ManpowerGroup Health Care Reform Webinar Follow-Up Q&A

ManpowerGroup Webinar Series 2014 ManpowerGroup Health Care Reform Webinar Follow-Up Q&A 1. Did I understand correctly that we may now legally offer benefits to new hires to be effective on the first of the month following their 90-day anniversary? If new hire coverage is effective on the first of the month following the 90-day anniversary, you will not have an employer penalty problem, but you may have a problem with the 90-day limit on waiting periods. This needs more clarification: The discussion of this issue during the webinar was in relation to the employer shared responsibility payments, and specifically was in reference to the regulations at section 54.4980H-3(c)(2). This section applies only if you are using the monthly measurement method. The section says (i) if you offer coverage by the end of third full calendar month, you avoid the 4980H(a) ( pay ) penalty for those three months, and (ii) if you offer MV coverage by the end of the third full calendar month, you avoid both the 4980H(a) and the 4980H(b) ( play ) penalties for those months. In other words, if a company s policy is first of month after 90 days, that is going to work out the same as three full calendar months after date of hire. (Under the regulations, a month could be 8/15 to 9/15, but a calendar month would be 8/1 to 8/31.) For example, if the employee s date of hire is 1/15, the offer of coverage would be 5/1 under both iterations. Employer penalties are a separate issue from (though obviously related as a practical matter) the 90-day limit on waiting periods. Here is what the preamble says about the relationship between the 90-day limit and the 4980H penalties (page 8546): Under the section 4980H final regulations, there are times when an employer will not be subject to an assessable payment with respect to an employee although the employer does not offer coverage to that employee during that time. However, the fact that an employer will not owe an assessable payment under section 4980H for failure to offer coverage during certain periods of time does not, by itself, constitute compliance with section 2708 of the PHS Act [the 90-day limit] during that same period. Violating the 90-day limit will result in an excise tax of $100 per affected person per day during the noncompliance period. 2. Our health plan is effective the day the employee begins employment and ends the day they terminate. When the child of an employee turns 26, that child s coverage has always terminated on the actual birthday. Does this mean that now the child must be covered through the entire month they turned 26? Employers may be subject to a penalty if the employer fails to offer coverage to a certain percentage of its full-time employees and their children under age 26. For these purposes, a child under age 26 means through the end of the month in which the child turns 26. As a result of this rule, we believe that most insurance companies and employers will cover children through the end of the month in which they turn 26. Continued on page 2

3. Can you have different contribution strategies for different classes of employees? Yes, contribution strategies can differ by different classes of employees as long as the employer and plan do not violate the applicable antidiscrimination rules under the federal civil rights laws, HIPAA and the Internal Revenue Code. To understand which of those rules applies to your plan, and to determine whether your contribution strategy complies with the applicable rules, contact legal counsel. 4. When mentioning affordable, exactly what does that mean? Affordable for the employer or affordable for the beneficiary (employee)? In the context of employer penalties, an affordable plan means a plan that is affordable for the employee. Coverage for an employee under an eligible employer-sponsored plan is affordable if the employee s required contribution for self-only coverage does not exceed 9.5% of the employee s household income for the taxable year. Because an employer, generally, will not know the taxpayer s household income, the regulations have adopted three safe harbor approaches that employers are allowed to use to determine if their coverage is affordable. The three safe harbors are: A. The Form W-2 wages safe harbor, B. The rate of pay safe harbor, or C. The federal poverty line safe harbor 4. What reporting will be required of small employers (fewer than 50 full-time equivalent employees) There are three employer reporting requirements: Section 6051(a)(14): Aggregate cost of coverage of plans subject to reporting requirements. The entities that are required to report are all employers issuing 250 or more Forms W-2 in the prior year. Section 6055: Information on enrollment in minimum essential coverage. The entities that are required to report are: Health care issuers with respect to coverage not offered through a marketplace Employers sponsoring self-insured health plans Joint boards of trustees responsible for multi-employer plans Designated entities of governmental units Section 6056: Information on offer of employer-sponsored coverage. The entities that are required to report are: Large employers (50 or more full-time equivalent employees) Designated entities of governmental units Note: Employers with 50-99 full-time equivalent employees in 2015 will not owe penalties in 2016 (in relation to 2015 coverage) but will still be reports to file reports in 2016 (in relation to 2015 coverage). 5. For clarification, contingent suppliers will be responsible for healthcare benefits, not the client, correct? The responsibility to offer health coverage or pay a penalty lies with the common-law employer. The common-law employer could be the contingent supplier or it could be the client, depending on the structure of the arrangement. Generally, ManpowerGroup structures its staffing arrangements so that ManpowerGroup (not the client) is the common-law employer. 1. 2

6. We currently enroll and require all full time employees to be in our group medical plan. Must we allow employees to opt out of medical in 2015 if they wish to do so? If you require all employees to enroll with no option to opt out, you may continue to do so under the Affordable Care Act. 7. As a large employer with a self-funded plan that provides greater than minimum coverage, do we still have to provide a statement to the employees? Yes. 8. Regarding Transitional Relief, I m confused by your wording: No penalties in 2015. Does this mean no penalties are calculated based on 2014 activity, payable in 2015? Or, does this mean no penalties are calculated based on 2015 activity, payable in 2016? The employer shared responsibility penalties were delayed by one year for all employers. Therefore, for all employers there are no penalties due in 2015 related to 2014 coverage. The employer shared responsibility penalties were delayed for an additional year for employers with 50 to 99 full-time equivalent employees. For these employers, there are no penalties due in 2016 related to 2015 coverage. 9. What are the regulations concerning commission-based employees? Their time is not tracked. For employees who are not paid hourly, the general rule is that an employer may use any of these methods: Counting actual hours worked or for which vacation, holiday, etc. are paid Crediting an employee with eight hours work for each day for which the person was paid for at least one hour of work, vacation, holiday, etc. Crediting an employee with 40 hours work for each week for which the person was paid for at least one hour of work, vacation, holiday, etc. There is also a special rule for employees paid on a commission basis: until further guidance is issued, an employer may use a reasonable method of crediting hours. The preamble to the final regulations provides this explanation: A method of crediting hours is not reasonable if it takes into account only a portion of an employee s hours of service with the effect of characterizing, a non-full-time employee, an employee in a position that traditionally involves at least 30 hours of service per week. For example, it is not a reasonable method of crediting hours to fail to take into account travel time for a traveling salesperson compensated on a commission basis. 10. Does break-in-service mean termination from the employer, or does it also apply to leaves of absence? It does not just mean termination it means a period of time for which there was no hour of service or special unpaid leave. An employee s hours of service include the following: (1) each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer; and (2) each hour for which an employee is paid, or entitled to payment by the employer on account of a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence. Paid leave described in (2) cannot be counted toward a break in service. Special unpaid leave means unpaid leave under the FMLA (Family and Medical Leave Act), under USERRA (Uniform Services Employment and Reemployment Rights Act), or for jury duty. (There are additional employment break rules for educational institutions.) None of these forms of unpaid leave can be counted toward a break in service. 1. 3

11. Does the Dependent Child Insurance that must be provided have to be AFFORDABLE? For example, we would of course provide employee coverage for no more than 10% of wages, but can we have employee pay 100% of dependent child health insurance? Just a reminder: coverage does not have to be provided and does not have to be affordable at all. I assume you are asking how affordable coverage is measured for purposes of the employer penalty. Coverage will be affordable if the employee s required contribution for the lowest cost, self-only coverage does not exceed 9.5% of household income. (Employers may use one of 3 safe harbors to determine affordability: (i) rate of pay, (II) federal poverty level, or (iii) Form W-2 earnings. (See question #4.)) So yes, you can have the employee pay 100% of dependent child health insurance without impacting your penalty. 12. I was advised by our insurance company that the waiting period is 60 days in California now, not 90. Is that correct? Federal law (the Affordable Care Act or ACA ) allows employers to impose up to a 90-day waiting period for group health plans. California law allows employers to impose up to a 60-day waiting period for group health plans. Other states may have similar laws, but I am not personally aware of any. With respect to California, specifically, there are a couple of interesting twists: The ACA applies to employer group health plans, no matter whether they are fully-insured or self-funded. The California law applies only to fully-insured plans (including HMOs) it does not apply to self-funded plans. The two waiting periods may not start at the same time. The starting point for the ACA waiting period is clear, but the starting point for the California law is not. California Senate Bill 1034 (introduced 2/14/2014) would repeal the California law. 13. Since the determination for full-time employee is an average of 30 hours per week, does that mean the employee s hours can vary greatly during any given month just as long as each month s total hours mathematically averages out to 30 hours per week?...meaning there could be some weeks in a particular month where the employee does not work 30 actual hours every week in that month but just that the average time worked that month is 30. That is correct. It is an average of 30 hours per week it does not matter if they worked a little more one week and a little less the next. It is important to consider the calculation methodology the monthly-measurement method versus the look-back measurement method. 14. Can an employer contribute a little more to the premium for certain low-wage qualified employees in order to avoid the affordability penalty? Contribution strategies can differ by employment group, as long as they do not violate the applicable antidiscrimination rules under the federal civil rights laws, HIPAA, and the Internal Revenue Code. 15. Is affordability based on premium only or include deductibles? Affordability is based on premium contributions only. It does not include deductibles. 16. If an employee chooses to get insurance from the exchange because it is cheaper for family coverage than our employer coverage even though we offer affordable employee coverage can we be fined? Remember that there are two penalties: 1. The 4980H(a) or pay penalty. If a large employer fails to offer minimum essential coverage to enough fulltime employees and their children, and if one full-time employee purchases subsidized exchange coverage, the employer pays a penalty for all full-time employees, whether they have coverage or not. For example, 1. 4

suppose you only offer coverage to 60% of your full-time employees. Further suppose that one of the employees in the uncovered 40% goes to the exchange and gets subsidized coverage. You will pay a penalty on all of your full-time employees, even if they have coverage. 2. The 4980H(b) or play penalty. If a large employer offers minimum essential coverage to enough full-time employees and their children, if the coverage fails to meet either the minimum value or the affordability standard, and if one full-time employee purchases subsidized exchange coverage, the employer pays a penalty for each employee with subsidized exchange coverage. The question indicates that the coverage was affordable but not whether the coverage was minimum value. If the coverage is minimum value, you will not pay a penalty. 18. Are there different requirements for non-profit organizations,or are they subject to the same provisions as for-profit organizations? Non-profit organizations are subject to the same ACA provisions as all other employers. 19. Don t self-insured companies come under reporting and reinsurance, even if they are small? See response to question #5. 20. Are high deductible health plans still acceptable under the ACA? Yes 21. Under the 2015 auto-enroll with opt out requirement, are we allowed to require employees to provide proof of other coverage in order to allow them to opt out of our group insurance coverage? No 22. If an employee started in 2014 but will not have worked a complete standard measurement period by late 2014, must we designate them as non-variable versus variable going into 2015? Basically, yes. Everyone who has worked a complete standard measurement period is an ongoing employee. Everyone else is a new employee. If the new employee can validly be designated variable hour, it is to the employer s advantage to do so. Nevertheless, an employer may choose to treat all new employees as non-variable hour. 23. Regarding notices that large employers must provide, may these notices be electronic? They may be provided electronically, but only if the DOL electronic disclosure safe harbor rules are met. 24. If an employee works an average of 30 hours per week, are they still part-time or would it have to be an average of 29 hours in order to be part-time? If they work only an average of 30 hours not 31, are they part-time? This is confusing... An employee is full-time if he or she averages 30 hours or more per week. An employee is part-time if he or she averages less than 30 hours. So an employee who averages 30.5 hours is full-time, and an employee who averages 29.5 hours is part-time. 25. If dependent coverage is not affordable, can the dependent purchase coverage on an exchange, or must s/he purchase the unaffordable coverage through the employer? All individuals are eligible to purchase coverage on the exchange; however they may not be eligible for subsidies. 1. 5

26. Say an employee is hired, and we do not know reasonably know whether the employee will meet the 30-hour average. What Is the period for determining eligibility called, and how long is this period? Then, at what point after the eligibility is determined do we have to offer coverage? How long will the employee have to elect or reject our coverage? I will assume that this employee can validly be classified as a variable hour employee. For a new variable hour employee, the period of time during which hours will be measured is call the Initial Measurement Period (IMP). The IMP is determined by the employer, subject to certain rules. The IMP must begin by the first of the month following the start date or the first payroll period following the start date, whichever is later. The IMP must be no shorter than three months and no longer than 12 months. At end of the IMP, the employer may have an administrative period. The administrative period gives the employer time to determine whether the employee is full-time, to offer coverage, and to enroll the employee. (It must be possible for the employee to accept and have the coverage be effective immediately after the administrative period.) The administrative period must be no longer than 90 days, minus the days between the employee s start date and the beginning of the IMP. In addition, there is cap on the combined length of the IMP and the administrative period. They must collectively end no later than the last day of the calendar month beginning on or after the employee s first anniversary. For example, if the employee s date of hire is 3/10/2015, the combined IMP and administrative period must end by 4/30/2016. The employer must give the employee a reasonable amount of time in which to decide whether to enroll the ACA does not specify a number of days. However, it must be possible for the employee to start being covered immediately after the end of the administrative period. Here is a fairly typical scenario: Company has a 12-month IMP, which starts on the first of the month following date of hire, and has a one-month administrative period. John Smith starts working for Company on 3/10/2015. The IMP starts on 4/1/2015 and ends on 3/31/2016. Company determines that John averaged more than 30 hours per week during the IMP. On 4/15/2016, Company offers John health coverage. John has 30 days in which to enroll. If John enrolls between 4/15 and 4/30, coverage will be effective on 5/1/2016. If John enrolls between 5/1 and 5/14, coverage will be effective on 6/1/2016. 27. Regarding Employer Shared Responsibility, are we exempt if we are under 50 employees? Yes. The Employer Shared Responsibility provisions apply to employers with 50 or more full-time equivalent employees. By definition, if you have less than 50 employees, you have less than 50 full-time equivalent employees. 28. What part of these rules applies to companies with UNDER 50 employees? If we offer a plan, does it also need to comply? If an employer with under 50 full-time equivalent employees offers coverage, the employer is not subject to the Employer Shared Responsibility penalties. However, the health coverage offered by the employer must comply with the other provisions of the ACA. For example, providing coverage to dependents up to age 26, not having any preexisting condition exclusions, not imposing a waiting period longer than 90 days, and providing employees with a standard Summary of Benefits and Coverage form explaining what their plan covers and what it costs. In addition, if the employer is covered by the Fair Labor Standards Act (generally, those firms that have at least one employee and at least $500,000 in annual dollar volume of business), the employer must provide notification to their employees about the new Health Insurance Marketplace, inform employees that they may be eligible for a premium tax credit if they purchase coverage through the Marketplace, and advise employees that if they purchase a plan through the Marketplace, they may lose the employer contribution (if any) to the health benefits plan offered by the employer. 1. 6

29. If you employ under 50 people, is there a penalty if there is no coverage offered? Employers with less than 50 full-time equivalent employees are not subject to the Employer Shared Responsibility penalties. 30. How do I get a copy of all requirements for companies under 50 employees, or are there any? There is no single place where all of this information is collected. You should talk to your legal, tax and insurance advisors. It would also be a good idea to look at the information provided by the Department of Labor and the Internal Revenue Service. 31. What are the three primary considerations that small employers (under 50) should engage in this year (2014)? A. Monitor workforce patterns and demands to ensure that the 50-employee threshold will not be broken. B. If currently offering coverage, determine what coverages will be available to employees through public marketplaces along with the associated cost. Determine whether employees would qualify for subsidies and how that would impact costs to employees. C. If your strategy is to terminate coverage in 2015, determine if you are going to make employees whole for the loss of coverage subsidy they were previously receiving from you, the employer. 32. If I have 75 full-time personnel and 28 part-time personnel, I will not be penalized in 2015, correct? It depends on how you are defining full-time and part-time. The real answer is that you should calculate the number of full-time equivalent employees. Add up the total hours of service for all employees during 2014 (but not more than 2,080 hours for any employee). Divide that number by 2,080. If the answer is not a whole number, you can round down. If the final number under 50, you will not accrue any Employer Shared Responsibility penalties in 2015. If the final number is 51-99, you will not accrue any Employer Shared Responsibility penalties in 2015, provided that you comply with these additional rules: (1) from February 9 to December 31, 2014, you do not reduce the size of the workforce or overall hours of service of the workforce in order to be under 100 full-time equivalent employees, (2) from February 9 to December 31, 2014, you do not eliminate or materially reduce the health coverage you had in place on February 9, 2014, and (3) you certify (procedures have not yet been published) that you are eligible for transition relief. 33. How do you determine a full-time equivalent? Are retail employees considered part time or variable hour employees? For example, if they are a regular employee who works all year long but their hours vary each week. Refer to the previous question for full-time equivalent calculation. A new employee would be considered to be part-time if, as of the start date, the employee is reasonably expected to work, on average, less than 30 hours per week. A new employee would be considered to be full-time if, as of the start date, the employee is reasonably expected to work, on average, 30 hours or more per week. A new employee would be considered to be variable-hour if, as of the start date, it cannot reasonably be determined whether the employee will be part-time or full-time. 34. Please talk about the excise tax imposed. In 2018, if the total cost of health coverage provided to an employee (includes employer subsidy as well as employee payroll deductions) exceeds a certain dollar threshold, the employer will be charged a 40% nondeductible excise tax on the portion of the cost that exceeds the threshold. In 2018, these thresholds will be $10,200 for individual coverage and $27,500 for other coverage. 1. 7

35. The company that I represent consists of 43 employees. The owner of the company has 51% ownership in another company which employees 98 employees. These companies have separate federal tax ID numbers and operate separately. Will we be linked together and considered a large company? It will depend on whether the companies are part of the same controlled group or affiliated service group. That is a legal determination, and you will need to consult an attorney. Here is what the final regulations say about this issue: For purposes of determining whether an employer is an applicable large employer, all persons treated as a single employer under [Internal Revenue Code] section 414(b), (c), (m), or (o) are treated as a single employer. Thus, all employees of a controlled group of entities under section 414(b) or (c), an affiliated service group under section 414(m), or an entity in an arrangement described under section 414(o), are taken into account in determining whether the members of the controlled group or affiliated service group together are an applicable large employer. For purposes of determining applicable large employer status, the term employer also includes a predecessor employer (see paragraph (a)(36) of this section) and a successor employer. 36. I believe your slide indicated open enrollment would start November 1, 2014, and I believe that might be a typo as I read it will start on November 15, 2014. Yes, there was a typo. Open Enrollment for Marketplaces coverage in 2015 begins on November 15, 2014 through February 15, 2015. 37. What help will there be for employers who have an HRA with a high deductible, but the employee only pays a small part of that? Our plan has a deductible of $7500 but the employee only pays the first $750. Of course, we have been told that we will no longer be able to get that plan come open enrollment. A $7,500 deductible is permitted. 38. Have staffing companies had cost impacts from ACA already in 2014, and if so what are they? Staffing companies have not been exempt from costs tied to ACA as they have been subject to the same health coverage requirements as employers in other industries, such as 100% preventive coverage, removal of lifetime limits and dependent coverage to age 26. Some staffing companies were permitted to continue their limited medical plans or mini-meds through 2013, but these plans were not permitted in 2014. The impact could vary widely from one firm to another depending on programs they previously had in place. 39. So if we are a large employer and we provide one health plan that meets the minimum value and affordability for employees (it s free), then do we meet the ability to certify that we meet this standard with 98% of our employees to not have to provide confirmation of whether or not an employee is a FT employee? Or would we have to offer affordable and minimum-value plans for our dependent offerings? In order for you to avoid all Employer Shared Responsibility penalties in 2015, you must offer coverage to 70% of your full-time employees and their children (to age 26). The coverage must be minimum essential coverage. The coverage for the employees must meet the minimum value standard and must be affordable. 40. OK, so are we now required to offer minimum value and affordable coverage to employee plus children and to employee plus spouses? You are not required to offer coverage at all. Offering certain coverage to certain employees allows you to avoid certain penalties. To avoid the penalty under 4980H(a), a large employer must offer minimum essential coverage to 70% of its full-time employees in 2015 (95% in 2016) and their children (spouses are optional). It does not matter whether the coverage is minimum value or affordable. 1. 8

To avoid the penalty imposed by 4980H(b), a large employer must offer minimum essential coverage to 70% of its full-time employees in 2015 (95% in 2016) and their children (spouses are optional). In addition, the coverage provided to the employee must be minimum value and affordable. The coverage provided to the children is not subject to the minimum value or affordability tests. 41. Coverage is being offered for dependents, but we do not contribute. Is that acceptable? Yes, but remember employers are not mandated to provide coverage at all as they can always just pay the penalty. 42. Could you tell me: if you are a small employer with 20 employees (Florida employer), what, if any, part of this we should be concerned with? If you grow to be more than 50 full-time equivalent employees, you will have to know about all of this. If you stay your current size, employer penalties will not be an issue. However, you will want to determine whether and how health coverage (and employer contributions to that coverage) can help you attract and retain employees. To do that, you need to understand the relative value (1) you offering small group coverage to your employees and (2) your employees options for purchasing coverage on the exchange (including the likelihood of them being eligible for federal subsidies). You also may want to explore tax credits available to small employers who offer and subsidize health coverage for their employees. 43. Who has the responsibility of covering temp to perm employees working full-time, the staffing agency or the company the temporary is on assignment to? The responsibility lies with the common-law employer. The common-law employer could be the staffing company or it could be the client, depending on the structure of the arrangement. Generally, ManpowerGroup structures its staffing arrangements so that ManpowerGroup (not the client) is the common-law employer and is responsible for ACA compliance. 44. My company established a full-time employee as those who works 40+ hours per week. A part-time employee is established as those working under 40 hours. We offer health benefits for those who work 30+ hours on a regular basis. As long as we provide benefits for those who work 30+ per week, we are in compliant, correct? Correct. If you provide benefits to those that the government deems full-time (which is at least 30 hours per week, refer to question 26) then you are compliant. 45. One of my clients has a question. He currently has insurance coverage at an international level, covering Mexico and USA. Do you know if this is acceptable for ACA. I suggested the client to ask his insurance carrier, but just wanted to check if you have heard anything on this? If the coverage for US employees meets the requirements of the ACA, it does not matter whether the policy covers employees in other locations as well. The ACA guidance includes some special provisions for expatriate coverage (coverage for US nationals who live and work in foreign countries). However, there is no international coverage exception to the ACA. 1. 9