on January 1, 2014, but were delayed until January 1, 2015 due to a delay in the informational reporting requirements. Additional transition relief is available for 2015 as follows: For the 2015 calendar year, an employer may determine its status as a large employer by reference to a period of at least six consecutive calendar months, as chosen by the employer, during the 2014 calendar year (rather than the entire 2014 calendar year). Whether an employer meets the requirements of the seasonal worker exception for 2015 is based on the calendar year, rather than on the calendar months chosen by the employer under this 2015 transition relief, if applicable. Employers with an FTE count of 50 to 99 are not required to comply with employers shared responsibility provisions until January 1, The following criteria must be met to be eligible for this transition relief. o Maintenance of Workforce and Aggregate Hours of Service. During the period beginning on February 9, 2014, and ending on December 31, 2014, the employer does not reduce the size of its workforce or the overall hours of service of its employees in order to satisfy the workforce size condition. (A reduction in workforce size or overall hours of service for bona fide business reasons will not be considered to have been made in order to satisfy the workforce size condition.) o Maintenance of Previously Offered Health Coverage. Except as expressly permitted, during the "coverage maintenance period" the employer does not eliminate or materially reduce the health coverage, if any, it offered as of February 9, "Coverage maintenance period" means: For an employer with a calendar year plan, the period beginning on February 9, 2014, and ending on December 31, 2015, and For an employer with a non-calendar year plan, the period beginning on February 9, 2014, and ending on the last day of the plan year that begins in o Certification of Eligibility for Transition Relief. The employer certifies on a prescribed form that it meets the eligibility requirements set forth above. Forthcoming final regulations related to employer information reporting are expected to provide that an employer subject to the requirements who qualifies for transition relief will provide this certification as part of the transmittal form it is required to file with the IRS. Compliance Corner, provided by AIA Benefits Resource Group, provides you with the most up-to-date information regarding industry news as well as legislation and regulatory activities affecting your benefits plan offerings. This communication is not intended to be legal advice and should not be construed as legal advice. If you have any legal questions or concerns about your plan, AIA recommends seeking counsel from an ERISA attorney.

48 September 2014 Transition Relief There are numerous transition relief provisions in the Affordable Care Act. This communication is intended to summarize the various transition relief provisions. Relief During 2014 No "Pay or Play" Penalties Assessed Notice provides as transition relief that no "pay or play" penalty applies for The "pay or play" provisions are effective for 2015, subject to other transition relief outlined below. Shorter Period Permitted for Determining Large Employer Status Rather than being required to use the full twelve months of 2014 to measure whether it has the requisite number of full-time employees (or equivalents), an employer may measure during any consecutive six-month period (as chosen by the employer) during For example, an employer could use a period of at least six months through August 2014 to determine whether it is subject to the "pay or play" requirements and, if it is, the period from September through December 2014 to make any needed adjustments to its plan (or to establish a plan). Relief During 2015 Employers with 50 to 99 Full-Time Employees Transition relief is available for certain large employers with respect to all of 2015 and, for non-calendar plan years that begin in 2015, for the portion of that 2015 plan year that falls in An employer is generally eligible for this transition relief if it satisfies the following conditions: Limited Workforce Size. The employer employs on average at least 50 full-time employees (including FTEs), but fewer than 100 full-time employees (including FTEs) on business days during Maintenance of Workforce and Aggregate Hours of Service. During the period beginning on February 9, 2014, and ending on December 31, 2014, the employer does not reduce the size of its workforce or the overall hours of service of its employees in order to satisfy the workforce size condition. (A reduction in workforce size or overall hours of service for bona fide business reasons will not be considered to have been made in order to satisfy the workforce size condition.) Maintenance of Previously Offered Health Coverage. Except as expressly permitted, during the "coverage maintenance period" the employer does not eliminate or materially reduce the health coverage, if any, it offered as of February 9, "Coverage maintenance period" means: o For an employer with a calendar year plan, the period beginning on February 9, 2014, and ending on December 31, 2015, and o For an employer with a non-calendar year plan, the period beginning on February 9, 2014, and ending on the last day of the plan year that begins in Certification of Eligibility for Transition Relief. The employer certifies on a prescribed form that it meets the eligibility requirements set forth above. Forthcoming final regulations related to employer information reporting are expected to provide that an employer subject to the requirements who qualifies for transition relief will provide this certification as part of the transmittal form it is required to file with the IRS. Compliance Corner, provided by AIA Benefits Resource Group, provides you with the most up-to-date information regarding industry news as well as legislation and regulatory activities affecting your benefits plan offerings. This communication is not intended to be legal advice and should not be construed as legal advice. If you have any legal questions or concerns about your plan, AIA recommends seeking counsel from an ERISA attorney.

49 New Employers The relief for employers with at least 50 but fewer than 100 full-time employees is also available to new employers (that is, employers that are not in existence on any business day in 2014). For new employers that would be subject to the "pay or play" requirements under the general rules in the final regulations, the special transition relief applies if the employer certifies that it: Reasonably expects to employ and actually employs fewer than 100 full-time employees (including FTEs) on business days during 2015; and Reasonably expects to meet and actually meets the standards relating to maintenance of workforce and aggregate hours of service and of previously offered health coverage, as measured from the date the employer is first in existence. Offers of Coverage for January 2015 Generally, if an employer fails to offer coverage to a full-time employee for any day of a calendar month, that employee is treated as not offered coverage during the entire month. Solely for purposes of January 2015, if an employer offers coverage to a full-time employee no later than the first day of the first payroll period that begins in January 2015, the employee will be treated as having been offered coverage for January Dependent Coverage The transition relief in the preamble to the final regulations generally extends the transition relief that had been provided for plan years that begin in 2014 (2014 plan years) to plan years that begin in 2015 (2015 plan years). Under this transition relief, an employer that takes steps during its 2014 plan year toward offering dependent coverage will not be subject to a "pay or play" penalty solely on account of a failure to offer coverage to dependents for that plan year. This extended transition relief applies to employers for the 2015 plan year for plans under which: Dependent coverage is not offered, Dependent coverage that does not constitute minimum essential coverage is offered, or Dependent coverage is offered for some, but not all, dependents. The transition relief is not available to the extent the employer had offered dependent coverage during either the plan year that begins in 2013 (2013 plan year), or the 2014 plan year and subsequently dropped that offer of coverage. The transition relief, as extended, applies only for dependents who were without an offer of coverage from the employer in both the 2013 and 2014 plan years and if the employer takes steps during the 2014 or 2015 plan year (or both) to extend coverage under the plan to dependents not offered coverage during the 2013 or 2014 plan year (or both). Note: Final rules clarify that for purposes of pay or play, a child is a dependent for the entire calendar month during which he or she attains age 26. Compliance Corner, provided by AIA Benefits Resource Group, provides you with the most up-to-date information regarding industry news as well as legislation and regulatory activities affecting your benefits plan offerings. This communication is not intended to be legal advice and should not be construed as legal advice. If you have any legal questions or concerns about your plan, AIA recommends seeking counsel from an ERISA attorney.

50 Relief for Non-Calendar Year Plans The preamble to the final regulations provides three pieces of transition relief addressing non-calendar year plans: Pre-2015 eligibility transition relief; Significant percentage transition relief (all employees); and Significant percentage transition relief (full-time employees). The first piece of relief generally addresses employees that are already eligible to participate in the non-calendar year plan. Specifically the pre-2015 eligibility transition relief provides that for any employees (whenever hired) who are eligible for coverage on the first day of the 2015 plan year under the eligibility terms of the plan as of February 9, 2014, (whether or not they take the coverage) and who are offered affordable coverage that provides minimum value effective no later than the first day of the 2015 plan year, the employer will not be subject to a potential penalty until the first day of the 2015 plan year. The remaining two pieces of relief generally address employees that have not been eligible to participate in the noncalendar year plan. They provide that if the employer meets certain requirements generally related to the portion of the employer's employees already eligible for or participating in the non-calendar year plan, the relief may be extended to those employees that have not been eligible to participate. The preamble to the final regulations provides additional information on the rules for determining whether an employer is eligible for this relief. All of this transition relief applies for the period before the first day of the first non-calendar year plan year beginning in 2015 (the 2015 plan year) but only for employers that maintained non-calendar year plans as of December 27, 2012, and only if the plan year was not modified after December 27, 2012, to begin at a later calendar date. Coordination with Other Transition Relief How does the transition relief for employers with fewer than 100 full-time employees coordinate with other transition relief available under the final regulations? For periods on or after January 1, 2016 (or, if applicable, for any period after the last day of the 2015 plan year) the transition relief for 2015 generally is not available. An employer may, however, use the shorter period in 2014 permitted for determining large employer status for 2015 in determining large employer status and full-time employee count for 2015 (but not for any subsequent year). Compliance Corner, provided by AIA Benefits Resource Group, provides you with the most up-to-date information regarding industry news as well as legislation and regulatory activities affecting your benefits plan offerings. This communication is not intended to be legal advice and should not be construed as legal advice. If you have any legal questions or concerns about your plan, AIA recommends seeking counsel from an ERISA attorney.

51 April 2014 Determining Full Time Employees An employer's number of full time employees is important for multiple reasons related to the Affordable Care Act (ACA). First for determining whether the employer shared responsibility ( pay or play ) requirements apply to the employer and second, whether the employer owes a penalty (and the amount of any penalty). An employer identifies its full time employees based on each employee's hours of service. Who is a Full Time Employee? For purposes of "pay or play," an employee is a full time employee for a calendar month if he or she averages at least 300 hours of service per week (130 hours of service in a calendar month is treated as the monthly equivalent of at least 30 hours of service per week). The final rules provide two methods employers may use to determine whether an employee has sufficient hours of service to be a full time employee: One method is the monthly measurement method under which an employer determines each employee's statuss by counting the employee's hours of service for each month. The second method is the look back measurement method under which an employer may determine the status of an employee during a future "stability period" based upon the hours of service of the employee in a prior "measurement period.." (This method may be used only for variable hour employees for whom it cannot be determined if they willl work the 30 hours per week or 130 per month.) The final rules describe approaches that can be used for various circumstances, such as for employees who work variable hour schedules, seasonal employees, and employees of educational organizations. Hours of Service Generally, an hour of service means each hour for whichh an employee is paid, or entitled to payment, for the performance of duties for the employer, and each hour for which an employee is paid, or entitled to payment, for a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. An hour of service does not include any hour of service performed ass a bona fide volunteer, as part of a federal work the study program (or a substantially similar program of a state or political subdivision thereof) or to the extentt compensation for services performed constitutes income from sources outside the United States. Look Back Measurement Method Employers may utilize the look back method when it cannot reasonably be determined if the employee will work 30 hours per week. The rules surrounding this method can be administrativelyy complex, but for many industries will be required to t fully comply with the pay or play regulations. Employers will selectt a period during which they will measure employees hours, followed by an administrative period. Finally, based on the measurement period results, employees will be considered full time or not full time during a stability period, resultingg in the employee either being eligible for medical benefits or not. Compliance Corner, provided by AIA Benefits Resource Group, provides you with the most up-to-date information regarding industry news as well as legislation and regulatory activities affecting your benefits plan offerings. This communication is not intended to be legal advice and should not be construed as legal advice. If you have any legal questions or concerns about your plan, AIA recommends seeking counsel from an ERISA attorney.

52 Employers have several choices in utilizing this method. The regulations permit the following for ongoing employees (there are different rules for new hires) known as the Standard measurement, administrative and stability periods: Measurement periods can be from 3 to 12 months Administrative periods can be no longer than 90 days Stability periods can be from 6 to 12 months. The measurement period cannot be longer than the stability period For convenience most employers will want to coordinate the stabilityy period with their plan year, so the 12 month measurement period will probably be the most prevalent. There could, however, be specific business reasons to utilize a different period length. To determine an appropriate standard measurement period an employer could start at the plan year beginning date, then back up 90 days (or a shorter period like 2 months) for an administrative period. From there the measurement period would be determined. For example, for a 2015 calendar year plan (January 1 through December 31) the look back method could be as follows: Measurement period = November 1, 2013 through October 31, 2014 Administrative period = November 1, 2014 through December 31, 2014 Stability period = January 1, 2015 through December 31, 2015 For new hires the rules requiree the individual to be measured and, either offered benefits, or determined to not be eligible, by the end of 13 th month following their date of hire (DOH). This is knownn as the initial measurement, administrative and stability periods. The latest effective date for coverage would be the first day of the 14 th month following their DOH. A reasonable approach would be to measure the new hire from their DOH for 12 months with a 122 month stability period running from the first day of the 14 th month after the DOH.. Once the new hire completes a standard measurement period, they will be included with all other variable hour employees. When transitioning a new hire from their initial stability period to an ongoing stability period the rule of thumb is to provide benefits at the earliestt date based on the benefit period. A best practice would include a review from a benefits consultant to determine and document the standardd and initial periods to assure consistent application. Special Rules Additional rules are still being considered for determining hours of service for certain categories of employees whose hours are particularly challenging to identify or track, or for whom the general rules for determining hours of service may present special difficulties (including adjunct faculty, commissioned salespeople and airline employees), as well as certain categories of work hours associated with some positionss of employment, including layover hours and on call hours. Until further guidance is issued, employers are required to use a reasonable method of crediting hours of service that is consistent with the requirements under the law. The preamble to thee final rules includes examples of methods that are reasonable and that are not reasonable, including a method that is considered reasonable for crediting hours of service for f adjunct faculty members. Compliance Corner, provided by AIA Benefits Resource Group, provides you with the most up-to-date information regarding industry news as well as legislation and regulatory activities affecting your benefits plan offerings. This communication is not intended to be legal advice and should not be construed as legal advice. If you have any legal questions or concerns about your plan, AIA recommends seeking counsel from an ERISA attorney.

53 May 2014 Fees The ACA created a number of new fees to be paid by employers and/or carriers. The two fees that will impact employers most directly are the PCORI fee and the Transitional Reinsurance fee. Both require specific reporting. Patient-Centered Outcomes Research Institute Fees (PCORI) Employers that sponsor certain self-insured health plans are responsible for new fees under Health Care Reform to fund the Patient-Centered Outcomes Research Institute (PCORI). The fees will support research to evaluate and compare health outcomes and the clinical effectiveness of certain medical treatments, services, procedures, and drugs. Affected Self-Insured Plans PCORI fees are imposed on plan sponsors of applicable self-insured health plans for each plan year ending on or after October 1, 2012, and before October 1, Applicable self-insured health plans generally include any plan providing accident or health coverage if any portion of the coverage is provided other than through an insurance policy, including health reimbursement arrangements (HRAs) and health flexible spending arrangements (FSAs) that are not treated as excepted benefits. Calculating the Fee The fee for an employer sponsoring an applicable self-insured plan is two dollars (one dollar for plan years ending before October 1, 2013) multiplied by the average number of lives covered under the plan. For plan years ending on or after October 1, 2014, the fee will increase based on increases in the projected per capita amount of National Health Expenditures. How to Report and Pay the Fee Plan sponsors of applicable self-insured health plans are required to report and pay the fee for a plan year no later than July 31st of the calendar year immediately following the last day of the plan year to which a fee applies. Thus, the first PCORI fees are due by July 31, The final regulations do not permit or include rules for third-party reporting or payment of the PCORI fee. Fees are reported and paid using IRS Form 720, Quarterly Federal Excise Tax Return. Click here for Instructions. Transitional Reinsurance Each state is required to establish a temporary reinsurance program for non-grandfathered plans in the small group and individual market, to which health insurers and group health plans are required to contribute. This program will be in operation from 2014 through 2016 and is basically insurance for insurers; that is, it shifts the risk of covering high expenses from the primary insurer to a reinsurer. Compliance Corner, provided by AIA Benefits Resource Group, provides you with the most up-to-date information regarding industry news as well as legislation and regulatory activities affecting your benefits plan offerings. This communication is not intended to be legal advice and should not be construed as legal advice. If you have any legal questions or concerns about your plan, AIA recommends seeking counsel from an ERISA attorney.

54 Affected Self-Insured Plans Contributing Entities are required to make contributions toward reinsurance payments. A contributing entity is defined as an insurer or third-party administrator on behalf of a self-insured group health plan. With respect to insured coverage, insurers are liable for making reinsurance contributions. With respect to selfinsured plans, the plan is liable, although a third-party administrator or administrative-services only contractor may be used to transfer reinsurance payments on behalf of a self-insured plan, at that plan's discretion. Thus, although self-insured plans are ultimately liable for reinsurance contributions, a third-party administrator or administrative-services only contractor may be used for transfer of the contribution payments. Calculating the Fee HHS is required to establish a national reinsurance contribution rate each year. The amount of the reinsurance contribution must be based on the statutory requirement to collect $12 billion for 2014 ($10 billion for the reinsurance program and $2 billion for the U.S. Treasury). (The combined amount will decrease to $8 billion for 2015 and $5 billion for 2016.) The annual per capita contribution rate for 2014 is $63 ($5.25 per month). HHS announced an annual contribution amount of $44 per covered life (about $3.67 per month) for How to Report and Pay the Fee Each contributing entity must make the reinsurance contributions annually. Enrollment data must be provided to HHS by November 15 (generally calculated based on January through September data, even for non-calendar-year plans). Contributions will be paid in two installments with the first installment reflecting the actual reinsurance contribution (plus HHS s administrative costs) and the second reflecting payments allocated to the U.S. Treasury. The first installment will be invoiced by December 15 of the benefit year (i.e., the calendar year for which coverage is provided), and the second installment in the fourth quarter of the following calendar year, with payment for each installment due within 30 days after the invoice date. Both installments will be based on the same enrollment count. Time Period of Application Annual Amount Party Responsible for Payment Timing and Payment Methods to Determine Covered Lives for Insured Plans PCORI Fees Plan and policy years ending on or after October 1, 2012 and before October 1, 2019 $1.00 per covered life for policy or plan years ending before October 1, 2013; $2.00 per covered life thereafter (as adjusted) Plan sponsor for a self-insured plan; insurer for an insured plan Report and pay fee (using IRS Form 720) by July 31 of the year following the last day of the policy or plan year Actual count, snapshot, member months, or state form methods Transitional Reinsurance Calendar years 2014 to 2016 $63.00 per covered life for 2014 Plan for a self-insured plan; insurer for an insured plan Report annual enrollment count (based on the first nine months of the year) to HHS by November 15 of each year; HHS will determine contribution amount and payment is due within 30 days Actual count, snapshot, member months, or state form methods Compliance Corner, provided by AIA Benefits Resource Group, provides you with the most up-to-date information regarding industry news as well as legislation and regulatory activities affecting your benefits plan offerings. This communication is not intended to be legal advice and should not be construed as legal advice. If you have any legal questions or concerns about your plan, AIA recommends seeking counsel from an ERISA attorney.