Affordable Care Act. Strategic, Legal & Operational Perspectives. CBIA s 2014 Compensation & Benefits Conference

Transcription

1 Affordable Care Act Strategic, Legal & Operational Perspectives CBIA s 2014 Compensation & Benefits Conference George Kasper & Sharon Freilich November 4, 2014

2 Overview The Employer Mandate Do You Need To Comply In 2015 Issues Many Employers Are Confronting Upcoming Reporting Requirements Next Steps & Strategies To Consider 2

3 Employer Mandate Refresher Which Employers are Responsible? Applicable Large Employer (i.e. at least 50 full time employees and full-time equivalent employee in prior calendar year) FTE = Works on average 30 hours a week or 130 hours a month FT equivalent employees = total hours of non-full time employees up to 120 hours per employee and divide by 120 All controlled group members aggregated to determine ALE statues Rules are applied to each member of the controlled group separately Transition rules applicable for

4 Employer Mandate Refresher What Penalties Potentially Apply? Offer minimum essential coverage (MEC) to substantially all FTEs and their dependents, or pay $2,000/FTE/year minus 30 (80 in 2015) if one FTE receives subsidy or premium tax credit Offer affordable coverage with minimum value, or pay $3,000/FTE/year for each FTE who receives subsidy or premium tax credit; not to exceed the no coverage penalty Penalties assessed on a monthly basis Transition rules applicable for

5 Employer Mandate Refresher What is Affordable Coverage? Affordable Coverage: if employee cost for lowest cost option self-only coverage does not exceed 9.5% of employee s household income household income it is deemed affordable 27 Safe harbors: Not exceed 9.5% if: Employee s W-2 income Monthly salary or for hourly employees 9.5% of hourly rate times 130 Federal Poverty Level for single person ($11,670 in 2014) 28 5

6 Employer Mandate Basic Rules On-Going Full Time Employees if employee determined to be full-time employee during Standard Measurement Period must be offered health care coverage during related Stability Period If hours change during Stability Period (i.e. go from full-time to parttime status or vice versa) employee retains status from associated Standard Measurement Period New Full-Time Employee if offered coverage effective the first day of the fourth full calendar month following start date No $2000 penalty will apply for period between start date and effective date of coverage No $3000 penalty will apply if coverage that is offered meets minimum value standards May have to offer coverage earlier under 90 Day Waiting Period Rules 6

7 Employer Mandate Basic Rules New Variable Hour/Seasonal/Part-time Employee if employee determined to be full-time employee during Initial Measurement Period must be offered health care coverage during Initial Stability Period If hours change during Initial Stability Period (i.e. go from full-time to part-time status) employee retains Full-Time Status during remainder of Initial Stability Period If Variable Hour employee becomes full-time employee during Initial Measurement Period (or is determined to no longer be a seasonal employee) must offer coverage by first day of fourth full calendar month following change in employment. 7

8 Employer Mandate Basic Rules New Variable Hour/Seasonal/Part-time Employee if employee determined to not be full-time employee during Initial Measurement Do not have to offer coverage during Initial Stability Period but If this employee averages 30 hours per week during the overlapping Standard Measuring Period then the employee must be offered coverage during the Stability Period associated with the overlapping Standard Measuring Period even if it starts before the Initial Stability Period ends 8

9 Look-Back Measurement Method 2013 Nov. 1 Dec 31 1 st Standard Measurement Period 2014 Jan 1 Nov. 1 Dec 31 1 st Standard Measurement Period cont. 1 st Admin Period/2 nd Standard Measurement Period Begins 2015 Jan 1 Dec 31 1 st Stability Period/2 nd Standard Measurement Period through 10/31;2 nd Administrative Period 11/-12/31; 3 rd Standard Measurement Period begins 11/1

10 Transition Relief For 2015 Small Employers (50 to 99 FTE) Employer mandate for is delayed for small employers until 2016 if following conditions met: In 2014 employed between 50 and 99 FTE using normal or transition measurement rules Between February 9, 2014 and December 31, 2014 do not reduce workforce to come within 50/99 limits reductions for bona fide business reasons are permitted The coverage in place on February 9, 2014 is not eliminated or materially reduced through the last day of the 2015 plan year. Employer Certifies Compliance with these requirements when filing under Code Section

11 Transition Relief For 2015 Limited Relief for Significant Coverage Requirement in 2015 Offer of coverage to at least 70% (instead of 95%) of Full Time Employees (and their departments) will be deemed to be offering coverage to substantially all FTE Reduced penalty for no coverage Employers subject to the $2000 no coverage penalty can subtract 80 (instead of 30) from the number of FTE to calculate the penalty Special January 2015 coverage rules Offer of coverage as of the first day of first 2015 payroll period (instead of January 1 st ) will be treated as offering coverage for January

12 Transition Relief For 2015 Shorter measurement periods allowed Employer may use a measurement period that is shorter than 12 months, but must be a period of at least 6 months Must start no later than July 1, 2014, and end no earlier than 90 days before 1 st day of 2015 plan year 12

13 Transition Relief for 2015 Coverage for Dependents Employer will not be subject to penalties for failure to offer coverage to dependents during 2015 IF: it s plan did not cover dependents during 2013 and 2014, and employer is taking steps to offer coverage to dependents Dependent does include foster child or stepchild for purposes of the employer mandate Spouses are not dependents 13

14 Transition Relief For 2015 Non-calendar Plan Years The Employer Mandate penalties will not apply for months in 2015 that precede the first month of the 2015 Plan Year if: The Plan was a non-calendar year plan as of 12/27/2012 The Plan Year has not been modified since 12/27/2012 Plan must offer affordable coverage that provides minimum value as of the first day of the 2015 Plan Year As of first day of 2015 Plan Year must meet significant coverage requirement (95% or special 70% transition rule) Relief only available for employees who were not eligible to participate in a calendar year plan as of 02/09/2014 Plus certain additional specified requirements not included here 14

15 Common Issues Controlled Groups Employer mandate applies to controlled group Controlled group issues often arise in corporate transactions Penalties apply to separate entities A failure by a controlled group member entity to offer coverage will result in a penalty assessment to that entity only Qualified Separate Line of Business (QSLOB) rules are not applicable, so employers may have controlled group for ACA purposes 15

16 Common Issues Issues for staffing firms and their clients Key concern is who is the common law employer This determines whether the staffing firm or the employer client is responsible for taking the employees into account for purposes of the mandate Is the worker a new FTE or variable-hour employee? Staffing firms can consider additional criteria to determine status of newly hire employee 16

17 Common Issues Variable Hour Employee Factors for Staffing Firm: Whether similarly situated employees (i.e. employees with comparable positions) retain the right to reject temporary placements Whether similarly situated employees typically have periods during which no offer of temporary placement is made Whether similarly situated employees typically are offered placements that do not extend beyond 13 weeks Whether similarly situated employees have actually varied above and below 30 hours in the most recent Measurement Period Whether the job was advertised or otherwise communicated to the new employee as requiring hours of service that would average at least 30 hours a week, less than 30 hours a week or would vary from week to week 17

18 Common Issues Seasonal Employees Employee who is hired into a position for which customary annual employment is six months or less Generally treated as a variable-hour employee - employee whose hours are reasonably expected to vary from week to week such that the Employer is unable to have any reasonable expectation regarding average hours worked per week No special treatment under 90 day waiting period rules 18

19 Common Issues Independent Contractors Classification is key for Applicable Large Employers Misclassification could result in significant tax consequences Use common law test to determine if worker is an employee or independent contractor Common law test factors: Degree of control Right to discharge others 19

20 Upcoming Deadlines Insurance carriers and certain self-insured health plans must obtain a health plan identifier (HPID) by Nov. 5, 2014 Delay to 10/5/2015 for small plans (annual receipts of $5mill or less) Most self-insured group health plans are required to submit enrollment information for the Transitional Reinsurance Fee to HHS by Nov. 15,

21 Reporting Requirements Employer Reporting of Coverage Offered Sec Reports - (self-insuring employers and insurance providers) Form 1095-B or Part III of Form 1095-C provides information to IRS and individuals about the type and period of minimum essential coverage Sec Reports - (ALEs) Form 1095-C provides information to IRS regarding coverage offered to FTE, regardless of whether group health coverage is offered Controlled group consideration Separate reports for each entity 21

22 Reporting Requirements Due Dates for Filing 2016 reporting for health coverage provided during 2015 Reports due by February 28 th (March 31 st if filed electronically) Must be filed electronically if at least 250 returns (use transmittal Forms 1094-B and 1094-C) Written statements to Employees must be provided no later than January 31 st of the year following the calendar year in which coverage was provided 22

23 Next Steps Document Review and Evaluation Review definitions of FTE and waiting periods in plan documents to determine if amendments are necessary Confirm that SPDs, booklets and insurance certificates reflect the proper full-time employee definition and appropriate waiting periods Amend Section 125 cafeteria plan document to incorporate new midyear election change opportunities, as applicable Eliminate stand-alone, non-exempt HRAs before 2015 Ensure all participant communications and policy documents are compliant with ACA 23

24 Operational Considerations Develop approach for identifying FTE Monthly measurement approach or apply look-back method Method for calculating hours of service for non-hourly employees Identify categories of employees Consider potential issues in reducing work hours to keep employees out of plan (cannot interfere with employee s right to participate in group health plan under ERISA Sec. 510) Coordinate timekeeping, payroll, and benefits systems Develop policy for determining FTE status 24

25 Plan Design Strategies Part-time coverage Spousal carve-out and surcharge strategies Dependent coverage surcharge strategies Maintain grandfather status Move to/create private exchange Enrolling in public exchange in 2016 and beyond Feasibility of skinny plan - risks Plan for Cadillac tax in

26 Contact Information Sharon Freilich Pullman & Comley, LLC Tel: George Kasper Pullman & Comley, LLC Tel:

27 These slides are intended for educational and informational purposes only. Readers are advised to seek appropriate professional consultation before acting on any matters in this update. These slides may be considered attorney advertising. Prior results do not guarantee a similar outcome. BRIDGEPORT HARTFORD STAMFORD WATERBURY WHITE PLAINS