The Affordable Care Act: An Update for Employers

Transcription

1 Fisher & Phillips LLP ATTORNEYS AT LAW Solutions at Work The Affordable Care Act: An Update for Employers Presented By Sheldon J. Blumling Fisher & Phillips LLP (949) Atlanta Boston Charlotte Chicago Cleveland Columbia Dallas Denver Fort Lauderdale Houston Irvine Kansas City Las Vegas Los Angeles Louisville Memphis New England New Jersey New Orleans Orlando Philadelphia Portland San Diego San FranciscoTampa Washington D.C.

2 Today s Agenda: 1. Where do things stand now? 2. Employer Mandate refresh 3. Key Considerations for Agricultural Employers

3 Where do things stand now?

4 Where do things stand now? The ACA is still a bit of a moving target Continuing legislative and judicial activity Efforts to repeal July 2015 amendment permitting exclusion of individuals covered by uniformed service plans (including TRICARE) or Veterans Affairs (VA) programs for purposes of the 50 or more / large employer test October 2015 amendment eliminating mandatory expansion of small group insurance market from 2 to 50 to 2 to 100 (states may now decide on their own ) Efforts to repeal or change the upcoming Cadillac tax (set to become effective in 2018) Regulatory agencies continue to issue new guidance Many questions still remain

5 Where do things stand now? In the meantime Federal and State Insurance Exchanges or Marketplaces opened in 2014 Individual Mandate became effective in 2014 Employer Mandate (finally) became effective in 2015 Final substantive guidance issued back in February of 2014 Final tax reporting guidance issued back in March of 2014 Final tax reporting forms and instructions issued in September of 2015

6 Where do things stand now? However, many transitional rules / delays to ease the burden of the Employer Mandate (mostly applicable to 2015) Delay for most medium sized employers with 50 to 99 FTEs Delay for many non-calendar year plans Shorter period for determining average FTE count in 2014 Will there be further delays or transition relief for the Employer Mandate? IRS: As these limited transition rules take effect, we will consider whether it is necessary to further extend any of them beyond 2015.

7 Where do things stand now? Notable aspects of more recent guidance Employers generally may not reimburse employees for individual coverage Pre-tax or after-tax Higher pay in lieu of benefits still OK, provided it is not conditioned on the purchase of individual coverage Be careful with earmarked stipends or bonuses Waiver payments or opt out payments are added to an employee s cost of coverage for purposes of the Employer Mandate affordability test

8 Employer Mandate Refresh

9 The Big Picture Primary policy goal is to get everyone covered Employer Mandate is one of the primary tools for this No magic solutions or blanket exceptions for agricultural employers (or any other types of employers) IRS specifically declined to create exceptions for guest workers

10 Applies to large employers 50 or more full-time employees (including full-time equivalents) [Note: 50 to 99 FTE transition rule for 2015] Full-time means 30 or more hours per week (or 130 or more hours per month) Mechanics of the 50 or more test: Based upon prior year employee counts Requires a month by month determination Determined on a controlled group basis

11 Example of the 50 or more test monthly FTE count: 30 full-time employees (130+ hours each for the month) 35 additional employees (100 hours each for the month) Full-time equivalents ( FTEs ): 35 x 100 hours = 3,500 hours / 120 = FTEs full-time employees and FTEs for the month

12 Seasonal worker exception to the 50 or more test Not a free pass for agricultural employers or a blanket exclusion of seasonal workers Applies if there are 50 or more for 120 days or fewer during the year and any employees in excess of 50 are seasonal workers

13 IRS definition of Seasonal worker : Labor is performed on a seasonal basis where, ordinarily, the employment pertains to or is of the kind exclusively performed at certain seasons or periods of the year and which, from its nature, may not be continuous or carried on throughout the year. A worker who moves from one seasonal activity to another, while employed in agriculture or performing agricultural labor, is employed on a seasonal basis even though he may continue to be employed during a major portion of the year.

14 Important to keep in mind: Seasonal worker concept is only relevant for purposes of the 50 or more test Seasonal worker exception will not help many large agricultural employers with year-around operations Seasonal worker exception must take into account all calendar months (even in 2014) What if I m not a large employer?

15 In order to fully play and avoid the possibility of paying penalty taxes, a large employer must: Make an offer of group health plan coverage to substantially all (70% in 2015; 95% thereafter) full-time employees and their dependent children Ensure that at least one coverage option provides minimum value (plan covers at least 60% of the cost of benefits) Ensure that the employee premium cost for the lowest cost minimum value coverage option is affordable (does not exceed 9.5% of household income ) (or is it 9.56%...?)

16 Example of play affordability: Full-time employee with $30,000 annual household income 9.5% x $30,000 = $2,850 / 12 = $ / month Assume total premium is $350 / month Employer must subsidize $ / month to make the premium affordable for this employee

17 Safe harbor incomes for the 9.5% test: Current year W-2 income (Box 1) Rate of pay (x 130 hours) Federal poverty line (currently $93.18) Important to keep in mind: Affordability based upon cost of employee-only coverage Dependent coverage must be offered, but does not need to be subsidized An offer is all that is required

18 What does it mean to pay? If an offer of coverage is not made to substantially all full-time employees and their dependent children, annual penalties of $2,000 per full-time employee, excluding the first 30 (80 in 2015) If an offer of coverage is made, but coverage lacks minimum value and/or affordability, annual penalties of $3,000 per full-time employee who receives subsidized public exchange coverage

19 Example of $2,000 pay penalty (assuming 2016 and after): 60 full-time employees throughout the year = 30 employees x $2,000 = $60,000 annual penalty

20 Example of $3,000 pay penalty: 5 full-time employees are offered coverage that is not affordable 3 of those employees purchase tax-subsidized coverage from a public insurance exchange Annual penalty = 3 x $3,000 = $9,000

21 Planning considerations: $2,000 penalty applies to all full-time employees, whereas: Coverage subsidies apply only to those employees who actually buy the coverage $3,000 penalty only applies to employees who get subsidized public exchange coverage Penalty is calculated on a monthly basis Penalty is nondeductible, whereas coverage subsidies are deductible Play vs. Pay choice may be different for each controlled group member

22 Determining who is a Full-Time Employee Lookback and Stability Period Concepts-New Employees Apply to new variable hour employees for whom it cannot be determined that the employee is reasonably expected to work on average at least 30 hours per week and- new seasonal employees New full-time employees subject to Employer Mandate obligations on first day of fourth full calendar month of employment

23 Determining who is a Full-Time Employee Key Points for Agricultural Employers Seasonal Employee definition limited to positions for which the customary annual employment is six months or less and begins approximately the same time each calendar year Break in Service concept 13 weeks with no hours of service

24 Lookback and Stability Period Concepts-New Employees Lookback period of 3 to 12 months Stability period of 6 to 12 months, but no shorter than lookback period (and stability period for ongoing employees) May apply an additional administrative period for enrollment process, as long as coverage begins no later than the end of the first calendar month beginning on or after an employee s first anniversary

25 Lookback and Stability Period Concepts-Ongoing EEs Lookback period of 3 to 12 months Stability period of at least 6 months, but no shorter than lookback period Use of an administrative period for enrollment process must overlap the stability period in order to prevent potential gaps in coverage Different periods for different groups permitted in some circumstances

26 Future requirements to keep in mind Automatic Enrollment Supposed to apply to large employers of more than 200 full-time employees Delayed implementation for now Nondiscrimination Requirements for Insured Plans Delayed implementation for now Cadillac Tax (beginning in 2018 )

27 Key Considerations for Agricultural Employers

28 Key Considerations for Agricultural Employers Properly identifying the employer Common law employer standard Grower vs. labor contractor? Properly identifying the controlled group Reporting requirements and eventual audits Initial reporting for 2015 will be done in the first calendar quarter of 2016 by all 50 or more employers Data collection Creating and maintaining proper documentation of offers of coverage

29 Key Considerations for Agricultural Employers Using the tools provided by the guidance to manage obligations Transition rules Seasonal worker exception to large employer status Lookback measurement / stability period rules to manage which employees qualify as FTEs Seasonal employee status Break in service rules Obligations for new FTEs pushed to the first day of the fourth full calendar month of employment Offering a skinny plan or MEC plan to limit penalty exposure

30 Fisher & Phillips LLP ATTORNEYS AT LAW Solutions at Work Questions? Presented By Sheldon J. Blumling Fisher & Phillips LLP (949) Atlanta Boston Charlotte Chicago Cleveland Columbia Dallas Denver Fort Lauderdale Houston Irvine Kansas City Las Vegas Los Angeles Louisville Memphis New England New Jersey New Orleans Orlando Philadelphia Portland San Diego San FranciscoTampa Washington D.C.

31 Fisher & Phillips LLP ATTORNEYS AT LAW Solutions at Work The Affordable Care Act: An Update for Employers Presented By Sheldon J. Blumling Fisher & Phillips LLP (949) Atlanta Boston Charlotte Chicago Cleveland Columbia Dallas Denver Fort Lauderdale Houston Irvine Kansas City Las Vegas Los Angeles Louisville Memphis New England New Jersey New Orleans Orlando Philadelphia Portland San Diego San FranciscoTampa Washington D.C.