Affordable Care Act Update Conference Forum

Transcription

1 Affordable Care Act Update 2014 Conference Forum

2 Disclaimer The material in this update is provided as general information and education. It should not be construed as, and does not constitute, legal advice nor accounting, tax, or other professional advice or services on any specific matter, nor does this message create an attorney-client relationship. Readers should consult with their counsel or other professional advisor before acting on any information contained in this presentation. 2

3 Agenda UMC Question: Who Is the Employer of Clergy? Employer Shared Responsibility Employer Reporting and Certification Affordability Other Reporting Requirements Account-Based Plans and Excepted Benefits Fees, Taxes and Coming Attractions ACA* Major Reforms 2014 Exchanges for Individuals, Tax Credits, Exchanges for Employers Conference Strategies General Board of Pension and Health Benefits Efforts * ACA: Affordable Care Act (Patient Protection and Affordable Care Act, PPACA) 3

4 Who Is the Employer?

5 UMC Clergy Employer IRS Final Rule for ACA Employer Shared Responsibility Provision (February 12, 2014) Did not directly respond to Church Alliance (UMC) question on Who is the employer Church Alliance comment letter to Proposed Rule for Employer Shared Responsibility (March 18, 2013) Sought application of pay or play rule at local level (i.e., local church) in all denominations Urged good faith standard 5

6 IRS Standard (for Now) Churches [e.g., UMC local churches] and conventions and associations of churches [e.g., annual conferences, denominations] may use a reasonable, good faith interpretation of [the Tax Code] to determine who is an applicable large employer under the Employer Mandate. 1 Treating appointed clergy as employee of local church that pays their salary and issues their W-2 should be reasonable, good faith interpretation 2 Treating local churches as separate employers from the conference and from each other (generally) seems reasonable, good faith interpretation 6

7 UMC Clergy Employer Clergy: Self-employed for FICA/SECA purposes (per statute) Tax Court case: Weber v. Commissioner UMC clergy: employees for income tax purposes Applied common-law standard Court declined to decide whether local church of annual conference was employer 7

8 UMC Clergy Employer Common-Law Test Plurality of 20 factors point to local church Key factors: Day-to-day control of method, manner and means of the work ACA Notice Employer is local church W-2 Reporting (once applied) Employer Shared Responsibility Employee Coverage Reporting Local church Reasonable, good faith argument for local church Reasonable, good faith argument for local church 8

9 Employer Shared Responsibility

10 Employer Shared Responsibility Effective Date: Also called Employer Mandate or pay or play rule Statute: January 1,2014 July 2013 Delay January 1, 2015 New delay for some employers 2016 Applies only to large employers Applicable large employer averages 50 or more full-time equivalent employees (FTEEs) Small employers (<50 FTEEs) exempt 10

11 UMC Impact Employer Shared Responsibility Rule should not apply to most UMC local churches However, each annual conference will likely have a few to a few dozen local churches subject to the Rule E.g., 3 to 12 in Indiana; 50+ in Oklahoma Many annual conference offices will be affected General agencies affected 11

12 Final Rule Highlights Mid-sized employers (50 99 FTEEs) Delay January 1, 2016 Certification required: employer must certify to IRS No layoffs to avoid 100 FTEEs in 2014 No benefits cutbacks Large employers (100+ FTEEs) Transition rules easier compliance for 2015 Cover 70% of FTEs in health plan 2016: Cover 95% of FTEs Deduct 80 FTEs from no coverage penalty in : Deduct 30 FTEs 12

13 Counting Employees Employer Shared Responsibility Rule Is an employer subject to the rule in 2015? Counting to 50 (or 100) in 2014 Employee Type Full-time employees (FTEs) Part-time employees (PTEs) (< 30 hours/week ) Rule or Accommodation 30 hours/week (130 hours/month) Added to FTE count to determine: Is employer subject to Rule? Aggregate monthly hours worked 120 (no employee counted >120 hours) Paid-leave employees (vacation, jury duty, disability, leaves of absence) Seasonal Workers Added to FTE count to determine: Is employer subject to Rule? Employer not subject to Employer Mandate ( Rule ) if exceeds 50 FTEEs solely due to seasonal employees for less than 120 days of a year 13

14 Counting to 50 (or 100) Part-Time Employees Count for 6 months (2014 only) to 12 months To determine if Rule applies in 2015 Determining full-time equivalent part-time employees Aggregate hours worked per week No more than 120 hours per month Divide by 120 hours Add to full-time employee count Fractions are counted; but rounded down at year-end 14

15 Employer Aggregation Controlled Group rules of Code 414(c) apply lumping together closely affiliated employers Local Churches Day care centers Schools and after-school programs Summer camps Annual Conferences Summer camps Agencies, boards, etc. Foundations Possibly also: schools, hospitals, retirement homes over which conference may have control for board appointments 15

16 Employer Aggregation Rule for churches reasonable good faith interpretation Common control exists where: Organizations share EIN* Organizations share 80% of board members/trustees One organization provides 80% of operating funds for another Organizations share some common management * EIN: Employer identification number 16

17 Employer Offer of Coverage Large employers must provide affordable coverage with minimum value to: Full-time employees (FTEs) (30+ hours/week) Includes employees on paid leave Excludes certain seasonal employees Excludes part-time employees Dependent children (up to age 26) of FTEs Or else pay a penalty Spouse coverage not required Small employers: Exempt 17

18 Offer of Coverage Large Applicable Large Employer (100+ FTEEs) Offer coverage to 70% of FTEs in 2015 Offer coverage to 95% of FTEs in 2016 Mid-sized Applicable Large Employers (50 99 FTEEs) 2015: not required to offer coverage (must certify to IRS) 2016: offer coverage to 95% of FTEs 18

19 Seasonal Employees Counting to 50: Employer with over 50 FTEEs only due to seasonal workers for 4 months (120 days) or fewer not applicable large employer Offering Coverage: Seasonal employee = reasonably expected to work 6 months or fewer, and work begins the same time each year (e.g., summer or Christmastime) 19

20 Variable-Hour Employees Employer cannot determine if employee is reasonably expected to work 30 hours per week or more (may be expected to work 30 or more hours some weeks and not others, or may be unknown) Measurement Period 3 to 12 months Administration Period 90 days or less Stability Period 6 to 12 months, (at least as long as Measurement Period) Exception for 2014: First Measurement Period can be shorter than first Stability Period 20

21 Penalties No Coverage At least one FTE qualifies for PTC* Inadequate Coverage Employer offers coverage and at least one FTE qualifies for a PTC Penalty 2015 = $2,000 per FTE (minus first 80 FTEs) Penalty 2016 = $2,000 per FTE (minus first 30 FTEs) Penalty = $3,000 per FTE receiving a PTC (limited to no coverage penalty) Penalties adjusted for inflation after 2014 Part-time employees count toward determining applicability of the rule but not counted for penalty accrued. * PTC: premium tax credit 21

22 Are you a large employer? At least 50 FT equivalent workers Including FT (30+ hours/week) and PT workers (prorated) Excluding seasonal workers (up to 120 days per year) Are any of your FT employees receiving PTC for exchange coverage? Yes Do you have more than 80 FT (2015) or 30 (2016) FT employees? Yes Do you provide health insurance? Yes Yes No No No No No Penalty Pay monthly penalty 1/12 x $2,000 x [number of FT employees (80) or (30)] Pay monthly penalty, lesser of: 1/12 x $2,000 x (number of FT employees 80 or 30) 1/12 x $3,000 x (number of FT employees receiving credits for exchange coverage) 22

23 Employer Reporting/Certification

24 Employer Coverage Reporting Applicable large employers* must report covered full-time employees (FTEs) to IRS (Code 6056) Required for 2015 calendar year Even if not subject to Employer Mandate until 2016 Submit Form 1095-C for each covered FTE (with single Form 1094-C) by February 28, 2016 March 31, 2016 (if filed electronically) Provide statement to each covered FTE by January 31, 2016 This reporting is an employer responsibility. General Board or CBOP will likely not perform this reporting for churches. * Applicable large employer: 50+ full-time equivalent employees 24

25 Employer Certification (2015) Related to new delay for mid-sized employers (50-99 FTEEs) Certification required for 2015 (with 2015 reporting of covered FTEs) Employer has FTEEs in 2014 Has not cut staff to have fewer than 100 FTEEs (February 9 December 31, 2014) Has not/will not drop or reduce health coverage (February 9, 2014 December 31, 2015) Final Rule published March 5,

26 Employer Coverage Reporting 6056 Report must include: Name, address, EIN* of employer Contact person at employer Certification that employer offered coverage to FTEs and dependent children FTEs for each month FTEs share of premium of lowest-cost plan Name, address, TIN* (SSN*) of each FTE * EIN: Employer identification number; TIN: taxpayer identification number; SSN: Social Security number 26

27 Affordability

28 Three Affordability Rules Employee s Cost for Premium ACA has several definitions of affordable <9.5% of MAGI for individual coverage Employer avoids employer mandate penalty ( pay or play ) Safe Harbor: <9.5% of W-2 wages (known to employer) for individual coverage >8% of MAGI for individual coverage Employee avoids individual mandate penalty Determined separately for spouse, dependent children >9.5.% of MAGI for individual coverage Employer plan is unaffordable Employee is eligible for PTC! 28

29 Individual Mandate Affordability Exemption If individual cannot find coverage anywhere (employer or Marketplace) that costs less than 8% of MAGI, then: Exempt from individual mandate penalty Determined separately for families/dependents 29

30 Tax Credit Eligibility Employee s required contribution (share of premium) for self-only (individual) coverage under employer plan cannot exceed 9.5% of household income* (MAGI) If employee contribution exceeds 9.5% of MAGI, can opt out; choose exchange coverage and PTC Dependent coverage affordability glitch Cost to cover dependents affordable as long as it does not cost the employee more than 9.5% of MAGI to cover self-only * MAGI: Modified adjusted gross income Note: Employers often have no information about employees household income 30

31 Affordability Safe Harbors Safe harbors for affordability under Employer Shared Responsibility Rule W-2 Wages: Employee contribution for self-only coverage in lowest-cost plan is less than 9.5% of W-2 wages Rate of Pay: For any month, employee share of monthly cost for self-only coverage in lowest-cost plan is less than 9.5% of 130 hours multiplied by employee s hourly rate of pay FPL*: For any month, employee share of monthly cost of self-only coverage of lowest-cost plan is less than 9.5% of 1 /12 of FPL for a single individual * FPL: Federal poverty level 31

32 Conference Affordability Approaches Clergy (employee) contribution for self-only coverage Of conference minimum salary Similar to rate of pay safe harbor Of federal poverty level (FPL) for % of $11,670 = $92.39 per month 32

33 Other Reporting Requirements

34 Reporting Health Coverage Minimum essential coverage (MEC) reporting (Code 6055) General Board (for HealthFlex) or CBOP (plan administrator of self-insured annual conference plan) should be able to report for all plan participants and dependents Insurance company will perform 6055 Reporting for fully-insured plans This reporting is a Plan responsibility. 34

35 Reporting Health Coverage Required for 2015 coverage (annually thereafter) Plan must submit Form 1095-B (if only Plan is reporting) or Form 1095-C (if jointly filing under 6056 Employer Reporting Rule) to IRS By February 28, 2016 Or March 31, 2016 (e-file) Plan must provide statement to covered individuals by January 31,

36 Reporting Health Coverage 6055 Report must include: Name, address, EIN of reporting entity Name of each person with MEC Name of responsible person (primary participant) TIN* (SSN)* of each covered person Calendar months each person was covered * TIN: Taxpayer identification number; SSN: Social Security number 36

37 W-2 Reporting Employers required to report value of health coverage on employees W-2s January 2013 on secular, large employer W-2s Temporary exemption remains for: Employers in church plans (unless church plan is subject to ERISA) Small employers (fewer than 250 W-2s) Multi-employer (union) plans IRS may end the exemption upon 6 months notice No earlier than 2014 (more likely for 2015 tax year) 37

38 Account-Based Plans and Excepted Benefits

39 Health Reimbursement Arrangements IRS Notice : restrictions on health reimbursement arrangements (HRAs) No stand-alone HRAs for active employees HRAs allowed if integrated Will allow establishment of private exchanges Prohibits combining HRAs with public exchanges Stand-alone HRAs allowed for retiree-only plans However, no PTC* for those retirees (i.e., no double dip ) * PTC: premium tax credit 39

40 Employer Payment Plans Overrules 1961 IRS rule (Rev. Rul ) that allowed employers to reimburse premiums paid for individual health insurance policies on a tax-favored basis ( employer payment plans ) Many local churches relied on this practice Lay employees; Deacons; Part-time clergy Individual policies (through exchanges or in private market) can only be paid with taxable income! Marketplace plans cannot be paid tax-free by: Employer, or Through cafeteria plan pre-tax (other than SHOP) 40

41 Flexible Spending Accounts (FSAs) FSAs are permissible if they qualify as excepted benefits (not subject to ACA Market Reforms) FSA qualified if: Offered with an employer group health plan Contributions do not exceed 2x employee salary deferral FSAs should not be offered to employees who are not offered group health plan coverage. 41

42 Excepted Benefits Excepted benefits plans Vision plans Dental plans Employee assistance programs (EAPs) Wrap-around plans (new December 23 regulations) Stand-alone HRAs if limited to excepted benefits Separate insurance policy if insured; or Separate contract and participant s separate election if self-funded 42

43 Excepted Benefits Excepted benefits plans are not subject to ACA Market Reforms E.g., no annual limits, no lifetime limits, preventive services, essential health benefits PROS CONS Employees covered in excepted benefits plans are eligible for premium tax credit Excepted benefits coverage does not satisfy the individual mandate 43

44 Fees, Taxes and New Guidance

45 PCORI* Fee Applies to plan years ending after October 1, 2012 and before October 1, 2019 Increased to $2 per covered life for 2013 Paid by July 31, 2014 Increases with inflation in future years IRS Form 720 with payment CBOPs (or HealthFlex) pay PCORI fee for self-insured plans (active plans, Medicare plans, retiree HRAs) Insurers pay PCORI fee for fully-insured plans * PCORI: Patient-Centered Outcomes Research Institute 45

46 Reinsurance Program Fee Temporary Funds reinsurance pool for Marketplace plans Applies to annual conference health plans Exceptions: (1) Not applied to covered lives for whom Medicare is primary; (2) not applied to coverage that is not major medical coverage or excepted benefits Plan responsible for fee for self-insured plans Insurer responsible for fee for fully-insured plans 46

47 Reinsurance Program Fee Timeline November 15: Head count to HHS* December 15: Invoice from HHS January 15: 1 st Installment due December: 2 nd Installment due * HHS: U.S. Department of Health and Human Services 47

48 Reinsurance Fee Final Rule 2014 Fee = $63 per covered life Two installments for 2014 January 15, 2015 ($52.50 per life) December 2015 ($10.50 per life) Lower for 2015 ($44) (Unofficial estimate for 2016: $25**) January 15, 2016 ($33 per life) December 2016 ($11 per life) Possible exemption in 2015 and 2016 for plans that are self-insured and self-administered I.e., Plan does not use a TPA to adjudicate, adjust, settle claims or enroll participants Unclear whether there are any such plans ** Estimate 48

49 Excise Tax Penalties Code 4980D Applies to church plans $100/day per affected individual accumulates quickly Plan/employer violations of ACA SBC*, no pre-existing condition exclusion, no annual/lifetime limits, preventive health coverage, health plan reporting, claims and appeals, patient protections These are already in effect * SBC: summary of benefits and coverage (standardized) 49

50 Non-Discrimination Rule Highly compensated employee (HCE) defined differently than for retirement plans 5 highest-paid officers, or Highest-paid 25% of all employees Every employer has HCEs Penalties for non-compliance are different Self-funded: Benefits of HCE become taxable Insured: Excise tax ($100/day per HCE), civil money penalty, or a civil action to compel nondiscrimination Enforcement of Section 105(h): on hold pending further IRS guidance August 2014 (Est.) Strange legislative and regulatory history 50

51 Cadillac Plan Tax Applies to fully-insured and self-funded plans Assessed on the cost of coverage for plans in excess of certain thresholds 40% excise tax on plan s cost in excess of: $10,200 for individual coverage $27,500 for family coverage Increased threshold for plans that cover pre-medicare retirees or high-risk jobs $1,650 individual or $3,450 family Adjusted for inflation (CPI)+1% ( ); CPI only after

52 Cadillac Plan Tax Waiting for regulations to define cost Premium cost for fully-insured plans COBRA cost for self-insured plans Plus: FSA/HRA/HSA* contributions General Board/Church Alliance advocating for church plans Actuarial value vs. premium cost vs. church contribution age demographics Conferences should already be planning for containing costs by 2018 * FSA: flexible spending account; HRA: health reimbursement account; HSA: health savings account 52

53 ACA Major Reforms 2014

54 Reminder ACA 2014 Individual Mandate Individual insurance market reforms Health Insurance Marketplace ( exchanges ) Government assistance for modest income premium tax credits (PTCs) Employer Shared Responsibility Rule Pay or play or Employer Mandate January 2015 (100+ FTEEs) or January 2016 (50-99) Expanded Medicaid (some states) 54

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56 ACA Enrollment As of March 14, 2014 ACA expanded enrollment Expanded Medicaid enrollees Marketplaces enrollees Open enrollment period: >90% lapsed million million million Kentucky: A Red State success ACA Enrollments: 300,000+ Marketplace QHPs: 60,000 Expanded Medicaid: 240,000 56

57 Exchanges (Marketplaces)

58 Status of State Exchanges December 2013 State Exchange Partnership Exchange No State Exchange (Federal Exchange)) Split Exchange 58

59 Exchange Plans Bronze Silver Gold Platinum Group Plans Actuarial Value 58-62% 68-72% 78-82% 88-92% 60% Covered Services Essential health benefits and preventive services Essential health benefits and preventive services Essential health benefits and preventive services Essential health benefits and preventive services Preventive services (need not cover Essential Health Benefits) Essential Health Benefits No annual limits No annual limits No annual limits No annual limits No annual limits (on covered EHBs) 2014 Deductible Maximums $2,000 Individual $4,000 Family $2,000 Individual $4,000 Family $2,000 Individual $4,000 Family $2,000 Individual $4,000 Family None 2014 Out-of- Pocket Maximums $6,350 Individual $12,700 Family $6,350 Individual $12,700 Family $6,350 Individual $12,700 Family $6,350 Individual $12,700 Family $6,350 Individual $12,700 Family Silver plan used to determine any government subsidies through the exchange 59

60 Market Reforms Premiums Guaranteed issue/renewal No pre-existing condition exclusions Community-rating: Premium rate variation limits Age: 3:1 (age 21 to 64) Tobacco use: 1.5:1 Family size Geography (regional cost factors) States can vary these factors Example: New York and Vermont use pure community rating Rate shock for young (healthy) Rate joy for older (less healthy) 60

61 Tax Credits

62 Premium Tax Credits Exchange plan premiums subsidized with federal assistance: Premium tax credit (PTC) Individuals and families with household income* between % of federal poverty level (FPL) State and federal exchanges eligible for PTCs Subject to ongoing federal court litigation challenge * Household income = modified adjusted gross income (MAGI) 62

63 PTC Eligibility: % of FPL (2014) Household Income (MAGI) % FPL Single Family of 2 Family of 3 Family of 4 100% $11,670 $15,730 $19,790 $23, % $16,105 $21,707 $27,310 $32, % $17,505 $23,595 $29,685 $35, % $23,340 $31,460 $39,580 $47, % $29,175 $39,325 $49,475 $58, % $35,010 $47,190 $59,370 $70, % $46,680 $62,920 $79,160 $94,320 >400% $46,681 $62,921 $79,161 $94,321 For families/households with more than 4 persons, add $4,020 for each additional person. 63

64 MAGI (Code 36B) Modified adjusted gross income (MAGI) Taxpayer s adjusted gross income (AGI) (Code 62) Form 1040 line 37 (last line of Page 1) Increased by: Foreign income Tax-exempt interest Non-taxed Social Security benefits Clergy housing/parsonage not included Employee 401(k)/403(b)/FSA contributions reduce MAGI Certain above-the-line deductions reduce MAGI 64

65 PTC Eligibility Requirements Two main requirements* (Both required to be PTC-eligible ) MAGI Between 100% and 400% of federal poverty level (FPL) Inadequate or no employer coverage No employer coverage Employer coverage is less than minimum value Employer coverage is not affordable to employee * Other requirements include not being: 1) incarcerated 2) covered by Medicare, Medicaid or other govt. coverage: CHIP, TRICARE, etc. 3) married, filing separately 65

66 PTC Impact on Premium Clergyperson age 50; spouse age 50; MAGI $40,000 State Bronze Plan w/o PTC Bronze Plan with PTC Silver Plan w/o PTC Silver Plan with PTC CA $586 $58 $796 $268* IN $782 $128 $922 $268 NY $616 $104 $780 $268 OH $554 $44 $778 $268 OR $516 $129 $628 $268 TX $370 $115 $528 $268 VA $532 $10 $790 $268 * Equal to 8.05% of MAGI 66

67 Exchanges for Employers (SHOP)

68 Exchanges for Employers Small Business Health Options Program (SHOP) Small employers can adopt exchange plans as their employer-provided coverage : Small employers with fewer than 100 FTEs States can limit SHOP to employers with fewer than 50 FTEs 2016: Small employers with fewer than 100 FTEs 2017 and beyond: States can expand SHOP to employers with fewer than 250 FTEs 68

69 SHOP Characteristics Employer offers coverage to all full-time employees Some have 70% enrollment requirement No premium tax credits (PTCs) for employees PTCs available only through exchanges for individuals Employees may have choice of plans* SHOP will aggregate premiums for employers SHOP can now create a composite premium for ER Employer contributions toward coverage nontaxable Can be coupled with cafeteria plan Employees can pay their contributions on pre-tax basis * Delayed to 2015 in federally-facilitated exchanges; some states are ready 69

70 SHOP Characteristics Small Business Health Care Tax Credit continues for employers in SHOP (up to 2 years after 2014) Available only through SHOP in 2014 and beyond Up to 50% of premiums for-profit employers Up to 35% of premiums tax-exempt employers Refundable credit for tax-exempt small employers Phases out As number of employees approaches 25 As average wages approach $50,000 70

71 Conference Strategies

72 Conference Strategies Considerations Book of Discipline Judicial Council Decisions 674, 866, 935 and 1014 ACA Employer Shared Responsibility Rule State s (or states ) embrace of ACA Appointment process and itineracy concerns Equity of health coverage Tax implications Unintended consequences (e.g., increased DAC) 72

73 Conference Strategies Status Quo Mandatory plan for clergy possible PROS Maintains ease of appointment No disruptive change for covered participants Forgoes cost savings in exchange plans with tax credits CONS May cause more tension with local churches (seeking cost savings) Plan costs continue to rise New ACA burdens (fees, reporting, taxes, etc.) 73

74 Conference Strategies Baby Steps Encourage Marketplace enrollment for continuation (COBRA) participants and clergy on unpaid leaves (where the conference plan is costly) Allow access to Marketplace for pre-65 retirees purchase with non-taxed employer dollars or federal PTC Retiree-only stand-alone HRAs allowed, but PTC not allowed Change dependent coverage eligibility PROS CONS Some cost savings related to certain beneficiaries Conference/church/clergy familiarization with marketplaces Cost savings of PTCs not fully realized Some administrative complexities 74

75 Dependent Coverage Factors If spouse, dependent children (or both) are offered employer coverage (i.e., are eligible to enroll); and If cost for employee-only (individual) coverage is less than 9.5% of MAGI Then: spouse and dependents not eligible for PTC Rule applies even if cost to employee for covering spouse/dependents is very high Applicable large employers (50+ FTEEs) must offer coverage to dependent children up to age 26 Even without PTC, full premium exchange coverage may be less costly than conference coverage 75

76 Dependent Coverage Options UPS Option Conference ceases covering spouses and dependents at conference/plan level PROS CONS No spouses or dependents would have affordable coverage PTCs available for many families, based on MAGI (cost savings to clergy/churches/conferences) Equity concern for families that do not qualify for PTCs (MAGI too high) They pay full premium on exchange with after-tax $ Compensation may have to be increased 76

77 Conference Strategies Private Exchange Option Clergy remain in uniform plan Mandatory plan for clergy possible PROS CONS Defined contribution approach may reduce liabilities Socializes participants to consumer approach (i.e., ACA Marketplaces) May be fully-insured or self-funded (if through GBOPHB) Forgoes premium tax credits Affordability may still shift some to ACA Marketplaces Some regulatory uncertainty remains Some administrative burden (e.g., collecting marginal premium) 77

78 Conference Strategies Affordability Option Maintain required full-time clergy coverage, but increase required individual contributions Clergy for whom coverage is not affordable (e.g., costs exceeds 9.5% of MAGI) seek exchange coverage PROS Captures savings of premium tax credits to low-paid clergy and families May be able to support clergy in Marketplaces with excepted benefits and other wrap-around coverage CONS May create appointment frictions and equity concerns May require way to offset increased health plan premium contribution for clergy remaining in the plan Other nontaxable benefits Taxable compensation 78

79 Conference Strategies Local Church Option Allow local churches to opt out of conference plan (for full-time clergy) Clergy at churches opting out no employer coverage PROS Lower-paid can seek exchange coverage and tax credits Appointment frictions and equity concerns CONS Disruptions to conference plan risk pool Diminution in size Change in risk profile Problem for churches with multiple clergy? Some would want to remain in the plan; some would not 79

80 Dependent Coverage Options Local Church Option Conference allows local churches to adopt conference plan for clergy-only PROS Each local church chooses whether to adopt clergy-only coverage or clergy-plus-family coverage through the conference Potential to maximize cost savings CONS Administrative burden for conference New appointment friction? 80

81 Conference Strategies Exit Option Terminate health plan entirely Significantly reduce conference administrative costs PROS CONS Rely on Marketplaces for individuals most local churches Rely on SHOP 1 for applicable large employers in conference (e.g., large churches, conference office) Increase taxable salary for some or all Unintended consequences Increases CAC and DAC; increases CRSP-DC 2, CPP 3 and UMPIP 4 contributions based on compensation Unintended distortions Uniform salary increases may have disparate impacts for single v. married v. family; PTC eligibility Add/increase other non-taxable benefits (UMPIP, UMLifeOptions) 1 SHOP: Small Business Health Options Program 2 CRSP-DC: Clergy Retirement Security Program-Defined Contribution 3 CPP: Comprehensive Protection Plan 4 UMPIP: United Methodist Personal Investment Plan 81

82 Church Alliance Efforts

83 Church Alliance Efforts Church Health Plan Act of 2013 Introduced in Senate as S by Senators Mark Pryor (D-AR) and Chris Coons (D-DE) Amends ACA to make PTCs available to participants in denominational church health plans Seeking GOP co-sponsor Could result in a UMC-Exchange with PTCs Regulatory Efforts Comment Letters 83

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86 Health Plan Considerations Plan Coverage Remain all in with group health plan Move all in to public exchange Split population: some in group health plan, some move to public exchange 86

87 Strategic Health Plan Considerations Consumerism and participant responsibility Mirroring public exchange metal plans Avoid Cadillac plan excise tax (2018) Prepare for separate populations Soft landing for exchange-bound population Excepted benefit wraparound offerings Wellness, vision, dental, etc. 87

88 Other Strategic Considerations Need unaffordable coverage to qualify for premium tax credits shift contributions Funding offset may vary by: reason, population (e.g. HRA vs. salary increase) Offset premium contribution increase Offset public exchange premium costs May vary by: salary, family size, age, coverage tier, service years, geography, etc. Minimize appointment tensions 88

89 Private Exchanges: Potential Future Opportunity Plan Sponsor Gold Silver Bronze Private Exchange Plan Choices or Participants 89

90 Private Exchanges Potential Benefits Plan Sponsor Defined contribution cost containment and sustainability Parallels for managing two groups (public and private exchanges) for ease of appointments Participant Chooses own right-sized coverage Potential opportunity for HRA savings for future years or retiree health coverage Both Pricing efficiencies 90

91 Private Exchanges Early Research Findings Different than retiree connector model HealthFlex researching (2016 at earliest possible) Key considerations: Participant and plan sponsor decision support Collect incremental overage from participants/churches 91

92 Plan Sponsor Decision Supports and Next Steps Web resources by audience, year Materials and consultations: HCR Impact Overview Population analysis financial modeling Strategy considerations, FAQ, toolkits, as needed 92

93 2014 General Board of Pension and Health Benefits of The United Methodist Church, Incorporated in Illinois. 93

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95 Conference Radars