The Affordable Care Act – overview, regulatory requirements and implementation
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This slide deck was designed to accompany a video webcast that included an interactive discussion by a moderator and three panelists. To view that webcast, please go to: http://bit.ly/UonXS3

This slide deck was designed to accompany a video webcast that included an interactive discussion by a moderator and three panelists. To view that webcast, please go to: http://bit.ly/UonXS3

The Affordable Care Act – Now is the time for companies to act
Origination date: Tuesday, 22 January 2013

The Affordable Care Act is the law of the land and will impact virtually all companies. The federal government has recently released major regulations and is moving full speed ahead with implementation of the law. It is imperative that companies do the same. Executives in tax, human resources, information technology, and finance need to become familiar with the impending deadlines and develop a comprehensive strategy for addressing key provisions of the law. The Act will affect companies’ benefit designs, workforce composition, reporting systems, tax administration, and bottom line. Failure to understand an employer’s obligations under the Affordable Care Act could result in fines, unforeseen tax liabilities, and reputational risk.

In this webcast, we presented an overview of the Affordable Care Act, including a discussion of the major employer requirements, key effective dates, and what companies need to know in the short- and long-term.

You are welcome to join the on-demand version of this interactive discussion and learn more by going to: http://bit.ly/UonXS3
This webcast is part of an ongoing series. Register for any webcast and you will be asked if you want to receive invitations to future webcasts.

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The Affordable Care Act – overview, regulatory requirements and implementation Presentation Transcript

  • 1. The Affordable Care ActNow is the time for companiesto act22 January 2013
  • 2. Disclaimer► Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young LLP is a member firm serving clients in the US.► This presentation is ©2013 Ernst & Young LLP. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is in violation of US and international law. Ernst & Young and its member firms expressly disclaim any liability in connection with use of this presentation or its contents by any third party.► The views expressed by panelists in this webcast are not necessarily those of Ernst & Young LLP.© 2013 Ernst & Young LLP Page 2 The Affordable Care Act
  • 3. Circular 230 disclaimer► Any US tax advice contained herein was not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.► These slides are for educational purposes only and are not intended, and should not be relied upon, as accounting advice.© 2013 Ernst & Young LLP Page 3 The Affordable Care Act
  • 4. Today’s moderator Hank Neely Ernst & Young LLP Tax Managing Partner — Markets Join todays Twitter discussion: #EY_ACA© 2013 Ernst & Young LLP Page 4 The Affordable Care Act
  • 5. Today’s agenda ► Overview of the Affordable Care Act (ACA) ► Major ACA regulatory requirements ► Checklist for ACA implementation Join todays Twitter discussion: #EY_ACA© 2013 Ernst & Young LLP Page 5 The Affordable Care Act
  • 6. Today’s presenters ► Jeff Saviano Ernst & Young LLP Director, Indirect and State / Local Tax Services ► Anne Phelps Washington Council Ernst & Young Principal ► Helen Morrison Ernst & Young LLP Principal The information contained herein is a summary in nature, viewers should consult their own professional advisors to address their individual circumstances and concerns.© 2013 Ernst & Young LLP Page 6 The Affordable Care Act
  • 7. Opinion check What are your company’s top two concerns regarding the employer requirements under the ACA? A. Calculating the amount of potential tax penalties B. Managing company health costs overall C. Understanding the new tax reporting obligations and timely generating reports D. Implications on systems, processes and internal controls E. Employee education, communication and retention F. Managing notices from Exchanges© 2013 Ernst & Young LLP Page 7 The Affordable Care Act
  • 8. Today’s agenda ► Overview of the Affordable Care Act (ACA) ► Major ACA regulatory requirements ► Checklist for ACA implementation Join todays Twitter discussion: #EY_ACA© 2013 Ernst & Young LLP Page 8 The Affordable Care Act
  • 9. Affordable Care Act — the basics► What is the basic structure for individuals to obtain health care coverage and for employers to provide health care coverage?► What are employers’ obligations to either offer certain health plan coverage or pay potential excise taxes? ► How will excise taxes be calculated and enforced? ► How do the potential tax obligations affect ► Employer costs? ► Recordkeeping and compliance?► What are the new tax reporting obligations?► What are the implications on systems, processes and internal controls?© 2013 Ernst & Young LLP Page 9 The Affordable Care Act
  • 10. An integrated approach is required HR Benefit Communication strategy with Exchanges Finance Tax Affordable Care Act Cost Compliance management and reporting Internal audit© 2013 Ernst & Young LLP Page 10 The Affordable Care Act
  • 11. What must be considered for ACAimplementation? Financial Compliance statement assessment/ implications cost analysis Excise tax Process and controversy technology ACA efficiencies implementation: a comprehensive view Employee Reporting communication/ services education Workforce Exchange analytics notification support© 2013 Ernst & Young LLP Page 11 The Affordable Care Act
  • 12. Today’s agenda ► Overview of the Affordable Care Act (ACA) ► Major ACA regulatory requirements ► Checklist for ACA implementation Join todays Twitter discussion: #EY_ACA© 2013 Ernst & Young LLP Page 12 The Affordable Care Act
  • 13. Key effective dates for employers► Employers generally must be in compliance Temporary with coverage requirements (1/1/2014) reinsurance fee ends► Individual mandate and premium tax credits► Medicaid expansion 40% excise tax► Other insurance market reforms on high-cost► Temporary reinsurance fee begins health plans 2014 2013 Coverage expansions 2015 2016 2017 2018 take effect►Open enrollment in Exchanges States may open Exchanges to large group market begins (10/1/2013)►Increase Medicare payroll tax by Employer information 0.9% on earned income reporting to the IRS►Impose 3.8% tax on unearned on employee coverage income (due by 1/31/2015)►PCORI * fee* Patient-Centered Outcomes Research Institute© 2013 Ernst & Young LLP Page 13 The Affordable Care Act
  • 14. Status of implementation of employerrequirements► January 1, 2014: Effective date for health care coverage provisions► October 1, 2013: Exchanges begin open enrollment► December 28, 2012: Comprehensive proposed rules released on the major employer coverage requirements ► Reliance until final rules are issued ► Transition relief in certain circumstances ► Outstanding issues to be addressed in regulations© 2013 Ernst & Young LLP Page 14 The Affordable Care Act
  • 15. Video Mark Iwry The Treasury Department Senior Advisor to the Secretary of the Treasury and Deputy Assistant Secretary for Retirement and Health Policy© 2013 Ernst & Young LLP Page 15 The Affordable Care Act
  • 16. Major coverage requirements and expansionprovisionsThe ACA expands health coverage through provisionsthat generally go into effect on January 1, 2014 Individual mandate: Medicaid expansion: Mandates Americans Allows states to expand maintain a minimum Medicaid up to 133% of level of health coverage federal poverty level Employer mandate: Insurance Exchanges: Mandates employers with 50 Creates insurance or more full-time equivalents Exchanges and certain to offer coverage to full-time individuals are eligible employees and their for premium assistance dependents or pay potential tax credits tax penalties© 2013 Ernst & Young LLP Page 16 The Affordable Care Act
  • 17. Who is a large employer?► IRC §4980H defines a large employer as any employer with 50+ full-time equivalents ► Includes full-time employees, hours worked by non-full-time employees ► Special treatment for seasonal workers in some circumstances ► Special rule for smaller employers in 2013► Applies to all common law employers► Definition of large employer is determined based on the control group rules ► Penalty is determined separately based on each member of the control group© 2013 Ernst & Young LLP Page 17 The Affordable Care Act
  • 18. Who is a full-time employee under the ACA?► Full-time employee: Defined as an employee who works on average 30 hours per week, per month (130 hours of service per calendar month)► Safe harbors: Special measuring periods allowed for determination of full-time status for part-time, seasonal and variable hour employees© 2013 Ernst & Young LLP Page 18 The Affordable Care Act
  • 19. Basic employer coverage rulesLarge employers may be subject to an excise tax if at least onefull-time employee whose household income is between 100%and 400% of the federal poverty level receives a premium taxcredit for Exchange coverage and an employer either Offers coverage to or Fails to offer coverage full-time employees to full-time employees that does not meet the and their dependents law’s affordability or minimum value standards© 2013 Ernst & Young LLP Page 19 The Affordable Care Act
  • 20. Calculation of non-deductible excise taxesunder IRC §4980H(a) Tax for no coverage - IRC 4980H(a) ► If a large employer does not offer minimum essential coverage to full-time employees and their dependents, an employer may face a tax of: ► $2,000 x the total number of full-time employees (FTE) if at least one FTE is receiving a premium assistance tax credit Large employers who do not offer coverage may subtract the first 30 workers when calculating their liability for taxes under IRC 4980H(a).© 2013 Ernst & Young LLP Page 20 The Affordable Care Act
  • 21. Calculation of non-deductible excise taxesunder IRC §4980H(b) Tax for unaffordable coverage - IRC 4980H(b) ► If a large employer offers minimum essential coverage to full-time employees and their dependents but the coverage is unaffordable to certain employees or does not provide minimum value, an employer may face a tax of: ► The lesser of $3,000 x the number of FTEs receiving a premium assistance tax credit or $2,000 x the total number of FTEs Taxes under 4980H(b) are capped not to exceed an employer’s potential tax under 4980H(a).© 2013 Ernst & Young LLP Page 21 The Affordable Care Act
  • 22. Tax for unaffordable coverage► Affordability general rule: Employers could face penalties if a full-time employee’s premium share for self-only coverage exceeds 9.5% of household income► Safe harbors: ► Form W-2 safe harbor ► Rate of pay safe harbor ► Federal poverty line safe harbor► Minimum value: A plan must pay for at least 60% of the cost of benefits (actuarial value test)© 2013 Ernst & Young LLP Page 22 The Affordable Care Act
  • 23. Employer communications with employees,Exchanges and the IRS Step 1 Step 2 Step 3 ► Employer provides ► Employee provides ► Exchange verifies employees with information Exchange with information information and makes about coverage and Step 1 6 5 4 3 2 to determine eligibility for preliminary eligibility availability of Exchanges the premium tax credit Assessment of employer taxdetermination regarding Exchange notifies employer ►Employee files information the ► Employer providesinformation premium tax credit Exchange verifies employees provides Exchange penaltiesand employee and information may receive a that IRS employee about with makes preliminary eligibility to determine Step 4 ► eligibility 5 and credit appeal Employee tax right to premium files premium Employer has regarding Step ► coveragefor thepersonal return 6 determination availability tax Step ►of liability to tax credit appeal tax premiumfiles information credit Employer IRS ► Exchange notifies employer Exchanges the ► Employer has right to ► Assessment of employer that employee may receive with IRS and employee tax penalties a premium tax credit Exchange’s files personal ► Employee determinationEmployer has right to ► of ► Employer has right to employee’s eligibility return appeal tax liability to IRS appeal Exchange’s determination of employee’s eligibility© 2013 Ernst & Young LLP Page 23 The Affordable Care Act
  • 24. Today’s agenda ► Overview of the Affordable Care Act (ACA) ► Major ACA regulatory requirements ► Checklist for ACA implementation Join todays Twitter discussion: #EY_ACA© 2013 Ernst & Young LLP Page 24 The Affordable Care Act
  • 25. How are companies operations affected? Data Process Employee gathering improvement communications Recommendations Educating employees Need to gather for people, processes on health care options employee information and technology Benefits Managing tax planning controversies Plan compliance with Excise tax ACA requirements assessments© 2013 Ernst & Young LLP Page 25 The Affordable Care Act
  • 26. Top 10 critical ACA implementation questions1. Has your company developed a strategy and prepared a project plan to implement the ACA?2. Does your health care plan comply with the ACA market reform provisions?3. Has your company estimated the cost of implementation?4. Have all “full-time” employees been identified? Were alternative ways to determine who is a full-time employee considered?5. Has your company estimated the number of employees who may be eligible for the premium tax credit?© 2013 Ernst & Young LLP Page 26 The Affordable Care Act
  • 27. Top 10 critical ACA implementation questions(cont.)6. Has your company developed employee education and communication strategies?7. Are the human resource and payroll systems and processes capable of determining who is a full-time employee based on hours worked? Can these systems collect and retain all relevant data for reporting purposes? Have vendor relationships been reviewed?8. Was consideration given to how your company will handle notifications from the health care Exchanges?9. What are the financial statement implications of the ACA?10. Is your company prepared to defend an IRS assessment of the excise tax or an IRS audit of the heath care plan offerings?© 2013 Ernst & Young LLP Page 27 The Affordable Care Act
  • 28. Best practices for ACA implementation ► Establish a cross-functional ACA team that includes Tax, Finance, Human Resources, Payroll and Internal Audit ► Develop and present a strategic plan to implement the ACA ► Prepare a detailed project plan addressing all facets of ACA implementation ► Establish a Project Management Office, with a designated leader, to execute the project plan ► Consider the portions of the project plan that may be completed internally and those that may be outsourced ► Establish and comply with target dates and deadlines ► Don’t delay!© 2013 Ernst & Young LLP Page 28 The Affordable Care Act
  • 29. Recap One- minute recap© 2013 Ernst & Young LLP Page 29 The Affordable Care Act
  • 30. Contact us Helen Morrison Ernst & Young LLP helen.morrison@ey.com Anne Phelps Washington Council anne.phelps@wc.ey.com Ernst & Young Jeff Saviano jeffrey.saviano@ey.com Ernst & Young LLP Follow us on Twitter: @EY_Webcasts© 2013 Ernst & Young LLP Page 30 The Affordable Care Act
  • 31. Thanks for participating! The Affordable Care Act Now is the time for companies to act
  • 32. Today’s webcast is about to begin The Affordable Care Act Now is the time for companies to act Join today’s Twitter discussion #EY_ACA Tuesday, 22 January 2013 3:00 – 4:30 p.m. New York Follow us on Twitter @EY_Webcasts© 2013 Ernst & Young LLP Page 32 The Affordable Care Act
  • 33. Connect with us Follow us on Twitter @EY_Webcasts Watch us on YouTube Search on Ernst & Young webcast© 2013 Ernst & Young LLP Page 33 The Affordable Care Act
  • 34. Viewing tips Need more help? To make the current slide ► Click the yellow Media Player appear larger, click the help/tips icon SLIDE SIZE button. ► Then click the red Click it again to reduce. QA icon and request assistance Feedback form Ask Media Launch at end of panelists a Related webcast to get your player links question (increase CPE/CE certificate volume) Download slides© 2013 Ernst & Young LLP Page 34 The Affordable Care Act
  • 35. Receiving CPE/CE► To be eligible for CPE/CE credit, you must meet all of the minimum eligibility criteria: ► Participate for a minimum of 50 minutes to start earning credit ► Respond to ALL polling questions ► Submit feedback► Webcast technology automatically determines whether participants qualify for credit based on the eligibility requirements above► Certificates will be available for qualified participants to print at the conclusion of the webcast by clicking on the purple CPE icon at the bottom of this interface© 2013 Ernst & Young LLP Page 35 The Affordable Care Act
  • 36. If you are participating in a group► Each person who logged into the webcast should: ► Register for and log into the live webcast ► Respond to the required number of poll questions ► Complete the feedback form► At the end of the webcast, the group leader can: ► Print certificates for ALL qualified participants by clicking on the purple CPE icon at the bottom of this interface OR ► Complete the CPE/CE attendance sheet available on the Thought Center Webcast site and include all requested information ► Submit the attendance sheet within 72 hours of the completion of the webcast by email to tcw.efaxdocs@ey.com ► Certificates will then be emailed to participants© 2013 Ernst & Young LLP Page 36 The Affordable Care Act
  • 37. Technical difficultiesWe are experiencing audio/video problems.Please stand by. We are working with techniciansto correct the problem as quickly as possible.Thank you for your patience.© 2013 Ernst & Young LLP Page 37 The Affordable Care Act
  • 38. Technical difficulties ► If you can’t hear the audio through your computer, you may listen by phone. ► Click on the Dial-in Numbers green telephone widget to get local numbers in your area. Dial-in Numbers© 2013 Ernst & Young LLP Page 38 The Affordable Care Act
  • 39. Polling question Opinion check CPE/CE certificates will be available for qualified participants to print at the conclusion of the webcast by clicking on the purple CPE icon at the bottom of this interface© 2013 Ernst & Young LLP Page 39 The Affordable Care Act
  • 40. Polling question Fact check CPE/CE certificates will be available for qualified participants to print at the conclusion of the webcast by clicking on the purple CPE icon at the bottom of this interface© 2013 Ernst & Young LLP Page 40 The Affordable Care Act
  • 41. Question from the audience Q& A© 2013 Ernst & Young LLP Page 41 The Affordable Care Act