Determining Full-Time Employees Under the Health Reform Law

Transcription

1 HEALTH REFORM ADVISORY PRACTICE Determining Full-Time Employees Under the Health Reform Law Presented by Edward Fensholt, JD Mark Holloway, JD LBG Compliance Services Lockton Benefit Group 2012 Images courtesy of Thinkstock Click the Lockton Logo to Access the Presentation 1 Agenda 1

2 Agenda 90-Day Waiting Periods Determining Full-Time Employees 30-hours per week What hours? New Regular, Full-Time Employees New Seasonal or Variable Hour Employees Initial Measurement, Administrative and Stability Periods Ongoing Employees Standard Measurement, Administrative and Stability Periods Some Thoughts About Who s Going to Track All of This? 3 90-Day Waiting Periods 2

3 Overview: Waiting Periods PPACA prohibits waiting periods that exceed 90 days Applies to plan years beginning on or after January 1, Applies to insured and self-funded plans; ERISA and non-erisa group health plans Irrespective of the plan s grandfather status or whether employer is subject to play-or-pay penalty Excepted benefits are exempt, such as most dental and vision coverage, health FSAs and stand-alone retiree medical Rule applies to employee and dependent coverage E.g., Cannot impose 90-day waiting period for employees, and require 6- month waiting period for family coverage Waiting period means period that must pass before coverage for an employee or dependent d who is otherwise eligible ibl to enroll under the terms of the plan can become effective Borrowed from definition in the HIPAA portability rules 5 Agency Guidance: Waiting Periods Temporary guidance from agencies applies at least through the end of Not clear if there is an extended delay for non-cy plans IRS guidance provides examples of permissible plan design, but leaves some questions unanswered No good examples provided of impermissible plan design 6 3

4 Agency Guidance: Waiting Periods Plan cannot impose an eligibility condition that is based solely on the lapse of time that is longer than 90 days However, having to meet the plan s eligibility substantive conditions is NOT considered a waiting period (e.g., must qualify as a full-time, salaried employee) If coverage begins later than 90 days due to employee s fault (e.g., didn t get paperwork in earlier) that s not the employer s problem no violation E.g., Plan says coverage begins on first of the month following eligibility, as long as enrollment forms are received; coverage effective date depends solely on when the eligible employee submits his or her paperwork Plans cannot apply a condition for eligibility that is designed to avoid the 90-day rule Special rules apply to variable hour employees Safe harbor if coverage is effective no later than 13 months after employee s start date (deferred until first day of next calendar month for mid-month hire) More on this in a moment... 7 Examples: Permissible Plan Design Waiting period starts only after the person joins an eligible class Employer offers coverage only to full-time employees (as defined in the plan); Alan works part-time beginning January 1,. He moves to full-time status on April day waiting period measured from April 11, 13-month safe harbor (e.g., for variable hours employees) Example: E.g., Colin s employer offers coverage to full-time employees Colin is a variable hour employee employer can t tell on start date whether Colin is full-time The employer may take up to a 12-month measurement period to see if Colin may be considered full-time under the terms of the plan as as long as coverage is effective no later than 13 months after start date (plus any additional time to the first of the month if the employee starts other than on the first of a month) Colin starts on November 26, and averages full-time hours (under the plan) through November 25, Colin is offered coverage effective January 1, 2016 If Colin had started November 1,, coverage would have to be offered effective December 1,

5 Open Issues Can coverage be deferred to first day of the month following 90 days for non-variable hour employees? Probably not; switch to first of the month following 60 days? Can plans require continuous service during the 90-day period and use a fresh start if there is a break in service? Can plans apply benefit-specific waiting periods, such as a one-year wait for organ transplant benefits? Probably not (and these create problems under other laws) When will we get more guidance on these issues? 9 Determining Full-Time Employees A Little Background 5

6 Background Play or Pay Who s in the Boat? Employers with at least 50 full-time equivalent employees on business days in the preceding calendar year (generally speaking) Controlled group calculation 11 Background Play or Pay What Goes on in the Boat? Identify full-time employees (FTEs) Offer all of them (substantially all?) and their dependents some coverage or pay $2,000 (nondeductible) per year x all FTEs (minus first 30) AND If offer all or substantially all employees coverage, the coverage must be: Qualifying (60% actuarial value), and Affordable (E ee-only coverage doesn t cost more the employee more than 9.5% of W-2 pay) or pay $3,000 (nondeductible) per year x each FTE who doesn t receive the offer of Q&A coverage, and obtains subsidized coverage in an insurance exchange 12 6

7 Background Who Are These Full-Time Employees? Health reform law: Individuals working at least 30 hours per week, on average What hours are counted? Guidance is silent, but Notice reflects IRS s thinking Hours paid for working Hours paid for not working (up to 160 hours) Non-hourly employees: Count hours Credit 8 hours for each day for which you d otherwise credit at least 1 hour (if you were counting hours) Credit 40 hours for each week for which you d otherwise credit at least 1 hour (if you were counting hours) What s the averaging period? Average at least 30 hours a week over what period? Ah. Therein lies the rub 13 Calculating Full-Time Employees 7

8 Determining FTEs Basic Concept Familiar if you ve worked with Taft-Hartley or other collectively-bargained plans Look-Back Measurement Period Prospective Stability Period 15 Determining FTEs Basic Concept The guidance employs look-back measurement periods, followed by stability periods, as the main building blocks of full-time employee determinations. 16 8

9 New Regular, Full-Time Employees Determining FTEs New Regular, Full-Time Employees Free pass for first 3 months (calendar months?) Full-Time 18 9

10 Determining FTEs New Regular, Full-Time Employees Track their hours going forward? 19 New Seasonal and Variable Hour Employees 10

11 Determining FTEs New Seasonal and Variable Hour Employees Much more relaxed than earlier IRS thinking Free pass for up to first 12 months! Many employees won t be there that long! Re-hires (for now) look to be treated as new hires! 21 Determining FTEs Seasonal Employees An employee who the employer reasonably and in good faith believes is a seasonal employee The IRS will likely tighten this standard later Variable Hour Employee On hire date, the employer can t reasonably conclude that the employee is expected to work an average at least 30 hours per week, or On hire date the employer expects the employee to work 30 or more hours per week at least initially but the employer expects that full-time employment will be of limited it duration, and can t conclude that t the employee is expected to average at least 30 hours per week over the entire initial measurement period 22 11

12 Determining FTEs New Seasonal or Variable Hour E ees Initial Measurement Period Begins on start date, typically Lasts 3-12 consecutive months (e.g., June 10, - June 9, ) Not necessarily calendar months Employer chooses the length of the period Employer may choose different initial measurement periods for certain, specific different groups of employees Collectively bargained versus non-collectively bargained employees Salaried versus hourly employees Employees of different divisions or subsidiaries, and Employees in different states Start Date Initial Measurement Period Initial Stability Period 23 Determining FTEs New Seasonal or Variable Hour E ees Initial Administrative Period (don t lose sight of the big picture!) Short gaps on either side of the Initial Measurement Period These are handy; they ll ease administration Permit the Initial Measurement Period to begin on first of next month, first of next payroll period, etc. Permit a take a breath pause after the Initial Measurement Period, allow time to tally and average hours, extend offer of coverage (if applicable) and process the application in time (more on this in a moment) Start Date Initial Measurement Period Initial Stability Period 24 12

13 Determining FTEs New Seasonal or Variable Hour E ees Initial Administrative Period Short gaps on either side of the Initial Measurement Period Ease administration Limits: No more than 90 days total (front and back ends combined) Start Date Initial Measurement Period Initial Stability Period 25 Determining FTEs New Seasonal or Variable Hour E ees Initial Administrative Period Short gaps on either side of the Initial Measurement Period Ease administration Limits: No more than 90 days total (front and back ends combined) AND, the length of the Initial Measurement Period, combined with any Administrative Period(s), cannot extend beyond the last day of the first month that begins on or after the first anniversary of the employee s start date Start Date Initial Measurement Period Initial Stability Period 26 13

14 Determining FTEs New Seasonal or Variable Hour E ees Example: Initial Measurement Period begins 1 st of month after start date Initial Measurement Period is 12 months Administration i ti Period following the IMP is 1 month The Initial Measurement Period, and the combined Administrative Periods, don t extend beyond the last day of first month beginning on or after the 1 st anniversary of the start date (1 st anniversary is June 10, ) June 10, Start Date July 1, June 30, July 31, Initial Measurement Period Initial Stability Period 27 Determining FTEs New Seasonal or Variable Hour E ees Example: Initial Measurement Period begins 1 st of month after start date Initial Measurement Period is 11 months to accommodate a following Administration i ti Period of 2 months The Initial Measurement Period, and the combined Administrative Periods don t extend beyond the last day of first month beginning on or after the 1 st anniversary of the start date If Initial Measurement Period is much shorter say 3 or 6 months this issue is a moot point June 10, Start Date July 1, May 31, July 31, Initial Measurement Period Initial Stability Period 28 14

15 Determining FTEs New Seasonal or Variable Hour E ees Initial Stability Period Where the rubber meets the road! The period following the Initial Measurement Period (and any associated Administrative Period) during which the employer must treat the employee as either full-time or part-time, depending on average hours per week during the Initial Measurement Period The employee s status (full-time or part-time) is stable during the stability period unaffected by actual hours in the stability period Start Date Initial Measurement Period Initial Stability Period 29 Determining FTEs New Seasonal or Variable Hour E ees Initial Stability Period How long? If the employee is treated as full-time during the Initial Stability Period, the stability yperiod must: Be at least 6 calendar months (even if Initial Measurement Period is shorter), and No shorter than the Initial Measurement Period (it could be longer) Employer may designate different lengths for certain groups of employees Administrative Periods come in handy here; if the employer will offer coverage to the FTE, to avoid risk of penalties, the offer must be made in time enough for the coverage to be elected and become effective by the beginning of the ISP Start Date Initial Measurement Period Initial Stability Period 30 15

16 Determining FTEs New Seasonal or Variable Hour E ees Initial Stability Period How long? If the employee is treated as part-time during the Initial Stability Period, the stability yperiod: May be as long as the Initial Measurement Period (or even longer, but only by a month), and Must end by the end of the Standard Measurement Period in which the Initial Measurement Period ends In other words, the feds want this Initial Stability Period to end as early as possible, where the employee is not treated as full-time want him to have the next bite at the measurement period apple as soon as possible Start Date Initial Measurement Period Initial Stability Period 31 Determining FTEs New Seasonal or Variable Hour E ees Example: June 10, July 31, Start Date July 1, June 30, Initial Measurement Period Initial Stability Period End of the Standard Measurement Period E.g., Jan. 1, December 31, 32 16

17 Determining FTEs New Seasonal or Variable Hour E ees Example: Amazing Shrinking Initial Stability Period! Why? June 10, July 31, Start Date July 1, June 30, Initial Measurement Period ISP Timelines are not to scale January 1, December 31, 33 Ongoing Employees 17

18 Determining FTEs Ongoing Employees Standard Measurement Periods Ongoing employees (whose hours you think you need to track) have hours averaged over Standard Measurement Periods, after their Initial Measurement Periods Ongoing employees segue to Standard Measurement Periods after having worked through an entire Standard Measurement Period (average weekly hours are determined for that Standard Measurement Period) Begin on fixed dates (e.g., Jan. 1, first day of plan year, each Jan. 1 and July 1, etc.) 3-12 calendar months in duration, as employer may select Employer may designate different lengths for certain groups of employees Standard Stability Period 35 Determining FTEs Ongoing Employees Example: Standard Measurement Periods: An employee will typically begin his or her first Standard Measurement Period at some point during his or her Initial Measurement Period if he or she stays employed that long! June 10, Start Date July 1, June 30, July 31, Initial Measurement Period Standard Stability Period Timelines are not to scale January 1, December 31, 36 18

19 Determining FTEs Ongoing Employees Standard Administrative Periods Follow the end of Standard Measurement Period These are handy; ease administration Permit a take a breath pause after the Standard Measurement Period, allow time to tally and average hours, extend offer of coverage (if applicable) and process the application in time for the beginning of the Standard Stability Period May be up to 90 days Standard Stability Period 37 Determining FTEs Ongoing Employees Standard Stability Periods The period following the Standard Measurement Period (and any associated Administrative Period) during which the employer must treat the employee as either full-time or part-time, depending on average hours per week during the Standard Measurement Period The employee s status (full-time or part-time) is stable during the stability period unaffected by actual hours in the stability period Standard Stability Period 38 19

20 Determining FTEs Ongoing Employees Standard Stability Periods How long? If the employee is treated as full-time during the Standard Stability Period, the stability period must be: At least 6 calendar months (even if the Standard Measurement Period is shorter), and No shorter than the Standard Measurement Period (it could be longer, but why?) Employer may designate different lengths for certain groups of employees Again, Administrative Periods come in handy here; any coverage offer must be made in time enough for the coverage to be elected and become effective by the beginning of the Standard Stability Period Standard Stability Period 39 Determining FTEs Ongoing Employees Standard Stability Periods How long? If the employee is treated as part-time during the Standard Stability Period, the stability yperiod must: Not exceed the length of the Standard Measurement Period Employer may designate different lengths for certain groups of employees Standard Stability Period 40 20

21 Determining FTEs Ongoing Employees Dovetailing Standard Measurement Periods and Standard Stability Periods for Ongoing Employees And so on Standard Stability Period Standard Stability Period 41 Bringing it All Together 21

22 Determining FTEs Bringing it All Together June 10, Aug. 1, Jul. 31, 2015 Initial Meas. Period Initial Stab. Period July 1, June 30, Nov. 1, Oct 31, 43 Determining FTEs Bringing it All Together June 10, Aug. 1, Oct. 31, Initial Meas. Period July 1, June 30, Dec. 31, Standard Stability Period Nov. 1, Oct 31, Jan. 1, 2015 Dec. 31, 2015 Standard Stability Period Nov. 1, Oct. 31, 2015 Jan. 1, 2016 Dec. 31,

23 Loose Ends Loose Ends When Do I Have to Start Tracking Hours? You really don t, if all you have are regular, full-time employees and you ll concede their full-time status under health reform For other employees, where full-time status might be in doubt, start in Your obligation to offer FTEs health insurance or risk penalties begins January 1, (unless authorities will defer this ) So you ll have to designate measurement periods in so you ll know, by January 1,, who your full-timers are Even if it s clear the employee is part-time, you ll need to show the hours to prove it, if you re not offering qualifying and affordable coverage to him or her Will employers be able to concede PT status, in reports to Exchanges? 46 23

24 Loose Ends Administrative Processes Concepts are easy Implementation will likely be a bit tedious at first 47 Loose Ends We May Rely on the Guidance At Least Through And with respect to stability periods extending into 2016, even! Guidance That s Coming: What hours, precisely, do we count? What if we re-hire a seasonal employee? Do we get to treat him or her as a new hire? Any special rules for staffing companies? What measurement and stability periods do we use in the wake of a merger or acquisition? Managing hours < 30? Etcetera 48 24

25 Questions? 49 Our Mission To be the worldwide value and service leader in insurance brokerage, employee benefits, and risk management Our Goal To be the best place to do business and to work Lockton, Inc. All rights reserved. Images 2011 Thinkstock. All rights reserved