SHRM Meeting Health Care Reform: Considerations for 2014 / 2015 Bobbie Honesty / Director, Strategic Benefit Services bobbie.honesty@manpowergroup.com May 1, 2014
Disclaimer This presentation is being sponsored by as a service. It was designed to provide general information about the Affordable Care Act. It is not intended to offer specific advice or guarantee a specific result. If you need advice that is tailored to your company s unique circumstances, contact your attorney or benefit advisor.
Agenda ACA Update Common-Law Employer Reporting Small vs. Large Employers ACA & Your Contingent Workforce Common Misconceptions 2014 ACA Strategy Checklist Appendix Questions? 3
ACA Update
Final Employer Shared Responsibility and Reporting Rules Issued No significant changes to the rules Require large employers to provide health plan coverage or pay a penalty If no Minimum Essential Coverage ( MEC ) pay penalty applies ($2,000 annually of all full-time employees in the legal entity if one full-time employee receives subsidized through a Marketplace ( Exchange )) If MEC is provided, but it is either not of Minimum Value (60% coverage), or is not Affordable (no more than 9.5% of household income*) play penalty applies ($3,000 annually for all full-time employees who receive subsidized coverage through a Marketplace)) * Modified adjusted income of he employee and any members of employee s family who are required to file an income tax return 5
Minimum Essential Coverage An employer sponsored plan A government-sponsored program, such as Medicare or Medicaid A grandfathered health plan A plan in the individual market purchased on or off the public Marketplace Other coverage such as that offered through state health benefit risk pools approved by the Department of Health and Human Services (HHS) 6
Employer Safe Harbor Affordability Approaches Rate of Pay: employee s required contribution for lowest cost, self only coverage that provides minimum value, does not exceed 9.5% rate of pay 130 hours/month multiplied by employee s hourly rate of pay as of the first day of coverage period (generally 1 st day of Plan Year). For salaried employees, monthly salary is used Federal Poverty Line: employee s required contribution for lowest cost, self-only coverage that provides minimum value does not exceed 9.5% of the Federal Poverty Level ( FPL ) see appendix For 2014, FPL for a single person is $11,670 9.5% of FPL is $1,108.65 and 1/12 th of the annual amount is $92.39 per month True even if employee s wages vary somewhat in a particular month because of low hours in a month 7
Employer Safe Harbor Affordability Approaches cont d Form W-2: employee s required contribution for the calendar year for the lowest cost, self only coverage that provides minimum value does not exceed 9.5% of employee s Form W-2 wages Cost of COBRA coverage is ignored if employee terminates employment Cost of coverage for employee who reduces hours and elects coverage does count for purposes of W-2 safe harbor The safe harbor approach means that if an employee receives subsidized coverage through a marketplace due to household income, but the employer s minimum value coverage is affordable under one of the safe harbor approaches, the employer will not be responsible for any play penalties 8
Determining Who is a Full-Time Employee Full-time employee: works an average of 30 hours or more per week Clarification that the employer may use either the monthly measurement period or the look-back measurement period method Can use different methods for the following categories: Salaried employees Hourly employees Employees in different states Collectively bargained employees (and each separate collectively bargaining agreement can be handled separately) Non-collectively bargained employees 9
Weekly Rule for Counting Monthly Hours To address issue of payroll periods: Employer may determine status for a calendar month to include either, but not both: The week that includes the first day of the month The week that includes the last day of the month When using the weekly rule to calculate monthly hours: For calendar months with 4 weeks, an employee is full-time if 120 hours are worked For calendar months with 5 weeks, an employee is full-time if 150 hours are worked 10
Administrative Period Final rules allow an optional period of up to 90 days following any measurement period to allow time for the employee to enroll. Final rules revise the definition of the administrative period following the Initial Measurement Period (for Variable Hour employees), to a 90-day period that includes the period between a new employee s start date and the beginning of the Initial Measurement Period, if the Initial Measurement Period does not begin on the employee s start date. 11
Variable Hour Employee Employees who, based on the facts and circumstances on the start date, the employer cannot determine whether the employee is reasonably expected to work an average of 30 hours a week on a regular basis Final Rules Provide additional guidance for making variable-hour determinations for staffing firms specific factors that should be considered when making variable-hour decisions for employees in the same position (no one factor will be considered as determinative) Employees retain, as part of their continuing employment, the right to reject the assignments offered by the staffing firm Employees typically have periods during which no offer of assignment is made Employees typically are offered temporary assignments for different periods of time Assignments offered typically do not extend beyond 13 weeks 12
Seasonal Employees Proposed Regulations Did not supply a definition of seasonal employee. Employers were to supply a reasonable and good faith interpretation of the term through 2014 Final Rules Define a seasonal employee as an employee who is hired into a position for which the customary annual employment is six months or less Employment period begins at approximately the same time each year 13
Part-Time Employees Proposed Regulations Did not define the term Final Rules Define a part-time employee as a new employee who is reasonably expected on the employee s start date not to be a full-time employee (and who is not a variable hour employee or a seasonal employee) Part-time employees and seasonal employees are tested along with variable hour employees during an initial measurement period. Once a part-time employee has been employed for a full standard measurement period, he or she is tested as an ongoing employee 14
Change in Definition of Dependent Proposed Regulations Stated that dependents included a full-time employee s biological son or daughter, stepchild, eligible foster child, legally adopted child or individual placed for legal adoption under age 26 Final Rules Coverage is no longer required for foster children, stepchildren or children who are non-us citizens or nationals Confirm that no penalty is applicable if coverage is not offered to spouses Clarification that a child must be eligible for coverage for the entire month during which he or she reaches age 26 15
Waiting Period Clarification Final rules confirm that the maximum waiting period is 90 calendar days for full-time employees. If the coverage offered is not of minimum value, the employer may be assessed a penalty for the initial 3-month waiting period. If the coverage offered is of minimum value, but not affordable, the play penalty will apply for any month after the 3-month waiting period. 16
Rehire or Continuing Employees Proposed Regulations Permitted a break-in-service of 26 weeks that would result in a returning employee being considered a new hire Final Rules Permit a break-in-service of 13 weeks to allow a returning employee to be considered a new hire Continuation of the alternative approach of treating an employee as a new hire if: The employee is not credited with any hours of service that is at least four weeks The period with no hours of service is longer than the employee s immediately preceding period of employment 17
Employer Shared Responsibility Final Rules Transitional Relief for 2015 Large Employers: Employers with 50 to 99 full-time equivalents are not subject to penalties in 2015 if certain conditions are met: The employer employs, on average, 50 to 99 full-time equivalent employees on business days in 2014 The employer has not reduced the size of its workforce in order to qualify for the transitional relief From 2/9/14 through the last day of the 2015 plan year, the employer has not eliminated or materially reduced coverage offered as of 2/9/14 Non-Calendar Year Plans: These employers will be subject to the Employer Mandate Provisions on the first day of the plan year, rather than 1/1/15, as long as they had a non-calendar year plan as of 12/27/12 18
Employer Shared Responsibility Final Rules Transitional Relief for 2015 (continued) Large Employer Determination Employers may use a consecutive 6-month period in 2014 to determine if they are a large employer. Employee Coverage For the 2015 plan year, an employer will be subject to penalties unless 70% of full-time employees and dependents are offered Minimum Essential Coverage. For the 30% not required to be covered, the play penalty of $3,000 still applies. Dependent Coverage If an employer did not offer dependent coverage in 2013 or 2014, no penalty is applied as long as the employer takes steps in 2015 to add dependent coverage. In 2016, the coverage requirement is 95%. 19
Employer Shared Responsibility Final Rules Transitional Relief for 2015 (continued) Penalty Calculator If an employer with 100 or more full-time equivalents who is subject to the pay penalty For 2015, employers may exclude the first 80 employees from the penalty calculation This reverts to the first 30 employees in 2016 20
Common-Law Employer
Who is the common law employer? The final rules confirmed that a worker s common-law employer is responsible for the employer shared responsibility penalties (and reporting) concerning that employee The preamble includes some confusing and contradictory language, In some places, it suggests that staffing companies are the common-law employer. In others, it suggests that staffing companies may not be the common-law employer Many staffing companies continue to believe that they are properly treating their associates and consultants as their common-law employees Consult with your legal adviser 22
Reporting
Final Reporting Rules Section 6055: self-funded employers and insurance companies must file a return with the IRS and provide a statement to each individual who is covered by a Minimum Essential Plan. Purpose: to provide the IRS and individuals information to administer individual mandate Section 6056: large employers must file a return with the IRS and provide a statement to each full-time employee with information regarding the offer of employer-sponsored coverage. Purpose: to provide IRS with information to administer the employer shared responsibility requirement First reporting due in early 2016 by every applicable employer (generally, an employer that employed on average at least 50 full-time employees (or equivalents) on business days in the preceding calendar year Applicable large employers required to file under 6055 and 6056 will be able to file information required by both sections on a single form 24
Reporting Forms Form 1094-C: section 6056 reporting to the IRS Form 1095-C: section 6056 reporting to individuals Self-insured employers will use Form 1095-C to report information required under both section 6055 and 6056 both sections of the form must be completed Fully insured employers will also use Form 1095-C, but will only complete the section required under section 6056 Entities that are not employers (e.g. insurance companies) will report what is required under section 6055 on Form 1095-B The final regulations state the Forms will be made available in draft form in the near future. 25
Information Reporting Requirements for Employers Select information reporting requirements under the ACA IRC 6051(a)(14) IRC 6055 IRC 6056 Information to be reported Aggregate cost of employer-sponsored coverage Information on enrollment in minimum essential coverage Information on offer of employer-sponsored coverage Entity required to report All employers issuing 250 or more W-2s in the prior year Self-insured employers, health insurers Large employers (50 or more full-time equivalent employees) Who receives the report / statement IRS, employees IRS, enrolled individuals IRS, all full-time employees Due Date to furnish statement to employees / covered individuals January 31 January 31 (electronic returns to individuals permitted only with individual consent) January 31 (electronic returns to individuals permitted only with individual consent) Due date to file information return with the IRS March 31 if filed electronically March 31 if filed electronically (required for employers filing more than 250 returns annually) March 31 if filed electronically (required for employers filing more than 250 returns annually) 26
Final Reporting Rules Simplified reporting is available for employers that offer affordable, minimum value to all full-time employees and Minimum Essential Coverage to spouses and dependents ( qualifying offer ). For 2015 only, large employers who made a qualifying offer to at least 95% of its full-time employees and their spouses and dependents will be able to provide a simplified notice to employees regarding the coverage provided An employer that can certify that it offered minimum value and affordable coverage to 98% or more of its employees and dependents does not need to determine whether each employee is a full-time employee or report the total number of full-time employees 27
Other Recent Updates The 2015 annual reinsurance contribution rate is set at $44 per enrollee (versus $63 for 2014) The Marketplace Open Enrollment period is finalized as November 15, 2014 through February 15, 2015 2015 Out-of-Pocket limits are $6,600 for single coverage and $13,200 for families 2015 annual limits on deductibles are $2,050 for single coverage and $4,100 for families 28
Small vs. Large Employer
Large Employer versus Small Employer Large Employer Large employers must either provide health coverage to all full-time employees or pay a penalty ( 50 fulltime equivalents 100 in 2015) Large employers cannot purchase coverage for their employees through the marketplaces until 2017 ( 100 employees) Large employers are not eligible for tax credits for purchasing health coverage ( 25 full-time equivalents) Small Employer Small employers are not required to provide health coverage to employees, and not subject to penalties Small employers can purchase coverage for their employees beginning on 1/1/14 Small employers may be eligible for up to a 35% tax credit. Note: The definition of large employer can differ for various provisions under the ACA Note: The definition of large employer can differ for various provisions under the ACA 30
Large Employer AND Small Employer Marketplace Notices Summary of Benefits and Coverage (SBC) Medical Flexible Spending Account (FSA) If employer is covered by FLSA, Notices concerning coverage available through the Marketplaces must be provided to all employees by October 1, 2013 If coverage is provided to employees, a Summary of Benefits and Coverage (SBCs) must be provided to employees and new hires Employee contributions to Medical Flexible Spending Accounts are capped at $2,500 31
Large Employer AND Small Employer Waiting Periods Transitional Reinsurance Program fee Wellness Programs If health coverage is provided, any waiting period can be no longer than 90 days If health coverage is provided, employers are subject to an annual Transitional Reinsurance Program fee (For 2014 the fee is $63 x average number of lives) {If fully insured paid by insurance company, included in premium} Beginning 1/1/14, the maximum reward to employers using a healthcontingent wellness program will increase from 20% to 30% (to reduce tobacco use, as much as 50%) 32
The ACA and your Contingent Workforce
Contingent Labor Trends Contingent labor usage continues to rise Advantages Respond better to business fluctuations Reach talent that prefers contingent work Baby Boomers The Affordable Care Act may also contribute to higher usage rates Outsource positions where costs may be more impactful Administration costs related to the ACA How will decisions that staffing organizations make around the ACA affect your contingent labor decisions? May 1, 2014 34
Financial Considerations Staffing organizations will experience a wide range of cost impacts dependent on a number of factors Current health care benefits Strategy for 2015 Size What does that mean for buyers of contingent labor services? Increased costs Challenges for small to mid-sized organizations Be prepared for conversations later in the year May 1, 2014 35
Talent Attraction and Retention Talent and Attraction Cost May 1, 2014 36
Administration IT Infrastructure/Business Processes Track Employees Hours Report to the Government Understand their financial exposure May 1, 2014 37
Misconceptions
Misconception #1 What They Say: I am going to have to pay for health care coverage for all of my employees that work 30 or more hours per week. What You Need To Know: The ACA does not require any employer to pay for health care coverage. Every large employer has a choice between offering coverage and paying a penalty. If an employer offers coverage to all of its full-time employees, then the more the employer contributes toward the cost of the premium, the lower the employer s penalties are likely to be. 39
Misconception #2 What They Say: At our company, you are only eligible for benefits if you work more than 32 hours per week. Obamacare is going to make us change that to 30 hours per week. What You Need To Know: Obamacare does not dictate (or even affect) the eligibility rules for any benefits other than health care. For example, a company could offer health coverage to employees who work at least 30 hours per week and group term life coverage to employees who work at least 40 hours per week. Obamacare does not require a company to change its eligibility rules for health care coverage to everyone who works at least 30 hours per week. However, an employer who wants to minimize penalties will probably want to use that rule. 40
Misconception #3 What They Say: The easiest thing to do is just keep everyone under 30 hours per week. What You Need To Know: Often, it s not so easy. To generate the same number of man-hours, you will need 4 workers instead of 3. This will increase your recruiting, training, and related costs. That strategy is likely to generate HR problems, such as employee dissatisfaction and turnover. If an employer cuts an employee s hours solely to prevent the employee from becoming eligible for health benefits, there is probably a violation of ERISA 510. 41
Misconception #4 What They Say: Starting in 2014, we are going to have to offer benefits to everyone after 90 days. What You Need To Know: The 90-day rule only applies to health care benefits. It does not apply to other benefits, like life insurance or 401(k) plans. Even within health care benefits, the 90-day rule does not generally apply to health flexible spending accounts, stand-alone vision, or stand-alone dental benefits. The 90-day rule only applies to full-time employees. It does not apply to part-time or variable-hour employees. 42
Misconception #5 What They Say: The penalty is $3,000 per employee. What You Need To Know: There are two different penalty calculations. One uses $3,000 and the other uses $2,000 Neither calculation is per employee. One of them is per full-time employee and the other is per full-time employee with subsidized exchange coverage. The $2,000 and $3,000 penalty figures are annualized amounts. Penalties will actually be assessed per month. So if you owe a penalty for an employee in January 2015, you owe $167 or $250. You do not automatically owe the whole $2,000 or $3,000. 43
Misconception #6 What They Say: It is less expensive to terminate an employer s health plan and just pay the penalty. What You Need To Know: Aside from the impact on employees, many employers will find that the penalties and tax savings may eliminate any savings. In fact, some will actually pay more by terminating its plan. It is important to model your plan offerings and the associated costs. 44
2014 ACA Strategy Checklist
2014 Checklist Task Review final rules requirements Determine if you are a large employer Determine the classification of all employees Assess your current strategy Evaluate the guiding principles for your employees benefits Determine what changes will be made to your strategy for 2014 Model costs and determine contribution strategy Objectives / Outcomes How do rules impact your business? How will transitional relief affect your strategy? What programming is needed for IRS reporting? Are full-time equivalents between 50 and 99? Do you have over 100 full-time equivalents? Full-time, part-time, variable hour, seasonal What measurement approach will be used? Is your current strategy in compliance with the ACA? Will you pay or play? Are any changes required? Does your coverage meet the needs of the company and employees? Are your benefits necessary for attraction and retention? Based on the guiding principles, what changes are required for 2014? Determine cost impact based on the 2015 strategy How much will employees pay for coverage? 46
Closing
What I Can Offer A copy of the presentation FAQs Article on the common-law employer Bobbie Honesty Director, Strategic Benefit Services bobbie.honesty@manpowergroup.com 48
Appendix
Definition of an Applicable Large Employer An applicable large employer is one with 50 or more full-time equivalent employees (100 or more for 2015) ( FTEs ). When counting FTEs, the employer must include all full-time (30+ hours/week) and part-time employees (<30 hours/week) in the controlled group. Example Anne owns two corporations, each of which operates a separate business. A dry cleaner with 15 full-time employees A restaurant with 20 full-time employees, and 35 part-time employees who each work an average of 80 hours per month. Each full-time employee is one FTE (15 + 20 = 35 FTEs) Add together all of the part-time employees hours for the month, then divide by 120 to get additional FTEs (35 x 80 = 2800 / 120 = 23.3 FTEs) Add together for the total (35 + 23.3 = 58.3 FTEs) Anne s corporation is considered a large employer For purposes of assessing the liability, the penalties are applied separately to each member of the controlled group. 50
Overview of Large Employer Requirements Generally, beginning in 2015 Large Employer Responsibilities If an employer has 50 or more full-time equivalent employees (100 or more for 2015) The employer must offer coverage that is affordable and of minimum value to all fulltime employees (and dependents, which does not include spouses) of the entity or the employer is subject to penalties Affordable Coverage Affordable means that the employee s share of the premium for employee-only coverage does not exceed 9.5% of the employee s household income (safe harbors include: (1) 9.5% x W2 earnings), (2) 9.5% x employee s hourly rate X 130, or (3) 9.5% x single person s FPL (for 2014: $1,092) If the employee s coverage is not affordable, the employee may be able to purchase subsidized coverage on an Exchange, and the employer is subject to penalties Minimum Value Minimum value means that the plan is designed so that the plan (not the insured) will pay approximately 60% of the covered plan expenses. If the employer s coverage is not of minimum value, the employee may be able to purchase subsidized coverage on an Exchange, and the employer is subject to penalties 51
2014 Federal Poverty Level 48 Contiguous States and DC Household Size 100% 133% 150% 200% 250% 300% 400% 1 $11,670 $15,521 $17,505 $23,340 $29,175 $35,010 $46,680 2 15,730 20,921 23,595 31,460 39,325 47,190 62,920 3 19,790 26,321 29,685 39,580 49,475 59,370 79,160 4 23,850 31,721 35,775 47,700 59,625 71,550 95,400 5 27,910 37,120 41,865 55,820 69,775 83,730 111,640 6 31,970 42,520 47,955 63,940 79,925 95,910 127,880 7 36,030 47,920 54,045 72,060 90,075 108,090 144,120 8 40,090 53,320 60,135 80,180 100,225 120,270 160,360 Hawaii and Alaska have separate FPLs 52
Why Some of Your Employees will likely be Better Off in the Exchanges Premium and Cost Sharing Subsidies Cost-sharing subsidies for those with family income over 250% FPL cannot reduce value of coverage below Silver plan level. These amounts are illustrative, produced by applying the law s OOP formula to the 2014 HDHP OOP limits 53
Questions?