User Group Meeting Major Account Services
Welcome & Introductions
User Group Meeting Discover best practices Network with industry peers Consult with ADP experts Learn about product innovation Optimize the value of your existing ADP Solutions 3
Navigating the New Regulatory Landscape
Wellness Program Wellness Solution Specifically Designed for the Mid-Market Truly plug-and-play with payroll integration for eligibility and rewards program ADP partnership with Vitality, a leading Global Wellness provider Flexible platform with ability to configure activities and website Largest wellness network including health clubs, screening partners, and fitness devices
Embracing Technology Innovation
ADP Pro Initiative ADP Pro Launched in March Designed for midsized companies Earn CEU credits, ADP certification Professional Certification Webinar Series Webinars showcase best practices Access to Experts
User Group Meeting Health Care Reform The Future is Now
Disclaimer This presentation is not: Legal advice Tax advice The final word on Health Care Reform A political opinion 10
Health Care Reform Terminology Patient Protection and Affordable Care Act (PPACA) - PPACA is sometimes used to refer to the entire law as amended, but technically it refers specifically to the Patient Protection and Affordable Care Act, enacted March 23,2010, (Public Law No. 111-148), which was subsequently amended by the Health Care and Education Reconciliation Act of 2010 (March 30, 2010, Public Law No. 111-152). The combined laws have been referred to as the Affordable Care Act (ACA). Health Care Reform, PPACA, ACA - These terms are all interchangeable.
A Complex Law Public Policy Aim of the ACA Increase Access Reduce d Cost Improve Quality Pre-existing conditions, overage children to age 26 Market Reforms & Mandates Starting in 2014, large employers must provide minimum essential coverage to full-time ees or pay tax penalty Employer and Individual Mandate Shared Responsibility Insurance Exchanges Approved insurance plans for individuals & small groups initially Medicaid Expansion Shifts focus to include more low income individuals up to 133% of Fed. poverty level
Health Care Reform Is a Transformative Event Health Care Reform will change the way healthcare is paid for, delivered and consumed in the United States over the next 20-30 years, impacting every: Employer Person residing in the United States Healthcare provider Insurance company Pharmaceutical company and medical device manufacturer
Major Employer Impact Employers have no alternative but to comply with the new requirements at both the federal and state level ACA is extremely complex administratively for employers Implementation began in 2010 and will continue until 2018 - clarifications and new rules emerging until mid-century Thousands and thousands of pages of regulations are anticipated at both the federal and state level The health care law with amendments comprises 974 pages (as reflected in the Federal Register) Pg. 14 14
Employer Size Matters Employers with fewer than 50 full-time employees: Exempt from Nursing Mother Break and Accommodations Provisions, if undue hardship to employer Exempt from Shared Responsibility requirements in 2014 (employers with fewer than 50 full-time employees plus full-time equivalents) Employers with up to 50 employees (or up to 100 employees at the discretion of the state) will have access to state-based Small Business Health Options Program (SHOP) Exchanges (starting in 2014) Employers with fewer than 100 full-time employees: Grants available for workplace wellness programs for employers with fewer than 100 workers who work 25 or more hours a week Health plans offered in the small group market (group plans for employers with 100 or fewer employees) will be required to comply with maximum deductible limits (starting in 2014) Cafeteria plans considered simple cafeteria plans that are exempt from nondiscrimination requirements of Code section 125(b) Employers with 250 or more W-2s Required to report Group Health Care Costs on the W-2 beginning in 2013 for 2012 forms 20
To drill down a little further, a couple of provisions to look at Exchanges Employer Shared Responsibility Wellness Taxes/Health Insurer Fees
Exchanges
Employee Notice of Exchange All states to establish an Exchange by January 1, 2014 Concept: An on-line shopping mall - On-line comparison of plans and costs Private Insurance Companies Meeting strict government requirements relating to Essential Health Benefits offered (including wellness and preventive services) Allowed cost sharing through co-payments and deductibles Overall premium cost (can vary by such factors as tobacco use, age, tier of coverage) Alternatively - Could offer government run public plan Intent: Increase competition and make coverage more available Employers must provide employees with notice describing availability of exchange coverage sometime after the DOL issues guidance with regard to the notice (originally set for 3/1/2012); guidance should be issued by late summer or early fall to align with the beginning i of the open enrollment season for Exchanges in October
Employee Notice of Exchange Types of Exchanges State Exchange (including Regional Exchanges) Federal/State Partnership Exchange Federally Facilitated Exchange Blue Prints States pursuing a State-based Exchange had to advise HHS by November 16, 2012 and submitted Blueprints by December 14, 2012
Status of State Decisions to Establish Exchanges 17 states t and DC establish or intend to establish Source: Kaiser Family Foundation as of February 15, 2013 25
Employer Shared Responsibility
Employer Shared Responsibility - Play or Pay? No Requirement to Provide Coverage An Applicable Large Employer is subject to a penalty if it does not: Offer minimum essential coverage to all of its full-time employees; Full-time employee is defined as employees who average 30 or more hours of service per week or 130 or more hours of service per month Or, if it offers minimum essential coverage to all of its full-time employees, but coverage is either unaffordable OR does not provide minimum value Penalty is only triggered by a full-time employee receiving subsidy to purchase coverage on the Exchange
Shared Responsibility - Decision Flow 1 st Check: Employer has on average 50 fulltime employees plus full-time equivalent employees in the prior year? No Penalties do not apply to small employers. 2 nd Check: Yes Does the employer offer minimum essential coverage to all of its full-time employees?" No Did at least one employee receive a premium tax credit or cost sharing subsidy in an Exchange? Yes The penalty (assessed monthly) for not offering coverage is the number of full-time employees (minus 30) times $2,000 annually. Yes 3 rd Check: Does the plan provide coverage of at least 60% minimum value?" Yes Do any full-time employees pay more than 9.5% of current year 4 th Check: Box 1 W-2 Wages, rate of pay, or Federal Poverty Level for self-only coverage? No No Yes Those employees can choose to buy coverage in an Exchange and may receive a premium tax credit. The penalty (assessed monthly) for failure to offer minimum value and/or affordable coverage is a $3,000 annual penalty that will be due for each full-time employee receiving a subsidy, up to a maximum of the total number of full-time employees (minus 30) times $2,000 There is no penalty payment required of the employer since it offers affordable coverage.
Determining Full-Time Status Q. How do you determine how many full-time employees you have? Two basic choices offered by the agencies: - Real-Time calculation - Look-Back approach Real-Time can result in employees moving into and out of benefits eligibility on a monthly basis. - Will result in significant administration and COBRA activity Look-Back minimizes this issue. - Requires time tracking by calendar month beginning at some point in 2013 - Commencement of tracking in 2013 may vary depending di on plan year and transitional relief
Determining Full-Time Status Look-Back Approach If an employer chooses the Look-Back approach it will need to establish the length of time for its: - Measurement Period - Administrative Period (if any optional) - Stability Period Measurement Period Administrative Period Stability Period Employers may vary Measurement Periods and Stability Periods for different categories of employees: - Union and Non-Union Employees (and employees under different CBAs) - Salaried and Hourly Employees - Employees located in different states
Determining Full-Time Status Look-Back Approach 3 Month Look-Back 2012 2013 2014 O N D J F M A M J J A S O N D J F M A M J J A S O N D N/A Measurement Period Admin Period Measurement Period Stability Period Admin Period Stability Period C Measurement Period Admin Period Stability Period C 12 Month Look-Back 2012 2013 2014 O N D J F M A M J J A S O N D J F M A M J J A S O N D Measurement Period Admin Period Stability Period Look-Back Admin Period 12 Month Look-Back - Transition Relief 2012 2013 2014 O N D J F M A M J J A S O N D J F M A M J J A S O N D Can Ignore Measurement Period Admin Period Stability Period Measurement Period Admin Period
Wellness
1. Wellness & Healthcare Cost Trend Reduction
2. Wellness & Employee Morale & Retention Employers are finding they have to shift more coverage costs to their employees. This has consequences! 35% of the HR / benefits decision makers ADP surveyed in midsized i d companies indicate that shifting the cost of healthcare to employees has had a negative impact on morale and djob satisfaction. Employees are also more likely to stay with a company they perceive to be making an investment in their well-being, according to an article posted by GreenIndustryPros.com.
3. Wellness & Employee Performance & Productivity There is an emerging focus on employee performance & productivity. A wellness program can help reduce worker absenteeism and presenteeism. A study by Wellness Proposals found that companies where wellness programs were implemented, sick leave was down by 28%, use of healthcare benefits decreased by 26% and compensation claims made by employees were reduced by 30%.
Wellness & Health Care Reform For plan years beginning on or after 1/1/2014, permitted wellness incentives increase from 20% of cost of coverage to 30% (or 50% for tobacco cessation). As discussed, this provides an additional opportunity to: Reduce the costs of healthcare Improve employee morale & retention Increase worker productivity, reduce absenteeism and presenteeism Increase employee accountability for healthcare costs
Wellness Programs Vitality Relationship Vitality, our Wellness Partner The holistic integration of employee health and productivity in a behaviorchange approach has the potential to unlock new opportunities for improved workplace outcomes. Vitality has studies to show savings in: Short Term Disability Workers Compensation Productivity
Other Compliance Considerations
Compliance Is Not Limited To Health Care Reform A complex, lengthy, and ever changing list of requirements Health Care Reform (PPACA) Internal Revenue Code (not limited to the following) Sec. 79 Sec. 105 Sec. 125 Imputed Income IRC Sec. 152 Same Gender Marriage CA SB 1386 (information privacy) ERISA HIPAA 834 Enrollment 820 Premium Payment Sec. 127 Sec. 129 Sec. 132 Adult children up to age 26 Privacy Rule Security Rule The requirements under Health Care Reform are in addition to all of the other regulatory requirements with which benefit plan sponsors and employers already have to comply Sarbanes-Oxley Act of 2002 SAS70 Type II audit reports FMLA Mental Health Parity Title VII ADAAA ADEA GINA COBRA Equal Pay Act
Examples of Key Interaction With ACA Auto Enrollment and IRC Sec. 125 IRC Sec. 105(h) non-discrimination requirements (current and potential changes) and ACA eligibility strategies ERISA Sec. 510 and Active Management of Hours Worked EPA and Title VII depending on final Total Rewards Strategy Adopted
Additional Employer Requirements: All Details Not Yet Clear Non-Discrimination Testing Implementation delayed Anticipate i t effective date of 1-1-15 1 15 Significant implications Ability to use aggressive pricing Carving out populations Auto Enrollment Implementation delayed Anticipate effective date of 1-1-15 Significant implications Cost IRC Sec. 125 Multi-Employer Benefit Trusts Unclear how various rules related to Excise Tax, Shared Responsibility, etc. will apply in instances when benefits are provided through trust rather than directly by employer
The ACA Litigation Minefield DOL, IRS and HHS audits will increase Already seeing audits of grandfathered status by DOL under the Act DOL efforts focus on increasing employer compliance rather than assessing penalties in early years Participant i t lawsuits may follow as participants seek to enforce benefit mandates
Taxes/Health Insurer Fees
Taxes and Fees ACA Impacts Insurer Premium Taxes & Fees by ~4% Provision Description Effective Date Fee Who's Impacted? PCORI Fee (Patient Will be used to help fund 10/1/2012/ / $1 PMPY in Year 1 Fully y Insured and Self Centered Outcomes clinical outcomes (Temporary, through Funded; Research Institute Fee) effectiveness research 2018) $2 PMPY in Year 2 Group / Individual segments Health Insurer Fee Charged to all insurers, 1/1/2014 Industry fee of $8B in 2014, Fully Insured; (Federal guidance pending) based on market share, to fund health insurance exchange subsidies (Permanent Fee) increasing to $14.3B in 2018, and each year thereafter at the rate of premium growth. Group / Individual segments Reinsurance Fee (federal and state notices of payment rules pending) Transitional fees to stabilize individual market (e.g., high risk pool) 1/1/2014 (Temporary, through 2016) Industry target of $25B through 2016. Fully Insured and Self Funded; Group segment Excise Tax on High Value Imposes an excise tax on 1/1/2018 Plans that cost more than Fully Insured and Self Plan (Cadillac Tax insurers and employers $10,200 (single) or $27,500 Funded; federal guidance pending) who offer rich benefit (Permanent Tax) (family) are subject to a 40% coverage excise tax on the amount Group segment above the limits, indexed by cost of living in subsequent years Premiums expected to increase 2 3% going forward just on Health Insurer Fee alone, reported by NFIB. 44
Shared Responsibility: Key Employer Considerations Determining ACA Full-Time Status Average hours of service credited per week per calendar month (all compensable time) Breaks in service Special rules applicable to FMLA, USERRA, or Jury Duty Teachers and other Educational Employees Rehires Management of hours worked Look-back determination Real-time active management Coverage availability Cover 95% of ACA Full-Time Employees Dependent determination Affordability determination ti Integration of payroll and benefits data Year-end determination Real-time determination Federal Poverty Level calculation Reporting and Reconciliation Exchanges Federal government
ACA Impact On Employer Sponsored Plans Government mandated coverage coupled with ongoing health care inflation will reduce employers ability to design health care plans that act as a differentiating component of total compensation and will increase likelihood of employers: Eliminating / reducing coverage Focusing on consumer based solutions HDHPs HRAs, HSAs Wellness Potentially moving some employees to exchanges for coverage 40% Excise Tax On Value Of Benefits Above Limit it Cadillac Tax $10,200 for Individual $27,500 for family Strategic Benefit Plan Design Note: Medical inflation continues to rise at 2 to 3 times the rate of overall inflation and has done so for more than 50 years nflation Medical I New Cos st Drivers Includes ER and EE Contributions for: Medical Rx ASO Fees FSA HRA HSA Pressure Lobbying Ins Co Fees The value of strategic benefit design will shrink over time due to Health Care Reform Mandated Requirements The Excise Tax Applies To Both Grandfathered Plans and Non-Grandfathered Plans
What does all this mean to employers??? Increased administrative burdens Compliance, penalties, taxes, employee education Increased costs Compliance, penalties, taxes, employee education Coverage for previously uninsured, Age 26 coverage for dependents, no pre existing conditions, no annual or lifetime limits, taxes Decreased flexibility in benefit design strategy and total compensation management (previous slide) Distraction of resources (monetary and human capital) away from core business focus
Employers Need an Integrated Approach to Workforce Planning and Administration Full-Time Status Warnings Auto-enrollment (Required in 2015) Full-Time Threshold Indicator Based on ACA Definitions Work Schedule Dashboard Enrollment of Eligible Employees Coverage Termination W-2 Affordability Calculation Full-Time Status Reporting Look-Back Approach Eligibility Enrollment Data to/from Exchanges Reporting to Federal Government Reporting/ Penalties Affordability Deductions and Other Earnings W-2 Earnings Reconcile Penalties Levied for Exchange Participation System of Record for Hours of Service
ADP Offers an Integrated Approach to Manage Workforce Planning and Administration ADP Time and Labor Management Full-Time Status Warnings Full-Time Threshold Indicator Based on ACA Definitions Work Schedule Dashboard Full-Time Status Reporting Eligibility Enrollment Auto-enrollment (Required in 2015) Enrollment of Eligible Employees Coverage Termination W-2 Affordability Calculation ADP Benefits Data to/from Exchanges Reporting to Federal Government Reporting/ Penalties Affordability Deductions and Other Earnings W-2 Earnings ADP Reporting and Reconciliation Reconcile Penalties Levied for Exchange Participation System of Record for Hours of Service Look-Back Approach ADP Payroll
Additional Health Care Reform Resources Visit ADP.com ADP.com > Tools & Resources > Health Care Reform Valuable information regarding Health Care Reform and it s impact on Employers Subscribe to receive EYE on WASHINGTON email alerts Frequently Asked Questions and Answers ADP has received on the topic of the ACA, please visit and bookmark: www.adp.com/acafaqs
Questions
Industry Networking Lunch
Thank You