Findley Davies' Ed Redder presented at Schneider Downs Not-For-Profit Symposium Health Care Reform and Compliance Challenges and Opportunities. Discussion Points - The importance of knowing who you are - Employer Shared Responsibility - Current regulatory obligations - Future obligations - Additional compliance challenges

1. Healthcare Reform Update: Compliance
Challenges & Opportunities for Employers
Schneider Downs 2014 Not-For-Profit Symposium
August 14, 2014

2. 2
Discussion Points
• The importance of knowing who you are
• Employer Shared Responsibility
• Current regulatory obligations
• Future obligations
• Additional compliance challenges
• Open discussion
• Please ask questions- Anytime!

3. 3
The importance of knowing who you are
Many requirements & opportunities are driven by size . . .
• Employer Shared Responsibility
• Small Business Health Options Program (SHOP) eligibility
• Small Business Health Care Tax Credit
To name a few.

4. 4
Employer Shared Responsibility
Refers to penalties that may be imposed on an applicable
large employer member if—
• It fails to offer minimum essential coverage—
̶ To substantially all (70% for 2015; 95% thereafter) of its full-time
employees and their children
̶ Of minimum value
̶ That is affordable
• And at least one full-time employee purchases coverage on the
Marketplace and qualifies for a premium tax credit or cost-sharing
subsidy

5. 5
Employer Shared Responsibility
Two potential monthly penalties:
• Penalty A: Failure to offer minimum essential coverage
̶ 1/12 of $2,000 per full-time employee (minus the first 30)
• Penalty B: Offering coverage that is not affordable or does not
provide minimum value
• 1/12 of $3,000 per employee who obtains marketplace coverage
and is eligible for a premium tax credit or cost-sharing subsidy

6. 6
Employer Shared Responsibility
Applies to “applicable large employers”
• An employer with 50 or more (100 or more for 2015)* full-time
equivalent employees
• Part time & seasonal workers included in determination
• All related companies are treated as a single employer for this
purpose
• Special controlled group rules apply to tax-exempt organizations
̶ Primary focus is overlapping control

7. 7
Employer Shared Responsibility
*To take advantage of this transition relief, an employer with
50-99 full-time equivalent employees must certify that it did
not—
• Reduce the size of its workforce or overall hours of service during
the period starting February 9, 2014 and ending December 31,
2014 in order to satisfy the workforce size condition of fewer than
100 full-time employees, or
• Eliminate or materially reduce health coverage offered as of
February 9, 2014 through the end of the 2015 plan year

8. 8
Employer Shared Responsibility
• A simple related companies example
• Company A employs 30 full-time equivalent employees. Company
B employs 35 full-time equivalent employees. The two companies
are unrelated.
̶ Because neither company has 50 or more full-time equivalent
employees, neither is subject to the Employer Shared Responsibility
provisions.
• Assume now that instead of being unrelated, Company A owns
100% of the voting stock of Company B.
̶ Because Company A and Company B are part of the same controlled
group, their full-time equivalent employees are aggregated. As a result,
the controlled group has 65 full-time equivalent employees and,
accordingly, both companies are subject to Employer Shared
Responsibility requirements.
Takeaway:
It is critical to
define the
employer
correctly

9. 9
Calculating FTEs to determine applicable large
employer status
Month A: # of FTEs B: (Total Hours Worked by Non-FTE’s) ÷ 120 A + B
January
February
March
April
May
June
July
August
September
October
November
December
Subtotal
(A + B) / 12 (round
down) =
 If > 100 (2015) or > 50 (2016 and beyond),
you are an Applicable Large Employer

10. 10
SHOP Opportunities
• The SHOP is the portion of the Health Insurance Marketplace for small
employers (online access not yet available in Ohio)
• The SHOP is available to an employer if—
̶ The employer has 50 or fewer full-time equivalent employees on business
days during the preceding calendar year (100 or fewer in 2016)
• Follows the methodology used for the Employer Shared Responsibility
• Calculator available at www.HealthCare.gov/fte-calculator
̶ The employer’s principal place of business within state in which coverage is
offered, or offers coverage to each eligible employee through the SHOP
servicing the employee’s primary worksite
̶ The employer has at least one common law employee (excludes business
owner and spouse)
̶ The employer offers coverage to all full-time employees (those averaging 30
or more hours per week)

11. 11
Small Business Health Care Tax Credit
• Refers to a tax credit of up to 50% of the employer’s contribution
towards premium costs for medical coverage available to certain
small employers
• Tax-exempt organizations are eligible for the credit
̶ Refundable for the lesser of the amount of the credit or the amount of
the payroll taxes of the employer for the calendar year in which the tax
year begins
• Beginning in 2014, the credit is available for 2 consecutive taxable
years
̶ Credits claimed from 2010-2013, if any, do not count against this limit

12. 12
Small Business Health Care Tax Credit
• An employer is eligible for the tax credit if the employer—
̶ Purchases coverage through the SHOP
̶ Has fewer than 25 full-time equivalent employees
• Caution! Full-time equivalent employees are calculated differently from the Employer
Shared Responsibility. Take the total hours of all employees (no more than 2080 counted
per employee) and divide by 2080. Round the result down to the next whole #.
̶ Pays its employees, on average, $50,000 or less per year (total wages/# full-time
equivalent employees, rounded down to nearest $1,000)
̶ Pays at least 50% of the premium for full-time employees
• The tax credit depends on the size of the employer: the smaller the
employer, the greater the credit
̶ Tax credit calculator available at www.HealthCare.gov/SHOP-calculators-taxcredit/

13. 13
More on Employer Shared Responsibility
• We previously discussed how to determine whether an employer is
subject to Employer Shared Responsibility. Now let’s turn to the
application.
• Remember: An applicable large employer is not required to offer
employer-sponsored group health plan coverage to its employees
̶ Rather, the failure to do so may subject the employer to the penalties
previously discussed

14. 14
Penalty Example (2015)
• Company A owns 100% of the voting stock of Company B. In 2014,
Company A and Company B each employed 75 full-time employees.
For all of 2015, Company A offered all of its full-time employees (and
their children) minimum-value, affordable, minimum essential
coverage. During the same period, Company B did not offer a health
plan to any of its employees.
• Company A and Company B are in the same controlled group. In the
aggregate, Company A and Company B have 100 or more FTEs and,
accordingly, are subject to Employer Shared Responsibility.
• Company A is not subject to any penalties under Pay or Play for 2015.
• Company B is subject to Penalty A if any FTEs obtain Marketplace
coverage and qualify for a premium tax credit. In that case, Company
B would be subject to the following penalty:
̶ 75 total employees – 40 employees (80 excluded employees ÷ 2) =
35 x $2,000 penalty each = $70,000 total penalty

15. 15
Penalty Example
• Consider how the outcome would differ if Company A and
Company B were treated as a single employer for penalty
purposes:
̶ The combined company would only offer coverage to 50% of its full-time
employees – below the 70% threshold under Penalty A
̶ The combined company would be subject to a penalty of:
• 150 total employees – 80 excluded employees = 70 x $2,000 penalty each =
$140,000 total penalty

16. 16
Affordability
• Remember, penalty B can apply if the coverage offered is either not
affordable, or does not provide minimum value.
• Coverage is affordable if the employee’s cost for the employee-only
option of the lowest cost coverage that provides minimum value
does not exceed 9.5% of household income
̶ Can include any tobacco-related wellness program premium incentive
̶ Can not include any other wellness program premium incentives
• Safe harbors – for calculation, replace household income with:
̶ W-2 wages (Box 1 of Form W-2 from prior year)
̶ Rate of pay (hourly rate x 130 or monthly rate for salaried)
̶ Federal Poverty Line (FPL): 100% of FPL ÷ 12

17. 17
Rate of Pay Safe Harbor Example
• Company offers the following group health plan coverage to all
FTEs and their children, both of which provide minimum value:
Employee Only Coverage Family Coverage
Standard PPO Plan $150/month $350/month
Premium PPO Plan $200/month $500/month
• There is a $50 monthly surcharge for tobacco users, and an
additional $50 monthly surcharge if an employee has a BMI over 30

18. 18
Rate of Pay Safe Harbor Example
• Jane is an hourly employee
̶ Earns $20/hour during the month of July
̶ Lowest-cost option that provides minimum value: $200 (employee only
coverage in Standard Plan, pays BMI surcharge)
̶ Monthly rate of pay: $20/hour x 130 hours = $2,600
̶ $200 monthly premium /$2,600 monthly pay x 100 = 7.69% (less than
9.5% rule)
̶ Coverage is affordable for Jane

19. 19
Minimum Value
• A plan provides minimum value if the plan’s share of the total
allowed cost of benefits provided is 60%
̶ Safe harbors are issued by the Department of Health and Human
Services (HHS) or the Internal Revenue Service (IRS)
̶ Actuarial certification available if calculator option or safe harbors are
not suitable
• Download the calculator at:
̶ https://www.cms.gov/CCIIO/Resources/Regulations-and-
Guidance/Downloads/mv-calculator-final-4-11-2013.xlsm
̶ Or, double-click on this icon to open file:

20. 20
Identifying and Tracking Full-Time Employees
• A full-time employee is a common law employee of an employer
who works, on average, 30 or more hours per week (130 hours in a
month)
• Two available methods for identifying FTEs:
̶ Look-back measurement method
̶ Monthly measurement method

21. 21
Look-back measurement method
• Employees who average at least 30 hours per week during a
measurement period are considered full-time employees for a
following stability period
̶ With an optional intervening administrative period of up to 90 days
• Rules vary based on whether an employee is an ongoing employee
or a new-hire
̶ Ongoing employees are those that have been employed for a full
standard measurement period (3 to 12 consecutive months)
̶ New-hires are those that have not been employed for a full standard
measurement period
• Special rules apply for rehires and certain changes of status

22. 22
Look-Back Measurement Period Example
Year 1 Year 2 Year 3 Year 4
J M A M J J A S O N D J M A M J J A S O N D J M A M J J A S O N D J M A M J J A S O N D
Measurement Admin Stability
I
Oct. 15
I
Oct. 14/ Oct. 15
I
Dec. 31/ Jan. 1
I
Dec. 31
Measurement Admin Stability
I
Oct. 15
I
Oct. 14/ Oct. 15
I
Dec. 31/ Jan. 1
I
Dec. 31

23. 23
Counting Hours
• May use different crediting methods for different classes as long as
reasonable and applied consistently
• Hourly employees – must use actual hours worked
• Salaried employees – may use actual hours worked or
̶ Credit 8 hours for each day worked
̶ Credit 40 hours for each week worked
• Anti-abuse rules apply

24. 24
Counting Hours
• The following hours must be counted—
̶ Each hour for which the employee is paid or entitled to payment for the
performance of services
̶ Each hour for which the employee is paid or entitled to payment for:
• Vacation
• Holiday
• Illness
• Disability
• Layoff
• Jury duty
• Leave of absence

25. 25
Counting Hours
• Special unpaid leave hours cannot affect determination
̶ FMLA, USERRA (military) and/or jury duty
• Exclude hours:
̶ For which employee receives foreign-source income
̶ Worked by a bona fide volunteer
̶ Worked as part of a work-study program
̶ For certain members of a religious order

26. 26
Recent Appellate Court Decisions Add Uncertainty
• On July 22, 2014, two federal Courts of Appeals—the D.C. Circuit and the
Fourth Circuit—issued conflicting decisions on whether an individual who
purchases insurance on a federally-facilitated Marketplace (or exchange) could
qualify for premium tax credits
̶ D.C. Circuit said “no”
̶ Fourth Circuit said “yes”
• Impact on employers
̶ To trigger pay-or-play penalties, an individual purchasing Marketplace coverage must
qualify for a premium tax credit
̶ If an individual purchasing Marketplace coverage on a federally-facilitated
Marketplace cannot qualify for a premium tax credit, the individual also cannot
trigger pay-or-play penalties for the employer.
̶ Employers may have dropped coverage with the expectation that employees could
qualify for premium tax credits to purchase Marketplace coverage. If employees
cannot qualify for the credits, it may warrant reconsideration of the position.

27. 27
Recent Appellate Court Decisions Add Uncertainty
• What should employers do?
̶ The issue has not been fully resolved
• Government has requested reconsideration by the full D.C. Circuit
• Plaintiffs will seek review of the Fourth Circuit opinion by the U.S. Supreme Court
̶ As such, take a wait-and-see approach; do not alter your current plans based on
the decisions

28. 28
Current Healthcare Reform Compliance Obligations

29. 29
A Word About Grandfathered Plans . . .
• Certain provisions of the ACA do not apply to grandfathered plans
• A benefit package is grandfathered if—
̶ A statement of grandfathered status is included in plan materials
provided to participants and beneficiaries
̶ The plan provides contact information for questions and answers
̶ The plan maintains records documentation of the plan terms as of
March 23, 2010, and makes those records available for examination
̶ The plan covers at least one individual continuously since March 23,
2010
̶ No changes of a specified type are made to the terms of the plan or
coverage
Takeaway:
Maintaining
grandfathered
status takes
affirmative
steps by you

30. 30
Compliance Obligations for Grandfathered and Non-
Grandfathered Plans
• Summaries of Benefits and Coverage
(open enrollment)
• PCORI Fees—next installment due July
31, 2014 (issuer for insured plans)
• Marketplace Notices (initially due by
October 1, 2013—must still be
provided to new hires within 2 weeks
of start date)
• $2,500 max on health care FSAs
(amendment due by end of 2014)
• No preexisting condition exclusions
• Report the value of health coverage on
form W-2 (employers who issued 250
or more W-2s for previous year)
• No annual or lifetime limits on
essential health benefits
• No waiting periods longer than 90 days
(not 3 months!)
• Reinsurance contributions—Due
annually for 2014, 2015 & 2016 (first
installment of $52.50 in January 2015
& second installment of $10.50 in
December 2015); Issuer for insured
plans
• Coverage for children up to age 26
(other employer-provided coverage
exclusion for grandfathered plans no
longer applies)—Remember, age 28 for
insured plans is Ohio

31. 31
Compliance Obligations for Non-Grandfathered Plans (In
addition to those that apply to all plans)
• Preventive care requirements
• Enhanced claims and appeals
requirements
• Quality Reporting (no guidance issued
to date)
• Health-contingent wellness program
maximum incentives increased from 20-
30% (up to 50% for programs to
prevent or decrease tobacco use); new
reasonable alternative standards apply
• OOPM capped—includes co-insurance,
deductibles, and co-pays
• No discrimination against healthcare
providers working within scope of
license
• No prohibitions against participation in
clinical trials & no limitations on
benefits for routine items and services
related to clinical trials

32. 32
Future Healthcare Reform Compliance Obligations

33. 33
Reporting on minimum essential coverage—Code
Section 6055
• Designed to inform IRS whether individuals were covered by
minimum essential coverage in preceding tax year (and in what
months)
• IRC § 5000A requires individual to be enrolled in MEC or pay a tax
• Individuals will be provided with written statements enabling
covered individuals to establish that they were covered by MEC
• First applies in 2015 (with reporting in early 2016)
̶ If paper, 2/28/2016 or 3/1/2016 (since 2/28 is a Sunday)
̶ If electronic, 3/31/2016
̶ Required reporting to employees due 1/31/2016 or 2/1/2016 (since 1/31
is a Sunday)

34. 34
6055 Requirements
• The reporting obligation is imposed on—
̶ For insured plans—the insurance issuer
̶ For self-funded plans—generally the employer
• Information to be reported
̶ Name, address, and EIN of the insurer/self-insured plan sponsor
̶ Name, address and EIN of the employer sponsoring the plan (when
insurer is reporting) and whether the plan is enrolled through the SHOP
program
̶ Name, address and TIN of each insured or employee
̶ Name and TIN of each individual covered under the plan
̶ For each covered individual, the months for which the individual was
covered for at least one day
̶ any other information required by the form and instructions

35. 35
Applicable Large Employer Reporting—Code Section
6056 Requirements
• Designed to assist IRS in determining whether (and what) Employer
Shared Responsibility penalties apply
• Individuals will be provided with written statements detailing
employer and employee-specific information
• Generally, each employer reports for its full-time employees
• First applies in 2015 (with reporting in early 2016)
̶ If paper, 2/28/2016 or 3/1/2016 (since 2/28 is a Sunday)
̶ If electronic, 3/31/2016
̶ Required reporting to employees due 1/31/2016 or 2/1/2016 (since 1/31
is a Sunday)
• Caution! Employer Shared Responsibility transition relief for
employers with 50-99 full-time equivalent employees does not
excuse reporting.

36. 36
6056 Requirements
• Information reported includes—
̶ Name, address and EIN of the employer
̶ Name and telephone number of contact person
̶ Calendar year for which report is provided
̶ Certification whether employer offered to its full-time employees (and
their dependents) MEC under an employer-sponsored group health plan,
by calendar month
̶ # of FTEs for each month of the year
• Simplified reporting for full-time employees receiving a qualifying
offer for the entire year

37. 37
6056 Requirements
• Additionally, for each full-time employee, report—
̶ Months during the year MEC was available to the employee
̶ Employee’s contribution to lowest cost self-only option providing
minimum value, by calendar month
̶ Employee’s name, address and TIN and months during which employee
was covered under the plan
• Any other information required by the forms

38. 38
6056 Requirements
• Employer does not have to identify or specify number of FTEs if it
certifies it made a qualifying offer to at least 98% of all its
employees (includes part-time employees)
• IRS will grant temporary relief from penalties if filed information is
incorrect or incomplete
̶ However, no relief for employers who do not make a good faith effort to
comply with the reporting requirements

39. 39
Reporting Requirements
• On July 24, 2014, the IRS released draft forms 1094-B & C, and
1095-B &C
• Draft instructions have not been issued
• The IRS has requested comments on the forms and expects to
finalize them later this year
• Do not use these forms!

40. 40
Other Future Healthcare Reform Obligations
• Coordination of OOPMs—2015 plan year
• Nondiscrimination requirements for insured plans
̶ Rules “similar” to those applicable to self-insured plans under Code Section
105(h) will apply
̶ Delayed pending rulemaking
• Cadillac Tax
̶ 40% excise tax on high-cost coverage
̶ Effective January 1, 2018
̶ No guidance issued yet
• Health Plan Identifier Number (HPID)
̶ Plans with annual receipts exceeding $5,000,000—November 5, 2014
̶ Plans with annual receipts of $5,000,000 or less—November 5, 2015
• Automatic enrollment (employers with more than 200 full-time
employees)
̶ Delayed pending rulemaking

41. 41
Other Common Compliance Challenges
• Wrap plan documents
̶ Insurance certificates/booklets often times do not satisfy SPD
requirements
̶ Helps to consolidate redundant information in a single document
̶ For larger plans, file a single 5500 rather than several 5500s
• Cafeteria plan documents
̶ If you permit employees to pay premiums on a pre-tax basis, you must
have a cafeteria plan document in place
• HIPAA Privacy & Security
̶ If, as the plan sponsor/employer, you have access to PHI, you must
comply with HIPAA privacy
̶ If the PHI is maintained, transmitted and/or received electronically, you
must comply with HIPAA security
• COBRA
̶ New forms issued in early May 2014

42. 42
Questions?
Edward C. Redder
Findley Davies, Inc.
65 East State Street, Suite 2550
Columbus, OH 43215
Office: (614) 453-4654
Cell: (614) 779-1673
E-mail: eredder@findleydavies.com