Transcript ADP Deck - SEPA
Pete Isberg VP, Government Relations September 13, 2013
Health Care Reform: A Changing Landscape
Disclaimer This presentation is not:
Legal Advice
The final word on Healthcare Reform
A political opinion
ADP is not a law firm and does not provide legal advice. Before taking any action on the information contained in this presentation, Plan Sponsors should review this material with internal and/or external counsel.
2
No Problem…
3 Source:
House Joint Economic Committee, August 2, 2010 11
Delays In ACA Employer Mandate
Delays In Employer Mandate
Reporting requirements from large employers with respect to the health coverage offered to their full-time employees will be optional for 2014 The IRS will not assess any employer shared responsibility payments for 2014 Individuals who meet eligibility requirements will still be able to apply for premium tax credits for Exchange coverage that begins in 2014 The delay in reporting and employer shared responsibility payments does not affect The individual mandate, which will become effective in 2014 Any other ACA requirements
5
Items That Employers Must Still Address In 2013/2014
Fees Payment of Patient-Centered Outcomes Research Trust Fund (PCORI) fees Payment of transitional reinsurance program contributions Distribution of the Notice to Employees of Coverage Options (Exchange Notification) Plan Design Changes Elimination of annual and lifetime dollar limits on essential health benefits No more than 90 day waiting period for coverage New wellness program rules Coverage of recommended preventive services without cost-sharing for non-grandfathered plans Look-Back Period Tracking
6
Notice of Coverage Options / Exchange Notification
Guidance issued on May 8, 2013 Employers are required to provide a notice to each employee Current employees: No later than October 1, 2013 New hires: Within 14 days of employee’s start date Broad applicability: All employers subject to FLSA All part-time and full-time employees (but not dependents) Including those not eligible for benefits Distribution Requirements Must be in writing but can be done electronically, if the employer complies with DOL electronic notice requirements Two different Model Notices For employers that offer health coverage – http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf
For employers that do not offer health coverage – http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf
Elimination Of Annual And Lifetime Dollar Limits
Annual and lifetime dollar limits must be eliminated on essential health benefits “Essential health benefits" is broadly defined under the ACA: Ambulatory Patient Services Emergency Services Hospitalization Maternity And Newborn Care Mental Health And Substance Use Disorder Services Pediatric Services, Including Oral And Vision Care
8
Maximum 90 Day Waiting Period For Health Care Coverage
All calendar days are counted, including weekends and holidays If a plan has a 90-day waiting period, and the 91st day is a weekend or holiday, the plan may make the employee’s coverage effective earlier than the 91st day for administrative convenience Plans with waiting periods of less than 90 days may delay the effective date of coverage to the first day of the month or payroll period following the end of the waiting period, but only if coverage begins no later than the 91st day
9
New Wellness Program Rules
Proposed regulations would require health-contingent wellness programs to follow certain rules, including: Programs must be reasonably designed to promote health or prevent disease – Must offer a different, reasonable means of qualifying for the reward to any individual who does not meet the standard based on the measurement, test or screening Programs must have a reasonable chance of improving health or preventing disease and not be overly burdensome for individuals Programs must be reasonably designed to be available to all similarly situated individuals.
– Reasonable alternative means of qualifying for the reward must be offered to individuals whose medical conditions make it unreasonably difficult, or for whom it is medically inadvisable, to meet the specified health-related standard Individuals must be given notice of the opportunity to qualify for the same reward through other means.
The maximum permissible reward under a health-contingent wellness program increases from 20% to 30% of the cost of health coverage – In addition, the rules increase the maximum reward to as much as 50 percent for programs designed to prevent or reduce tobacco use
10
Coverage Of Recommended Preventive Services Without Cost Sharing
ACA requires that certain recommended preventive services be provided at no cost to the participant ACA defines preventive care services as follows: Items or services recommended with an A or B rating by the U.S. Preventive Services Task Force Immunizations recommended by the Advisory Committee on Immunization Practices of the CDC Preventive care and screenings for infants, children and adolescents supported by the Health Resources and Services Administration Preventive care and screenings for women supported by the Health Resources and Services Administration per the August 1, 2011 guidance: – Well-woman visits – – Screening for gestational diabetes Human papillomavirus DNA testing – – – – – Counseling for sexually transmitted infections Counseling and screening for human immune-deficiency virus Contraceptive methods and counseling (certain religious groups are exempt) Breastfeeding support, supplies and counseling Screening and counseling for interpersonal and domestic violence
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Additional Guidance Expected
Employer health coverage reporting under Sec. 6056, 6055 Non-discrimination testing requirements Regulations are expected for fully-insured plans Requirements are already in place for self-insured plans under IRC Sec. 105(h) Auto-enrollment requirements Regulations are expected to be issued within the next several months
12
ACA Changes Increasing Complexity For Employers
Mandates Affecting Employers
2011 2012 2013 2014 2015 2016 2017 2018
Small business premium tax credits W2 reporting of employer provided healthcare coverage Summary of benefits coverage Notice to inform EEs of Exchange (Oct 2013) Employee FSA contributions limited to $2500 Wellness tax credit for small ERs; Various Fees; Some Plan Change Medicare payroll tax increase for high earners Shared Responsibility Determination Reporting Reconciliation ($2-3k penalty) Auto enrollment; Non discrimination (awaiting Guidance) Exchange Reporting (continues) Federal Reporting Exchanges open to large ERs Penalty Assessment Reconciliation “Cadillac” Excise Tax (non deductible 40%)
Potential for significant penalties
Only 32% of small, 32% of mid-size and 50% of large employers are confident in understanding responsibilities under ACA 1 In addition to employer-specific mandates, provisions for individuals, insurers, states, and the federal government (e.g., exchanges) are also likely to impact employers.
Source: PPACA legislation, ADP RI 1 ADP RI research study of HR decision makers, 193 <50 EEs, 176 50 – 1000 EEs, 175 >1000 EEs, June 2013
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Response Of Employers To ACA Goes Beyond Compliance To Include Strategic Considerations
Employers must focus on meeting foundational requirements of ACA, but will also need to address strategic challenges of benefits decisions and workforce strategy Level of response to ACA Specific capabilities employers need Workforce strategy
Use as a competitive advantage • • • Manage number of employees that are full time Make compensation tradeoffs (e.g., benefits vs income) Manage health costs via wellness, incentives, education, etc.
+ Benefits decisions
Choose appropriate plans
+ Foundational requirements
Ensure compliance with ACA • • • Decide whether to offer coverage Determine employer contribution approach (e.g., defined contribution vs. defined benefit) Choose benefit and wellness plans to mitigate cost impact (e.g., “Cadillac” Excise tax) • • • • • Basic compliance activities Notify employees of exchanges Track employee full-time status and report results Ensure coverage and affordability of health plans (>50 EEs) Report value of health coverage on W2 (>250 EEs)
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Potential Employer Penalties
2012
2015 (Delayed From 2014)
If an employer does not offer minimum essential coverage to all its full-time employees and their dependents, the non deductible penalty is
$2,000
X the number of full-time employees the employer has in excess of 30 2013 2014 2015 2016
Excise Tax 2018
If group health plan coverage exceeds certain thresholds, an employer could be subject to a
40% Excise Tax
(non-deductible) on the amount of excess benefits 2017 2018
2015 (Delayed From 2014)
If the minimum essential coverage offered is unaffordable or doesn’t have sufficient value, there are penalties triggered. The non deductible penalty is
$3,000
X the number of full-time employees who actually receive a subsidy (so long as at least 95% of ACA F-T employees have been offered MEC coverage – otherwise, $2,000 per all ACA F-T employees will apply)
Shared Responsibility
Excise Tax
Health Care Cost Continue A Long Term Cost Increase Far In Excess Of Inflation
Health care represents a larger portion of the GDP almost every year since 1965 – and will account for over 18% of GDP in 2012
25% 20% 15% 10% 5% Medicare and Medicaid Enacted
7.2% 5.8% 9.1% 10.3% 10.5% 12.5% 13.9% 13.8% 16.0% 18.0% 20.0% 0.9% 0.8% 1.0%
0% 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source:
Centers For Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, U.S. Department of Commerce, Bureau of Economic Analysis
2015
Average annual cost of employer provided health care rose an average of 8% annually between 1999 and 2012 Employee Only coverage exceeds $ 5,600 in 2012 1
$16,000
Family coverage exceeds $15,700 in 2012 1
Individual Family $15,745 $15,073 $14,000 $13,770 $13,375 $12,680 $12,000 $12,106 $11,480 $10,880 $10,000 $9,950 $9,068 $8,000 $8,003 $7,061 $6,438 $6,000 $5,429 $5,791 $4,824 $5,049 $5,615 $4,479 $4,704 $4,242 $4,024 $4,000 $3,695 $2,471 $3,383 $2,196 $3,083 $2,689 $2,000 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source:
1 Kaiser Family Foundation, 2012 Employer Health Benefits Survey
17 15% 14% 13% 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%
7.7% 1.6% 11.6% 5.7% 13.1% 9.1% 14.2% 13.5% 8.4% 3.6% 10.6% 5.4% 4.5% 2.8% 6.1% 3.4% 5.7% 3.4% 4.2% 1.6% 6.2%
Every Year since 1965:
Medical CPI has risen faster than general CPI
Percent change in per capita health care expenditures has been higher than change in medical CPI 1965 1970 1975 1980 Per Capita NHE 1985 1990 1995 2000 CPI All Items 2005 2010 2015 Sources: 1.
Per Capita National Health Expenditures (NHE) - Centers For Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, U.S. Department of Commerce, Bureau of Economic Analysis
2.
Percent Change in CPI (All Items and Medical Care) – U.S. Dept of Labor, Bureau of Labor Statistics
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 Cost Of Benefits Above Limit
$10,200(A)
/
$11,850(R) for Individual “Cadillac Tax” $27,500(A)
/
$30,950(R) for family
Strategic Benefit Plan Design
Medical inflation continues to rise at 1.8 times the rate of overall inflation Per capita health costs have grown faster than the rate of CPI every year since 1965 – Since 2001 they have gone up an average of 2.2 times the rate of change in the CPI Includes ER and EE Contributions for: Medical Rx ASO Fees FSA HRA (ER Pre-Tax Contributions) HSA (ER Pre-Tax Contributions) The value of strategic benefit design will shrink over time due to health care reform Mandated Requirements
18 The Excise Tax Applies To Both Grandfathered Plans and Non-Grandfathered Plans
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The Excise Tax: Two Simple Examples
Exceeding the excise tax limits by even a small amount can result in a significant non deductible penalty In Example 1 Individual costs exceed the excise tax limit by only $250 per year (less than $21 per month Family costs exceed the excise tax limit by only $750 per year In Example 2 costs are higher – as is the corresponding excise tax assessment Individual costs exceed the excise tax limit by $800 Family costs exceed the excise tax limit by $1,500 per year
EXAMPLE 1
Excise Tax Limit Cost of Plans Amount Subject To Excise Tax Number Enrolled Annual Penalty In 2018 Individual Coverage $10,200 $10,550 $350 500 $70,000 Family Coverage $27,500 $28,250 $750 1,500 $450,000 Total 2,000
$520,000 EXAMPLE 2
Excise Tax Limit Cost of Plans Amount Subject To Excise Tax Number Enrolled Annual Penalty In 2018 Individual Coverage $10,200 $11,000 $800 500 $160,000 Family Coverage $27,500 $29,000 $1,500 1,500 $900,000 Total 2,000
$1,060,000
Example: Estimating Excise Tax in 2018
Assumptions Health Care plan costs in 2012 (includes ASO fees for self-insured plans): – Individual - $ 5,615
Source:
Kaiser Family Foundation, 2012 Employer Health Benefits Survey Family $15,745 Note: cost are approximately 1.5% higher for large employers – but average costs are used below Average annual FSA contribution of – – Individual: $ 750 (held constant - not increased for any inflation assumption) Family: $1,250 (held constant - not increased for any inflation assumption) $23,000
Individual Coverage ($5,615 in 2012)
10.5% Trend $21,000 $19,000 $17,000 $15,000 $13,000 $11,000 $9,000 $7,000 $5,000 6.2%% Trend 8.5% Trend
3.5% CPI 20 18 20 19 20 20 20 21 20 22 20 23 20 24 20 25
$65,000
Family Coverage ($15,745 in 2012)
$60,000 $55,000 $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 6.2%% Trend 10.5% Trend 8.5% Trend
3.5% CPI
20 18 20 19 20 20 20 21 20 22 20 23 20 24 20 25
Unless They Make Plan Changes, Most Employers Will Exceed The Excise Tax Limits No Later Than 2019 – With Many Incurring A Penalty in 2018 20
Example: Estimating Excise Tax in 2018 Estimated Tax Liability
Number of Employees: Individual Coverage Year 2018 6.20%
$0
2019 2020 2021 2022 2023 2024 2025
$0 $0 $0 $0 $0 $0 $9,251
Number of Employees: Individual Coverage Year 2018 2019 2020 2021 2022 2023 2024 2025 6.20%
$0 $0 $0 $0 $0 $0 $0 $18,501
21 Number of Employees: Individual Coverage Year 2018 2019 2020 2021 2022 2023 2024 2025 6.20%
$0 $0 $0 $0 $0 $0 $0 $37,002
8.50%
$0 $26,470 $121,540 $228,385 $348,137 $482,027 $631,393 $797,695
8.50%
$0 $52,939 $243,079 $456,771 $696,275 $964,053 $1,262,786 $1,595,390
8.50%
$0 $105,879 $486,159 $913,542 $1,392,550 $1,928,106 $2,525,571 $3,190,781
2,500 20% 10.50%
$154,341 $297,597 $460,893 $646,508 $856,966 $1,095,064 $1,363,897 $1,666,894
Family Coverage 6.20%
$0 $0 $0 $0 $0 $0 $0 $542,719
8.50%
$0 $526,712 $1,624,982 $2,856,453 $4,233,841 $5,770,993 $7,482,983 $9,386,217
80% 10.50%
$1,930,120 $3,567,782 $5,431,299 $7,546,272 $9,941,056 $12,647,053 $15,699,030 $19,135,481
Total 6.20%
$0 $0 $0 $0 $0 $0 $0 $551,970
8.50%
$0 $553,181 $1,746,522 $3,084,839 $4,581,979 $6,253,020 $8,114,375 $10,183,912
100% 10.50%
$2,084,461 $3,865,379 $5,892,192 $8,192,780 $10,798,022 $13,742,116 $17,062,927 $20,802,375
5,000 20% 10.50%
$308,683 $595,195 $921,786 $1,293,015 $1,713,932 $2,190,127 $2,727,794 $3,333,787
Family Coverage 6.20%
$0 $0 $0 $0 $0 $0 $0 $1,085,438
8.50%
$0 $1,053,423 $3,249,964 $5,712,906 $8,467,683 $11,541,986 $14,965,965 $18,772,434
10,000 20% 10.50%
$617,366 $1,190,389 $1,843,572 $2,586,031 $3,427,863 $4,380,254 $5,455,587 $6,667,575
Family Coverage 6.20%
$0 $0 $0 $0 $0 $0 $0 $2,170,876
8.50%
$0 $2,106,847 $6,499,929 $11,425,813 $16,935,366 $23,083,973 $29,931,930 $37,544,868
80% 10.50%
$3,860,239 $7,135,564 $10,862,599 $15,092,544 $19,882,113 $25,294,105 $31,398,060 $38,270,963
Total 6.20%
$0 $0 $0 $0 $0 $0 $0 $1,103,939
80% 10.50%
$7,720,478 $14,271,129 $21,725,197 $30,185,089 $39,764,225 $50,588,211 $62,796,120 $76,541,926
Total 6.20%
$0 $0 $0 $0 $0 $0 $0 $2,207,878
8.50%
$0 $1,106,363 $3,493,044 $6,169,677 $9,163,958 $12,506,040 $16,228,751 $20,367,824
100% 10.50%
$4,168,922 $7,730,759 $11,784,385 $16,385,560 $21,596,044 $27,484,232 $34,125,854 $41,604,750
8.50%
$0 $2,212,726 $6,986,088 $12,339,355 $18,327,916 $25,012,079 $32,457,502 $40,735,649
100% 10.50%
$8,337,844 $15,461,518 $23,568,769 $32,771,119 $43,192,089 $54,968,465 $68,251,708 $83,209,501
Shared Responsibility
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Key Employer Considerations
Determining Full-Time Status
Average weekly hours credited per month (all compensable time) Breaks in service Special rules applicable to – FMLA, USERRA, or Jury Duty – Teachers and other Educational Employees – Rehires
Offer Coverage
Offer coverage to at least 95% of ACA F-T employee's Dependent determination and documentation of coverage offering
Affordability
Integration of payroll and benefits data – Year-end determination – Real-time determination Federal Poverty Level calculation
Reporting and Reconciliation
Exchange Notices Responses/hearings Employer Health Coverage reporting (Sec. 6056)
IRS Assessment
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Employer Shared Responsibility Provisions
Key Elements
–
Is employer sponsored coverage offered?
–
Is it sufficient?
Coverage standards and minimum actuarial value –
Is it affordable?
Premiums not more than 9.5% of W-2 Box 1 –
Is the employee receiving subsidized Exchange coverage?
–
Is the employee full-time?
Monthly tracking of FT status
IRS Shared Responsibility Assessment: 4980H
A monthly “penalty” for large employers who: − − − Either don’t offer coverage Whose employees would have to pay over 9.5% of their W-2 income for coverage If any “full time” employees instead receive subsidized Exchange coverage
25 No FT employees receive credits for Exchange coverage No penalty Does Not Offer Coverage Offers Health Coverage One or more FT employees receive credits for Exchange coverage
•
# of FT employees (minus 30) x $2,000 annually ($166.67/month) No FT employees receive credits for Exchange coverage No penalty One or more FT employees receive credits for Exchange coverage Lesser of :
•
# of FT employees (minus 30) x $2,000 annually, or
•
# of FT employees who received Exchange subsidies x $3,000 annually.
•
($250/month/EE)
Shared Responsibility - Decision Flow
1 st Check:
Employer has on average 50 full time employees plus full-time equivalent employees in the prior year?
Yes
2 nd Check:
Does the employer offer
minimum essential coverage
to at least
95% of its ACA full-time employees
?" Yes No
3rd Check:
Does the plan provide coverage of at least
60% minimum value
?"
4 th Check :
Yes Do any full-time employees pay more than
9.5% of current year
Box 1 W-2 Wages, Rate of pay, or Federal Poverty Level for self-only coverage?
No
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There is no penalty payment required of the employer since it offers affordable coverage.
© Copyright 2013 ADP, Inc. Proprietary No Yes No Did at least one employee receive a premium tax credit or cost sharing subsidy in an Exchange?
Those employees can choose to buy coverage in an Exchange and may receive a premium tax credit.
Penalties do not apply to small employers.
Yes The penalty (assessed monthly) for not offering coverage is the number of full-time employees (minus 30) times
$2,000 annually
.
The penalty (assessed monthly) is
$3,000 annually
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
4980H(a) Penalty for Not Offering Coverage to 95%
Determine Full-Time Status and Eligibility
Average of 30 hours/week or 130 hours/month
– Employers may use a look-back/stability period method rather than tracking hours real-time
Penalties apply for ALL FT employees, minus 30
– – – Even those enrolled in employer sponsored coverage If even one FT employee receives subsidized Exchange coverage Income qualification for subsidies is high
Penalties apply monthly
Action Step: Manage/monitor the 95% to not inadvertently trigger the 4980H(a) penalty for the entire company
– $167 per employee (minus 30) per month
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Employees Will Qualify For Federal Subsidies At Fairly High Income Levels
Income Levels For 400% Of FPL (Indexed For Inflation) No. Persons In Family
1 2 3 4 5 6
Federal Poverty Level: 2013 48 Contiguous States
$11,490 15,510 19,530 23,550 27,570 31,590 7 35,610 8 39,630
Source:
Federal Register on January 24, 2013
48 Contiguous States/DC
$45,960 $62,040 $78,120 $94,200 $110,280 $126,360 $142,440 $158,520
U.S. Median Household Income was $49,445 In 2010 U.S. Census Bureau – http://www.census.gov/prod/2011pubs/p60-239.pdf
U.S. Census Bureau – http://www.census.gov/newsroom/releases/archives/income_wealth/cb11-157.html
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4980H(a): Offering Coverage to 95%
Must offer coverage to greater of At least 95% of ACA F-T employees All but 5 ACA F-T employees Regular F-T Employees Variable Hour Employees Average Less Than 30 Hours Average 30 or More Hours Total ACA F-T Eligible Population Number Offered Coverage Percent Offered Coverage Non-Deductible Penalty Scenario 1 1,500 Scenario 2 1,500 Scenario 3 1500 500 0 1,500 1,500 100% $0 300 200 1,700 1,650 97% $0 300 200 1,700 1500
88% $3,340,000
Penalty is triggered in Scenario 3 since less than 95% of ACA F-T EEs were offered coverage Penalty Calculation: Total number of ACA Eligibles Less Excludable EEs Number On Which Penalty Is Based Penalty Amount (Annual) Total Penalty 1,700 30 1,670 $2,000
$3,340,000
4980H(b) Penalty: Affordability
Penalty ONLY applies if FT Employees receive Exchange subsidies
Employees don’t qualify for Exchange coverage if employer coverage is offered
Unless employer coverage is not affordable
Full-Time Employees with apparently affordable employer coverage may qualify for subsidies based on family income/circumstances
Even with a subsidy, employer coverage may be more valuable
Action step:
Identify any FT employees that receive subsidized Exchange coverage(?)
Plan for costs - - penalties apply monthly State Exchanges and IRS will notify employers
Respond to Exchange/IRS with Affordability safe harbor measures
Employer coverage details, full-time status etc..
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Affordable: Defined
No more than 9.5% of an employee’s W-2 earnings for self-only coverage Three safe harbor methods: W-2 (Post-Year) – W-2 Box 1 (reduced for 401(k) and Sec. 125) – E.g., for 2015, the employer would use the W-2 issued in January 2016 Rate of Pay (Real-Time) – Hourly rate of pay in effect on the first day of the coverage period times130 (hours/month) – Pay rate cannot be reduced during the year – NOT reduced by 401(k) ; Sec. 125, etc. – E.g., an employee earning $7.25/hour has a premium of $85/month. $7.25 x 130 = $942.50. $85 is less than 9.5% of $942.50. Federal Poverty Level ( as of the first day of the coverage year) – The employee contribution for self-only coverage cannot exceed 9.5% of the FPL – If the FPL is $11,170, premiums for self only coverage can’t be more than 9.5% of $11,170 = $1,061.15, or $88.43/month.
Shared Responsibility: Tracking Full-Time Employee Status
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Monthly FTE Determination
Large employers must track each employee’s monthly status as full-time or part-time
–
An average of 30 hours per week, or at least 130 hours of service in a month
–
Keep permanent tax records of monthly status
Include hours worked, and hours paid but not worked
–
Vacation, holiday
–
Illness, disability, LOA
Up to 160 hours for any continuous period
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Measurement/Stability Period Safe Harbor Method
Employers may analyze past periods to establish FT status for future periods
–
Employers choose a measurement period of 3 - 12 months
For full-time employees the stability period must be at least six months, and no shorter than the measurement period For part-time employees, the stability period can be no longer than the measurement period
Employers may need to begin compiling monthly hours of service in January 2014 for 2015
May change measurement periods periodically
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Initial Measurement Periods for New Hires
Employers can take up to 13+ months to determine if new hires are full-time employees
Each new hire has their own measurement period, starting on hire date, or shortly thereafter As well as the standard measurement period for all continuing employees
Employers may apply different measurement periods to limited classes
– Union/Non union, hourly/salary, different states… – Special rules may apply to shifts between classes
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May use Payroll Periods as Measurement Periods
If the payroll periods are one week, two weeks, or semi-monthly
Example: An employer uses a 12-month measurement period. In 2014, the first pay period of the year includes some days from December 2013.
The employer can exclude the first full pay period (which includes January 1, 2014) from the measurement period if it includes the last full pay period (which includes December 31, 2014) in the measurement period. Alternatively, the employer could exclude the last full pay period (which includes December 31, 2014) if it includes the first full pay period (which includes January 1, 2014) in the measurement period
Generally, an employer can’t omit time periods.
Measurement Period Examples
3 Months Look-Back Measurement Period Stability Coverage Period 2014 2015 J F M A M J J A S O N D J F M A M J J A S O N D 6 Months 6 Months 2014 2015 J F M A M J J A S O N D J F M A M J J A S O N D 6 Months 9 Months 2014 2015 J F M A M J J A S O N D J F M A M J J A S O N D 9 Months 12 Months 37 2014 2015 J F M A M J J A S O N D J F M A M J J A S O N D 12 Months
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Administrative Periods
Employers may use 30 – 90 day administrative periods to act on FTE measurement period analyses
Conduct measurement period analysis & associated recordkeeping Notify newly eligible employees Provide materials, answer questions and enroll employees
The measurement period and the administrative period combined may not extend beyond the last day of the month following the one year anniversary of the employee’s start date
– “totaling, at most, 13 months and a fraction of a month” New employee starts 10/4/2013 Measurement period = 10/4/2013 – 10/3/2014 or 11/1/1013 – 10/31/2014 Administrative period = 30 days Coverage must be effective by 12/1/2014
Measurement Periods with Administrative Periods
3 Months Look-Back Measurement Period Stability Coverage Period 2013 2014 2015 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 6 Months 2013 2014 2015 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 9 Months 2013 2014 2015 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 2013 2014 2015 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 12 Months 39 6 Months 6 Months 9 Months 12 Months
Measurement Periods with Administrative Periods
3 Month Look Back
O
2013
N D J F M
Not Applicable
A M J
2014 2015
J A S Look-Back O N D 90 Day Admin Period J Look-Back F M A M J J A S O N D Stability Coverage Period 90 Day Admin Period C Stability Coverage Period Look-Back 90 Day Admin Period C Stability Coverage Period
12 Month Look Back
O
2013
N D J F M A Look-Back M J
2014
J A S O N D 90 Day Admin Period J F M A M J
2015
J A S Stability Coverage Period Look-Back O N D 90 Day Admin Period
12 Month Look Back - Transition Relief
O
2012
N D J
Can Ignore
F M A
2013
M J J Look-Back A S O N D 90 Day Admin Period J F
2014
M A M J J A S Stability Coverage Period Look-Back O N D 90 Day Admin Period
40
© Copyright 2013 ADP, Inc.
41
Breaks In Service
Unpaid leave under FMLA, USERRA, or Jury Duty Determine the average hours of service per week during the measurement period – excluding the unpaid leave – and use that average, or Credit the hours of service for unpaid leave at a rate equal to the average weekly rate credited during the other weeks in the measurement period Teachers and Other Employees of Educational Organizations Working On An Academic Year Basis For periods of no service of four or more consecutive weeks – Determine the average hours of service per week during the measurement period – excluding the unpaid leave – and use that average, or – Credit the hours of service for unpaid leave at a rate equal to the average weekly rate credited during the other weeks in the measurement period – Not required to credit more than 501 hours in any employment break period in a calendar year
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Breaks In Service
(continued)
Rehiring After Termination or Resuming Service After Other Absence If an individual has no hours of service for at least 26 consecutive weeks and later returns to work, the employer can treat the individual as a new employee If the break in service is less than 26 weeks, the employer can still treat the individual as a new employee if – The break in service is at least 4 weeks, and is longer than the preceding period of employment For a rehired employee who is treated as a continuing employee, the measurement and stability period that would have applied to the employee had the employee not discontinued employment continue to apply upon the employee’s resumption of service (coverage would have to resume as soon as administratively feasible)
New Hire And Ongoing Measurement Periods with Transition Rules
Full-Time Employee 2013 2014 2015
O DOH N D J 90 Day Admin F M A M J J A S O N D Stability Periodd- Coverage In Force OE Admin Period J F M A M J J A Coverage In Force S O N D
12 Month Look Back: Ongoing Hourly Employee 2013 2014 2015
O N D J F M A M J Measurement Period J A S O N D 90 Day Admin Period J F M A M J J A S O Stability Coverage Period Measurement Period N D 90 Day Admin Period
12 Month Look Back: Hourly New Hire 2013 2014 2015
O N D J F M A M J J A S O DOH N 12 Month Measurement Period D J F Ad Pd M A M Measurement Period J J A S O N D Stability Coverage Period 90 Day Admin Period
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Other Important Elements…
IRS Reporting Requirements under Section 6056
To date, reporting requirements have not been issued Data may need to be drawn from several systems in order to generate required reporting ( Scheduling, payroll, benefits, leave administration, third parties) Employer/Plan attestation: Is coverage offered that meets the minimum value standard?
Waiting period not more than 90 days?
months during which coverage was offered Monthly premium for the lowest cost option in each enrollment category The number of full-time employees for each month Employee level reporting: Months during which the employee was full time Months during which the employee was offered coverage Months during which dependents/spouse were offered coverage?
May involve date ranges - possibly include breaks in service FT employees must receive a copy The ACA requires a phone number for the employer on the employee copy
IRS Reporting Requirements under Section 6056
Proposed Regulations Issued 9-5-2013(!!)
Data may need to be drawn from several systems in order to generate required reporting ( Scheduling, payroll, benefits, leave administration, third parties) Form 1094-C - - Employer/Plan attestation: • Whether coverage meets minimum value • Whether the employer offered coverage to full-time employees (and dependents), by calendar month; • The number of full-time employees for each month; • Months during which the employer was not conducting business; • If the employer expects that it will not be an ALE the following year
IRS Reporting Requirements under Section 6056
Form 1095-C - - Employee Statement
employer’s contact person… Name, address, FEIN of the employer; name and phone number of the
For each full-time employee, by month:
the months during which coverage was available; the employee’s monthly premium for self-only coverage; the name, address, and SSN (truncated) of each full-time employee and the months, if any, during which the employee was covered; Whether minimum essential coverage was offered to: a. employee only; b.
employee and the employee’s dependents only; c.
employee and the employee’s spouse only; or d. All of the above; Coverage was not offered to the employee and the employee was a. in a waiting period; b. not a full-time employee; c. not employed during that month Coverage was offered although the employee was not full-time The employer met one of the affordability safe harbors with respect to the employee.
Simplified Methods Proposed
No 6056 Employee Statements – Use W-2 Reporting For employees who were full time all year Offered coverage all year Premium did not change No Need to Determine Full-Time Employees If Coverage Is Offered to All Potentially Full-Time Employees Forgo the process of tracking full time status 6056 returns/ employee statements still required Self-Insured Employers Offering Mandatory No-Cost Coverage Would provide a code on the W-2 and summary information on the 6056 transmittal form Voluntary Reporting 6056 Elements During or Prior to the Year of Coverage An employment/health coverage database Not final, etc..
Reporting for Employees Potentially Ineligible for the Premium Tax Credit If all employees are highly paid and therefore wouldn’t qualify for subsidies Combinations - Employers may use different methods for different employees
IRS Reporting Requirements under Section 6056
Proposed Regulations Issued 9-5-2013(!!)
Data may need to be drawn from several systems in order to generate required reporting ( Scheduling, payroll, benefits, leave administration, third parties) Form 1094-C - - Employer/Plan attestation: • Whether coverage meets minimum value • Whether the employer offered coverage to full-time employees (and dependents), by calendar month; • The number of full-time employees for each month; • Months during which the employer was not conducting business; • If the employer expects that it will not be an ALE the following year
Employee and Dependent: Defined
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Employee means a common-law employee The term “employee” is not defined in the Internal Revenue Code The IRS has provided a 20 factor test for determining employee or contractor status – http://www.irs.gov/Businesses/Small Businesses-&-Self Employed/Independent-Contractor (Self-Employed)-or-Employee%3F The following are not considered employees Leased employees Sole proprietor Partner in a partnership 2% S Corporation shareholder Dependent is a child up to age 26 as defined in IRC Sec. 152: Biological child Adopted child Stepchild “Eligible Foster Child” Transition relief: plans that don’t currently offer coverage to children do not have to add this until plan years beginning in 2015 Dependent does not include spouse for purposes of 4980H Employer can rely on employee representations in determining who is a child Dependent audits can help control costs
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Minimum Essential Coverage
Minimum essential coverage that satisfies the individual mandate includes the following types of coverage: Coverage under an “eligible employer-sponsored plan” – Proposed Treasury rule defines to mean coverage under a group health plan, whether insured or self-insured, including coverage under a federal or non-federal governmental plan Coverage under an employer-sponsored retiree health plan Coverage under certain government programs, such as Medicare, Medicaid, the Children’s Health Insurance Program (CHIP) and TRICARE Coverage in the individual insurance market, including a plan offered by an Exchange Other coverage recognized by HHS, including self-funded student health coverage and coverage under Medicare Advantage plans
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Minimum Value
Minimum Value Calculator provided by HHS http://www.irs.gov/pub/irs-drop/n-12-31.pdf
http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/mv calculator-final-4-11-2013.xlsm
Must cover specified preventive care at 100% Actuarial value of no less than 60%
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Additional Medicare Tax
Beginning in 2013 ACA imposes a new 0.9% Additional Medicare Tax In addition to the existing 1.45% Medicare tax Applies to income above specified thresholds – – – $200,000 for unmarried individuals $250,000 combined income for married couples filing jointly $125,000 for a married individual filing a separate return Withholding applies when employee income exceeds $200,000 Issues??
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Value of Health Care: W-2 Reporting
Required for Employers with 250+ W-2s Group Health Insurance – employer and employee paid portion: – Box 12, Code DD – – Interim W-2s not required Does not apply to COBRA, 1099 or Retirees
Coverage Type
Major medical Dental or vision plan not integrated into another medical or health plan Dental or vision plan which gives the choice of declining or electing and paying an additional premium FSA funded solely by salary-reduction amounts Health FSA value for the plan year in excess of employee’s cafeteria plan salary reductions for all qualified benefits HRA contributions HSA contributions (employer or employee) Archer MSA contributions (employer or employee) Mini-Meds paid on after-tax basis Mini-Meds paid through salary reduction (pre-tax) or by employer EAP providing applicable employer-sponsored healthcare coverage On-site medical clinics providing applicable employer-sponsored healthcare coverage Wellness programs providing applicable employer-sponsored healthcare coverage Multi-employer plans Domestic partner coverage included in gross income
X X Form W-2, Box 12, Code DD Report X
Required if employer charges a COBRA premium
Do Not Report X X X X Optional X X X
Optional if employer does not charge a COBRA premium
X X http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage
An Integrated Approach to Manage Workforce Planning and Administration
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 Exchanges • Reporting to Federal Government • Reconcile Penalties Levied for Exchange Participation
Penalties Affordability
• Deductions and Other Earnings • W-2 Earnings • System of Record for Hours of Service
• Look-Back Approach Reporting and Reconciliation Benefits Payroll 55