May 2014 Non-Calendar Year Health Plans Delayed Effective Date Worksheet Do I qualify for the delayed effective date for the Employer Shared Responsibility Requirements under PPACA? Some, but not all, large employers with non-calendar year plans may start complying with Employer Shared Responsibility provisions the first day of the 2015 plan year (rather than January 1, 2015) if certain conditions are met: The employer must have maintained a non-calendar year plan as of December 27, 2012 and has not modified the plan year since then, and The employer (needs to qualify for at least one of the four options): o Offered coverage to at least 1/3 of ALL employees, at last open enrollment before Feb. 9, 2014 o Actually covered at least 1/4 of ALL employees, as of any day (your choice) between February 10, 2013 and February 9, 2014 o Offered coverage to at least 1/2 of ALL FT employees, at last open enrollment before Feb. 9, 2014 o Actually covered at least 1/3 of ALL FT employees, as of any day (your choice) between February 10, 2013 and February 9, 2014 As of the first day of the 2015 plan year, the employer offers affordable, minimum value coverage to at least 70% of its full-time employees. To determine whether you qualify, complete the following worksheet. Keep a copy in your file and send a copy to your Leavitt Benefits Account Manager. Following this worksheet is a more detailed explanation of: 1) the transition rule that allows the delayed effective date, and 2) the potential penalties on non-compliant large employers.
Non-Calendar Year Health Plans Delayed Effective Date Worksheet In order to qualify for the delayed effective date, an employer must be able to say YES to each of the following three steps. Step 1 As of December 27, 2012, did you have a non-calendar year plan? Yes No If no, you do not qualify for the delayed effective date. Your effective date is 1/1/15. If yes, what date did it start? Date: o Have you amended your plan year to start at a later calendar date since December 27, 2012? If yes, you do not qualify for the delayed effective date. Your effective date is 1/1/15. If no, go on to Step 2 Yes No Step 2 Can you say yes to at least one of the following four options? (Work through the options on the next 2 pages) Significant Percentage Test 1A (All Employees Test) Yes No Significant Percentage Test 1B(All Employees Test) Yes No Significant Percentage Test 2A (Full-Time Employees Test) Yes No Significant Percentage Test 2B (Full-Time Employees Test) Yes No o If you cannot say yes to at least one of the above four tests, you do not qualify for the delayed effective date. Your effective date is 1/1/15. o If you can say yes to at least one of the above four tests, you qualify for Step 2. Go on to Step 3. Step 3 As of the first day of the 2015 plan year, will you offer affordable, minimum value coverage to at least 70% of your full-time employees? o If no, you do not qualify for the delayed effective date. Your effective date is 1/1/15 Yes No o If yes, you qualify for the transition rule and you may opt to start complying with Employer Shared Responsibility (ESR) on your 2015 plan year date instead of on 1/1/15. Name & Title of Person Completing this Form Company
Step 2 Test 1A (All Employees) Significant Percentage Test #1 (ALL Employees Test A or B) Goal: To determine if at your most recent enrollment period before February 9, 2014, you offered coverage to at least 1/3 of your total employees. 1. At your most recent enrollment period before February 9, 2014, how many full-time and part-time employees (total employees) did you have? + = Full-time EEs Part-time EEs Total EEs 2. At your most recent enrollment period before February 9, 2014, what is the total number of employees who were offered coverage? Take your Number of EEs who are offered coverage (answer 2) divided by Total Number of Employees (answer 1) Is the significant percentage calculated at least 33.33% (1/3)? Yes No ii. If yes, you pass this test. Step 2 Test 1B (ALL Employees) Goal: To determine if as of any day (your choice) during the 12 months ending on February 9, 2014, your group health plans covered at least 1/4 of your total employees. 1. Date you are using: / / 2. Total number of full-time and part-time employees as of date chosen in #1: + = Full-time EEs Part-time EEs Total EEs 3. Total number of covered full-time and part-time employees as of date chosen in #1: Covered FTEEs Covered PTEEs Take your Number of EEs who are actually coverage on Chosen Date (answer 3) divided by Total Number of Employees (answer 2) Total Covered EEs Is the significant percentage calculated at least 25% (1/4)? Yes No ii. If yes, you pass this test.
Test 2A (Full-Time Employees) Significant Percentage Test #2 (FULL-TIME Employees Test A or B) Goal: To determine if at your most recent enrollment period before February 9, 2014, you offered coverage to at least 1/2 of your full-time employees. 1. At your most recent enrollment period before February 9, 2014, how many full-time employees did you have? 2. At your most recent enrollment period before February 9, 2014, what is the total number of fulltime employees who were offered coverage? Take your Number of FTEEs who are offered coverage (answer 2) divided by Total Number of FTEEs (answer 1) Is the significant percentage calculated at least 50% (1/2)? Yes No ii. If yes, you pass this test. Test 2B (FULL-TIME Employees) Goal: To determine if as of any day (your choice) during the 12 months ending on February 9, 2014, your group health plans covered at least 1/3 of your full-time employees. 1. Date you are using: / / 2. Total number of full-time employees as of date chosen in #1: 3. Total number of covered full-time employees as of date chosen in #1: Take your Number of FTEEs who are actually coverage as of Date Chosen (answer 3) divided by Total Number of FTEEs (answer 2) Is the significant percentage calculated at least 33.3% (1/3)? Yes No ii. If yes, you pass this test.
Detailed Explanation of Delayed Effective Date For Employer Shared Responsibility Provisions of PPACA For Non-Calendar Year Plans For calendar year plans, the Affordable Care Act (ACA) provides that the effective date of the Employer Shared Responsibility provisions ( Pay-or-Play ) is January 1, 2014. However, this was delayed for one year by guidance issued in early July 2013. (IRS Notice 2013-45) Additionally, the proposed regulations (December 28, 2012) and the final regulations (February 10, 2014) include a transition rule that allows a delayed effective date for non-calendar year plans if certain criteria are met. For plans that meet these criteria, the delayed effective date means the employer will not be subject to a penalty (called an assessable payment ) under IRC section 4980H between January 1, 2015 and the first day of the 2015 plan year. For example, a plan with a September 1 plan year that qualifies for the delayed effective date will not be subject to a penalty between January 1 and August 31, 2015 even if full-time employees receive a subsidy for buying health insurance in the public insurance Marketplace. The Leavitt Non-Calendar Year Plans Delayed Effective Date Worksheet will help a large employer with a non-calendar year plan determine if it qualifies for the delayed effective date for the employer shared responsibility provisions. The potential transition relief applies only if an applicable large employer (ALE) maintained a non-calendar year plan as of December 27, 2012, and the plan year was not modified after December 27, 2012 to begin at a later calendar date. Rule #1, Delayed Effective Date: No 4980H penalty will be imposed on the employer between January 1, 2015 and the first day of the 2015 plan year for any employee who was eligible to participate in the plan under its terms as of February 9, 2014 (even if the employee did not enroll). This delayed effective date only applies if, no later than the first day of the 2015 plan year, the employer offers affordable coverage that provides at least minimum value to at least 70% of full-time employees (and dependents, unless the transition relief regarding dependent coverage applies). This means that even if the coverage is not offered to such employees between January 1, 2015 and the first day of the 2015 plan year, OR is offered, but is not affordable or does not provide minimum value, the employer will not be liable for a penalty during that time if an employee buys coverage in an Exchange/Marketplace and receives a subsidy. Caveat: If the employers plan on February 9, 2014, required full-time employees to work more than 30 hours per week to be eligible (e.g., the threshold was 32 or 35 or 40 hours), it is not clear if this transition relief applies with respect to employees who worked more than 30 hours/week in 2014, but worked less than the employer s threshold for benefits. Rule #2, Significant Percentage Tests: No 4980H penalty will be imposed on the employer between January 1, 2015 and the first day of the 2015 plan year if: No later than the first day of the 2015 plan year, the employer offers affordable coverage that provides at least minimum value to at least 70% of full-time employees (and dependents); and The employees would not have been eligible for coverage under any calendar year group health plan maintained by the employer as of February 9,2014; and The Plan meets either of the following two significant percentage tests: 1. All Employees Test: As of the end of the most recent open enrollment period prior to February 10, 2014, either: o The non-calendar year plan (and any other non-calendar year plans of the employer with the same plan year) was offered to at least 1/3 of the employer s employees (full-time and part-time) at the last open enrollment, OR o The non-calendar year plan actually covered at least 1/4 of the employer s employees (total full-time and part-time), as of any date in the twelve months ending on February 10, 2014 (the employer can select the date).
2. Full-Time Employees Test: As of the end of the most recent open enrollment period prior to February 10, 2014, either: o The non-calendar year plan (and any other non-calendar year plans of the employer with the same plan year) was offered to at least 1/3 of the employer s full-time employees at the last open enrollment, OR o The non-calendar year plan actually covered at least 1/4 of the employer s full-time employees, as of any date in the twelve months ending on February 10, 2014 (the employer can select the date). Background Information on Penalties, Affordability, and Minimum Value Two Types of Potential Penalties There are two possible penalties under the Employer Shared Responsibility provisions: the IRC section 4980H(a) penalty and the 4980H(b) penalty. Neither penalty applies unless at least one full-time employee purchases health insurance in a Health Insurance Marketplace (originally called an Exchange) and qualifies for a subsidy (a cost-sharing reduction and/or a premium tax credit). An employer can be subject to only one penalty, not to both of them. Additionally, the 4980H(b) penalty is capped at the amount of the 4980H(a) penalty. The two types of penalties are: IRC 4980H(a) penalty - the $2,000 annual penalty. An employer who does not offer minimum essential coverage (MEC) to at least 95% of its full-time employees and their dependents may be subject to a penalty. The penalty is calculated monthly. The annual penalty is the sum of 12 months of penalties. The monthly penalty is $166.67 per month times the total number of eligible full-time employees, minus the first 30 employees. For 2015 only, the final regulations decrease the offering percentage from 95% to 70% and increase the offset to 80 employees rather than 30. For purposes of this penalty, the coverage is only required to be minimum essential coverage, and it is not required to be affordable or provide minimum value. An employer who provides coverage to less than 95% (70% in 2015) of its full-time employees (and dependents) must include in the penalty count those full-time employees for whom the employer is providing MEC, so the employer will pay both the penalty and its share of the cost of benefits. The penalty does not apply to those full-time employees who are in their waiting periods, or who are in their measurement periods if they are measured by the look back measurement method, nor does it apply to part-time employees. The penalty will apply only if at least one full-time employee buys health insurance in a Marketplace and qualifies for a subsidy. IRC 4980H(b) penalty - the $3,000 annual penalty. If an employer does offer MEC to substantially all its full-time employees and their dependents, but the coverage is not affordable or does not provide minimum value, the employer will be subject to a monthly penalty equal to $250 for each affected full-time employee who buys health insurance in a Marketplace and qualifies for a subsidy. The annual penalty is the sum of the 12 months of penalties. This penalty cannot exceed the amount that would apply under 4980H(a) if the employer were a non-offering employer. Affordability and Minimum Value The proposed regulations include three safe harbors for the affordability test as it applies to employers: coverage is affordable if an employee s cost for self-only coverage (under the lowest-cost option available from the employer) is not more than 9.5% of one of the following amounts: The Federal Poverty Line (FPL) amount for an individual (this is $11,770 in 2015, up from $11,670 in 2014) The employee s W-2 income from the employer (Box 1) for the taxable year
130 multiplied by the employee s hourly rate as of the first day of the plan year (or a lower rate if the hourly rate is reduced during the year), or the employee s monthly salary as of the first day of the plan year (not multiplied by 130) Coverage meets minimum value if the plan pays on average at least 60% of the cost of allowed benefits under the plan. This means that participants do not pay more in co-payments, coinsurance, deductibles and other out-of-pocket amounts than 40% of the total allowed costs. Balance billing by out-of-network providers is not included in the calculation of minimum value. The minimum value calculation is made based on expected cost of claims of a specified risk pool. It is not made on a participant-by-participant basis. This document is not intended to be exhaustive, nor should any information be construed as tax or legal advice. Readers should contact a tax professional or attorney if legal advice is needed. Although we have made every effort to provide complete, up-todate, and accurate information in this document, such information is meant to be used for reference only. If there is any inconsistency between the information contained in this document and any applicable law, then such law will control.