ABD s Office Hours The Employer Mandate What are the penalties & when do they take effect?

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1 ABD s Office Hours The Employer Mandate What are the penalties & when do they take effect? Ruben D. Reyes, Esq. Asst. Vice President, Lead Benefits Counsel Employee Benefits Division April 9, 2013

2 The Employer Mandate Employer shared responsibility provisions, also known as Play or Pay Fast Facts Effective January 1, 2014 Employers with over 50 full-time equivalent employees The Pay option (penalties) No credible coverage is being offered $2,000 annually ($ per month) per total number of full-time employees. Exclude first 30 full-time employees. The Play option (penalties) Offers minimum essential coverage but it is unaffordable (9.5% or more of employee s W-2 wages) and employee purchases subsidized coverage from exchange $3,000 Annually ($250 per month) per each full-time employee that receives premium tax credit / cost-sharing reduction from an exchange (Capped at penalty calculated as if no minimum essential coverage)

3 Employer Mandate Play or Pay Employer shared responsibility provisions Questions Q: What constitutes a full or part-time employee? A: A FT employee is regularly scheduled to work 30 or more hours a week. Less than 30 hours a week would be considered PT. Employer would not be penalized for no offer of benefits to PT employees Q: What constitutes offering coverage to substantially all employees? A: Offer coverage to at least 95% of FT employees, access for dependent children Q: What constitutes an offer of coverage? A: An opportunity to enroll in the group plan. Annual Open Enrollment period would satisfy this requirement. Q: I do not know what my employee s household income will be. What constitutes affordable coverage? A: EE s contribution for employee-only coverage for lowest cost option, < 9.5% of employee s W-2 wages

4 Employer Mandate Play or Pay Employer shared responsibility provisions Questions Q: Do I need to calculate the total assessment (penalty)? A: No. HHS and IRS will prepare an assessment and deliver to the employer by November of Employers will submit the excise tax (non-deductible) penalty accordingly. Q: The effective date is January 1, 2014, but my plan is on a fiscal year? A: First, for any employees who are eligible to participate in the plan under its terms as of December 27, 2012 (whether or not they take the coverage), the employer will not be subject to a potential payment until the first day of the fiscal plan year starting in Second, if: (a) the fiscal year plan (including any other fiscal year plans that have the same plan year) was offered to at least one third of the employer s employees (full-time and part-time) at the most recent open season; or (b) the fiscal year plan covered at least one quarter of the employer s employees Employer also will not be subject to the Employer Shared Responsibility payment with respect to any of its full-time employees until the first day of the fiscal plan year starting in 2014, provided that those full-time employees are offered affordable coverage that provides minimum value no later than that first day.

5 Employer Mandate Play or Pay Employer shared responsibility provisions Questions Q: How will employees be eligible for government subsidies for coverage? A: Employees who do not have affordable and minimum value coverage through their employer and have income below 400% of the Federal Poverty Level (FPL) will be eligible for government subsidies toward coverage on the exchange. Q: What are the Federal Poverty Level income amounts? A: 400% of the FPL equates to $44,680 for a single person and $92,200 for a family of four. In California, 66% of households have income below 400% of the FPL. Q: What happens if I hire an employee mid year and do not offer coverage. Do I pay the full annual penalty? A: No. The penalty is pro-rated on a monthly basis. This would prevent two employers from paying the penalty for one individual.

6 Thank You Ruben D. Reyes, Esq. Lead Benefits Counsel Employee Benefits ABD Insurance and Financial Services For more information please contact your ABD Team Member April 9, 2013