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PPACA Update:
How The Affordable Care Act Will
Affect Employers
Seth Perretta
Principal, Co-Chair of the Health Practice G...
We	
  will	
  cover...	
  
•  Status	
  of	
  the	
  individual	
  mandate	
  
•  Employer	
  mandate	
  or	
  “pay	
  or	...
•  Originally	
  scheduled	
  to	
  take	
  effect	
  on	
  January	
  1,	
  2014	
  
•  Now	
  scheduled	
  to	
  take	
  ...
•  Originally	
  effec@ve	
  for	
  2014,	
  but	
  delayed	
  for	
  one	
  year	
  
•  Now	
  scheduled	
  to	
  take	
  ...
•  Two	
  separate	
  penal@es:	
  
•  4980H(a)	
  or	
  “A-­‐Penalty”	
  
•  4980H(b)	
  or	
  “B-­‐Penalty”	
  
	
  
	
 ...
•  A-­‐Penalty	
  (4980H(a))	
  
•  Some@mes	
  referred	
  to	
  as	
  the	
  “offering	
  requirement”	
  
•  General	
  ...
Birth	
  
Child	
  Up	
  
to	
  Age	
  26	
  
Adopted	
  
Child	
  Up	
  
to	
  Age	
  26	
  
Step-­‐
children	
  
Foster	...
•  B-­‐Penalty	
  (4980H(b))	
  
•  General	
  rule	
  =	
  Even	
  if	
  an	
  employer	
  sa@sfies	
  the	
  offering	
  r...
•  4980H	
  Applies	
  to	
  “applicable	
  large	
  employers”	
  or	
  ALEs	
  
•  Who	
  is	
  an	
  ALE?	
  
•  An	
  ...
•  To	
  determine	
  ALE	
  status,	
  you	
  need	
  to	
  take	
  the	
  following	
  
steps:	
  
1.  For	
  each	
  ca...
Preceding	
  Calendar	
  Year	
  
Jan	
   Feb	
   Mar	
   Apr	
   May	
   Jun	
   July	
   Aug	
   Sept	
   Oct	
   Nov	
 ...
•  Full-­‐Time	
  Employee	
  (FT)	
  
•  Defini@on:	
  Worked	
  on	
  average	
  120	
  hours	
  during	
  the	
  
calend...
•  Full-­‐Time	
  Equivalent	
  Employee	
  (FTE)	
  
•  For	
  each	
  calendar	
  month	
  in	
  the	
  preceding	
  cal...
•  “Hour	
  of	
  service”	
  includes:	
  
•  Hours	
  Worked	
  –	
  Each	
  hour	
  for	
  which	
  the	
  employee	
  ...
•  For	
  employers	
  with	
  50-­‐99	
  full-­‐@me	
  employees	
  (FTs)	
  or	
  full-­‐
@me	
  equivalent	
  (FTEs),	
...
•  To	
  qualify	
  for	
  the	
  50-­‐99	
  FT/FTE	
  delay,	
  what	
  requirements	
  apply?	
  
1.  From	
  2/9/14	
  ...
•  What	
  else	
  was	
  delayed?	
  	
  Nothing…	
  
	
  
•  But	
  a	
  host	
  of	
  addi@onal	
  transi@onal	
  rules...
•  Fiscal	
  plan	
  year	
  transi@on	
  relief	
  
•  Shorter	
  measurement	
  period	
  permined	
  for	
  use	
  with...
•  Special	
  A-­‐Penalty	
  transiUon	
  relief	
  
•  What	
  does	
  the	
  relief	
  provide?	
  
•  So	
  long	
  as	...
•  Special	
  A-­‐Penalty	
  transiUon	
  relief	
  
•  What	
  does	
  the	
  relief	
  provide?	
  
•  HOWEVER,	
  it	
 ...
•  New	
  rule	
  for	
  first-­‐year	
  ALEs	
  
•  New	
  monthly	
  measurement	
  method	
  
•  New	
  seasonal	
  empl...
•  To	
  different	
  categories	
  of	
  workers,	
  such	
  as:	
  
•  Full-­‐@me	
  employees	
  
•  Part-­‐@me	
  emplo...
•  Full-­‐Time	
  Employee	
  
•  Defini@on	
  =	
  	
  An	
  employee	
  reasonably	
  expected	
  to	
  work	
  a	
  full...
•  Part-­‐Time	
  Employee	
  
•  New	
  defini@on	
  included	
  in	
  the	
  final	
  regula@ons	
  
•  Part-­‐@me	
  =	
 ...
•  Variable	
  Hour	
  Employee	
  
•  Defini@on	
  =	
  	
  An	
  employee	
  not	
  reasonably	
  expected	
  to	
  work	...
•  Variable	
  Hour	
  Employee	
  
•  How	
  4980H	
  applies	
  to	
  these	
  employees	
  depends	
  on	
  whether	
  ...
•  Seasonal	
  Employee	
  
•  Proposed	
  regula@ons	
  permined	
  employers	
  to	
  use	
  a	
  good	
  faith	
  
inte...
•  Short-­‐Term,	
  Non-­‐Seasonal	
  Employee	
  
•  Short-­‐term	
  hires	
  are	
  NOT	
  necessarily	
  seasonal	
  em...
•  Troubled	
  rollout	
  of	
  federal	
  and	
  many	
  state	
  exchanges	
  
•  Extended	
  enrollment	
  window	
  th...
•  Troubled	
  rollout	
  of	
  federal	
  and	
  many	
  state	
  exchanges	
  
•  Extended	
  enrollment	
  window	
  th...
•  Growing	
  number	
  of	
  providers	
  offering	
  private	
  exchanges	
  –	
  insured	
  or	
  
self-­‐funded	
  cove...
Questions
info@gnapartners.com
1-800-253-8562
** This webinar will be posted to the G&A website by Friday
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PPACA Update: How The Affordable Care Act Will Affect Employers

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PPACA Update: How The Affordable Care Act Will Affect Employers

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PPACA Update: How The Affordable Care Act Will Affect Employers

  1. 1. PPACA Update: How The Affordable Care Act Will Affect Employers Seth Perretta Principal, Co-Chair of the Health Practice Group Groom Law Group April 24, 2014
  2. 2. We  will  cover...   •  Status  of  the  individual  mandate   •  Employer  mandate  or  “pay  or  play”   •  Brief  refresher  on  “pay”  or  “play”  choice   •  How  to  determine  whether  you  are  subject  to  the  employer  mandate     •  Overview  of  the  recently  issued  final  regula@ons     •  Treatment  of  various  types  of  workers   •  Seasonal  employees   •  Short-­‐term,  non-­‐seasonal  hires   •  State  of  public  and  private  exchanges     2  
  3. 3. •  Originally  scheduled  to  take  effect  on  January  1,  2014   •  Now  scheduled  to  take  effect  on  January  1,  2015   •  Generally  requires  that  all  nonexempt  individuals  be   enrolled  in  “minimum  essen@al  coverage”  or  pay  a  tax   penalty             Individual  Mandate  
  4. 4. •  Originally  effec@ve  for  2014,  but  delayed  for  one  year   •  Now  scheduled  to  take  effect  on  January  1,  2015   •  Addi@onal  delay  for:   •  Qualifying  sponsors  of  non-­‐calendar  year  plans   •  Qualifying  employers  with  50-­‐99  full-­‐@me  (FTs)  and            full-­‐@me  equivalent  (FTE)  employees   •  Limited  transi@on  relief  for  the  “A-­‐Penalty”         “Pay  or  Play”  
  5. 5. •  Two  separate  penal@es:   •  4980H(a)  or  “A-­‐Penalty”   •  4980H(b)  or  “B-­‐Penalty”                 “Pay  or  Play”  
  6. 6. •  A-­‐Penalty  (4980H(a))   •  Some@mes  referred  to  as  the  “offering  requirement”   •  General  rule  =  An  employer  must  offer  “minimum  essen@al   coverage”  (MEC)  to  95%  of  its  4980H-­‐defined  full-­‐@me   employees  “(and  their  dependents)”  or  risk  a  penalty  equal  to  (i)   $2,000,  mul@plied  by  (ii)  the  number  of  full-­‐@me  employees   minus  30   •  **  Certain  transi@on  relief  through  close  of  2015  plan  year  was   provided  **     “Pay  or  Play”  
  7. 7. Birth   Child  Up   to  Age  26   Adopted   Child  Up   to  Age  26   Step-­‐ children   Foster   Children   All   Children   age  26+   4980H “Dependents”          Yes            NO      Spouse   **  Note:  Special  2015  TransiUon  Relief   “Pay  or  Play”  
  8. 8. •  B-­‐Penalty  (4980H(b))   •  General  rule  =  Even  if  an  employer  sa@sfies  the  offering  requirement  (i.e.,   avoids  the  A-­‐Penalty),  if  the  employer  fails  to  offer  affordable  and  minimum   value  coverage  to  a  full-­‐@me  employee,  it  can  risk  a  B-­‐Penalty  generally  equal   to  $3,000  per  year  for  that  employee               “Pay  or  Play”  
  9. 9. •  4980H  Applies  to  “applicable  large  employers”  or  ALEs   •  Who  is  an  ALE?   •  An  employer  that  employed  on  average  at  least  50  full-­‐@me  employees  (FTs)  or  full-­‐ @me  equivalents  (FTEs)  during  the  preceding  calendar  year   •  Note:    Special  seasonal  worker  excep@on   •  ALSO,  special  transi@on  rule  for  2015   •  Things  to  keep  in  mind:   •  ALE  status  is  determined  using  IRS  80%  controlled  group  rules   •  But  once  ALE  status  is  determined,  each  ALE  member  gets  its  own  “pay  or  play”   decision       Subject  Employers:  ALEs  
  10. 10. •  To  determine  ALE  status,  you  need  to  take  the  following   steps:   1.  For  each  calendar  month  last  year:   •  Determine  the  client  employer’s  number  of          full-­‐@me  employees  across  its  controlled  group     •  Determine  the  client  employer’s  number  of          full-­‐@me  equivalent  employees     2.  Add  up  the  number  of    FTs  and  FTEs  for  all  12  months  of  last   year  and  divide  by  12   Subject  Employers:  ALEs  
  11. 11. Preceding  Calendar  Year   Jan   Feb   Mar   Apr   May   Jun   July   Aug   Sept   Oct   Nov   Dec   Total   #  Full-­‐Time   Employees   34   42   53   51   37   39   41   44   50   51   48   46   N/A   #  FT   Equivalents   12.6   12.9   10.3   10.5   14.2   12.3   9.3   10.0   10.3   13.2   12.8   13.2   N/A   Total  Number   46.6   54.9   63.3   61.5   51.2   51.3   50.3   54.0   60.3   64.3   60.8   59.2   677.7     #  of  Full-­‐Time  Employees/Equivalents  During  the  Preceding  Calendar  Year:                                              677.7  divided  by  12    =  56.48   Subject  Employers:  ALEs  
  12. 12. •  Full-­‐Time  Employee  (FT)   •  Defini@on:  Worked  on  average  120  hours  during  the   calendar  month  at  issue   •  NOTE:    This  is  NOT  the  same  defini@on  of  FT  that  applies  in  second  step  of   analysis,  i.e.,  when  determining  TO  WHOM  qualifying  coverage  must  be   provided.    (That  defini@on  uses  30  hours/wk  or  130  hours/month).       Subject  Employers:  ALEs  
  13. 13. •  Full-­‐Time  Equivalent  Employee  (FTE)   •  For  each  calendar  month  in  the  preceding  calendar  year,   add  up  all  hours  worked  by  non-­‐FTs  (up  to  a  maximum  of   120  hours  per  employee)  and  divide  by  120.         Subject  Employers:  ALEs  
  14. 14. •  “Hour  of  service”  includes:   •  Hours  Worked  –  Each  hour  for  which  the  employee  is  paid,  or  en@tled  to  payment,   “for  the  performance  of  du@es;”  AND   •  Paid-­‐Time  Off  –  Each  hour  for  which  the  employee  is  paid,  or  en@tled  to  payment,   for  the  period  of  @me  due  to  vaca@on,  holiday,  illness,  incapacity  (including   disability),  layoff,  jury  duty,  military  duty,  or  leave  of  absence   •  Notes:   •  ALL  paid  leave  gets  counted   •  Final  regs  include  rules  for  non-­‐hourly  and  commissions-­‐based  employees   •  Final  regula@ons  include  certain  methods  to  credit  hours  (i.e.,  actual  count,   days-­‐worked  equivalency,  weeks-­‐worked  equivalency)       Subject  Employers:  ALEs  
  15. 15. •  For  employers  with  50-­‐99  full-­‐@me  employees  (FTs)  or  full-­‐ @me  equivalent  (FTEs),  the  en@re  mandate  may  be  delayed,   if  certain  criteria  are  sa@sfied   •  For  employers  that  can  fit  within  the  transi@on  relief,  they   will  not  be  subject  to  the  A-­‐Penalty  or  the  B-­‐Penalty   •  BUT,  numerous  requirements  apply  in  order  to  qualify  for  the  delay,   so  be  careful!!             What  Was  Delayed?  
  16. 16. •  To  qualify  for  the  50-­‐99  FT/FTE  delay,  what  requirements  apply?   1.  From  2/9/14  through  12/31/14,  the  employer  CANNOT  reduce  the  size  of   its  workforce  or  the  overall  hours  of  service  of  its  employees  to  get   below  the  99-­‐count  threshold   •  Unless  for  business  reasons   2.  During  what  is  called  the  “coverage  maintenance  period,”  the  employer   CANNOT  eliminate  or  materially  reduce  the  health  coverage,  if  any,  it   offered  as  of  2/9/14   3.  The  employer  must  cer@fy  on  a  prescribed  form  that  it  meets  these   requirements         What  Was  Delayed?  
  17. 17. •  What  else  was  delayed?    Nothing…     •  But  a  host  of  addi@onal  transi@onal  rules  were  provided  for  2015   (which  is  sort  of  like  a  delay)               What  Was  Delayed?  
  18. 18. •  Fiscal  plan  year  transi@on  relief   •  Shorter  measurement  period  permined  for  use  with  2015   stability  period   •  Shorter  period  for  determining  ALE  status  for  2015   •  Offer  of  coverage  for  January  2015  can  be  @ed  to  first  payroll   period  commencing  in  2015   •  Offer  of  coverage  for  dependents   •  Special  A-­‐Penalty  transi@on  relief     TransiUon  Rules  
  19. 19. •  Special  A-­‐Penalty  transiUon  relief   •  What  does  the  relief  provide?   •  So  long  as  the  ALE  member  offers  MEC  to  at  least  70%  of  its  full-­‐@me   employees  (and  children,  as  required  under  the  transi@on  relief),  then  no   A-­‐Penalty  applies  –   •  Through  12/31/15  for  calendar  year  plans   •  Through  close  of  2015  plan  year  for  non-­‐calendar  year  plans   •  Also,  the  A-­‐Penalty  is  reduced  by  the  ALE’s  allocable  share  of  80  full-­‐@me   employees  rather  than  just  30     TransiUon  Rules  
  20. 20. •  Special  A-­‐Penalty  transiUon  relief   •  What  does  the  relief  provide?   •  HOWEVER,  it  is  important  to  note  that  there  is  no  corresponding  B-­‐ Penalty  relief!!!   •  Thus,  the  employer  could  be  on  the  hook  for  the  penal@es  equal   to  $3,000  per  employee  for  any  employee  that  goes  to  the   exchange  and  gets  subsidized  individual  coverage   •  Most  likely  helpful  on  issue  of  worker  misclassifica@on         TransiUon  Rules  
  21. 21. •  New  rule  for  first-­‐year  ALEs   •  New  monthly  measurement  method   •  New  seasonal  employee  defini@on   •  Clarified  treatment  of  short-­‐term,  non-­‐seasonal  hires   •  Modifica@ons  to  change  in  status  and  break  in  service  rules           Overview  of  Notable  Changes  
  22. 22. •  To  different  categories  of  workers,  such  as:   •  Full-­‐@me  employees   •  Part-­‐@me  employees   •  Variable  hour  employees   •  Seasonal  employees   •  Short-­‐term,  non-­‐seasonal  employees         How  Does  It  Apply?  
  23. 23. •  Full-­‐Time  Employee   •  Defini@on  =    An  employee  reasonably  expected  to  work  a  full-­‐@me   schedule  (using  30  hr/wk  –  130  hr/month  defini@on)   •  Generally,  must  offer  coverage  to  a  full-­‐@me  employee  by  the  first   day  of  the  fourth  full  month  following  hire   •  Excep@ons  if  using  “look  back”  method  and  there  is  a  change  in  status             How  Does  It  Apply?  
  24. 24. •  Part-­‐Time  Employee   •  New  defini@on  included  in  the  final  regula@ons   •  Part-­‐@me  =  A  new  employee  who  is  reasonably  expected  at  the   employee’s  start  date  not  to  be  a          full-­‐@me  employee   •  Generally  treated  just  like  a  variable  hour  employee               How  Does  It  Apply?  
  25. 25. •  Variable  Hour  Employee   •  Defini@on  =    An  employee  not  reasonably  expected  to  work  a  full-­‐@me   schedule  (using  30  hr/wk–130  hr/month  defini@on)   •  Final  regs:    Facts  and  circumstances  test,  but  factors  to  consider  include:   •  Whether  the  employee  is  replacing  an  employee  who  was  or  was  not  a  full-­‐@me   employee   •  The  extent  to  which  employees  in  the  same  or  comparable  posi@ons  are  or  are  not  full-­‐ @me  employees   •  Whether  job  was  adver@sed,  or  otherwise  communicated  to  the  new  hire  or  otherwise   documented  as  full-­‐@me   •  Consider  crea@ng  wrinen  job  descrip@ons  for  variable  hour  employees  that   explicitly  set  out  the  hours  expecta@on         How  Does  It  Apply?  
  26. 26. •  Variable  Hour  Employee   •  How  4980H  applies  to  these  employees  depends  on  whether  the  employer  plans  to   use  the  “look-­‐back”  measurement  method  or  the  new  monthly  measurement  method   •  If  using  the  “look-­‐back”  measurement  method:    Can  apply-­‐up  to  a  12  month  measurement   period  for  determining  full-­‐@me  status   •  If  using  new  monthly  measurement  method:    Must  have  offered  coverage  in  advance  for  any   calendar  month  in  which  the  variable  hour  employee  works  a  full-­‐@me  schedule  (subject  to   once  per-­‐employment-­‐term  3-­‐month  non-­‐assessment  period)             How  Does  It  Apply?  
  27. 27. •  Seasonal  Employee   •  Proposed  regula@ons  permined  employers  to  use  a  good  faith   interpreta@on  for  determining  who  is  a  “seasonal  employee”   •  An  employee  is  permined  under  the  final  regula@ons  to  apply  a   measurement  period  of  up  to  12  months  with  respect  to  seasonal   employees  (subject  to  “slice  and  dice”  rules)   •  The  prac@cal  effect  of  this  is  that  no  4980H  penal@es  are  likely  to  apply  (since  a  seasonal   employee  should  not  be  employed  at  the  close  of  the  12-­‐month  period  at  which  @me  the   coverage  requirement  could  take  effect)   •  The  final  regula@ons  provide  an  express  defini@on:   •  Seasonal  employee  =  an  employee  in  a  posi@on  that  is  performed  at  a  recurring  @me  each   year  and  customarily  lasts  no  longer  than  6  months   •  Note:    In  limited  instances,  actual  employment  could  in  theory  extend  beyond  without   jeopardizing  status  as  a  seasonal  worker       How  Does  It  Apply?  
  28. 28. •  Short-­‐Term,  Non-­‐Seasonal  Employee   •  Short-­‐term  hires  are  NOT  necessarily  seasonal  employees   •  In  fact,  many  short-­‐term  hires  will  NOT  qualify  as  seasonal  employees   •  Why?    Because  the  posi@on  (i)  customarily  lasts  in  excess  of  6  months,  or  (ii)  is  not  recurring  based   on  a  specific  @me  of  the  year   •  The  proposed  regula@ons  included  a  limited  transi@on  rule  for  2014  that  permined   employers  in  certain  instances  to  treat  short-­‐term  hires  like  seasonal  employees  and  apply   a  measurement  period  of  up  to  12  months   •  The  final  regula@ons  do  NOT  include  a  similar  transi@on  rule   •  And  specifically  state  that  an  employer  CANNOT  take  turnover  or  expected  short-­‐term  nature  of   employment  into  considera@on  in  determining  whether  “full-­‐@me”   •  THEREFORE,  an  employer  that  employs  a  short-­‐term  hire  that  is  expected  to  work  a  “full-­‐ @me”  schedule  and  is  not  a  seasonal  employee  generally  must  be  offered  4980H-­‐compliant   coverage  by  the  first  day  of  the  fourth  month  aqer  hire  (or  else  the  employer  could  be   subject  to  penal@es)         How  Does  It  Apply?  
  29. 29. •  Troubled  rollout  of  federal  and  many  state  exchanges   •  Extended  enrollment  window  through  3/31/14   •  By  end  of  March:  Total  of  6  million  enrolled   •  Percola@ng:   •  Errors  in  enrollment  and  “adver@sing”  of  plans   •  Issues  with  processing  premium  tax  credits  and/or  cost-­‐sharing   subsidies       State  of  Exchanges  –  Public  
  30. 30. •  Troubled  rollout  of  federal  and  many  state  exchanges   •  Extended  enrollment  window  through  3/31/14   •  By  end  of  March:  Total  of  6  million  enrolled   •  Percola@ng:   •  Errors  in  enrollment  and  “adver@sing”  of  plans   •  Issues  with  processing  premium  tax  credits  and/or  cost-­‐sharing   subsidies       State  of  Exchanges  –  Public  
  31. 31. •  Growing  number  of  providers  offering  private  exchanges  –  insured  or   self-­‐funded  coverage   •  Agency  guidance  makes  it  very  difficult  for  employers  to  par@cipate  in   public  exchanges  u@lizing  individual  insurance  if  the  employer  wants  to   provide  a  tax-­‐preferred  premium  subsidy  to  the  employee   •  Generally,  the  employer  will  need  to  sponsor  insured  or  self-­‐funded   group  health  plans   •  Many  employers  are  considering  use  of  self-­‐funded  coverage  with  the   private  exchange  because  economics  (e.g.,  the  “COI”  with  insured   coverage  is  too  great)   •  Be  careful!  –  Arrangements  can  raise  ERISA  concerns       State  of  Exchanges  –  Private  
  32. 32. Questions info@gnapartners.com 1-800-253-8562 ** This webinar will be posted to the G&A website by Friday 32  

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