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Fourth Quarter                                                                                                            ...
Fourth Quarter, 2012           IRS Issues New Guidance on Employer Penalties (cont. from page 1)                          ...
Fourth Quarter, 2012          Obama Wins Re-Election: Health Care Reform Law Here To Stay (cont.)Employers may decide that...
Fourth Quarter, 2012             Obama Wins Re-Election: Health Care Reform Law Here To Stay (cont.)Issues that will likel...
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Q4 2012 F&P Benefits Bulletin


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Please find attached our 4th Quarter Benefits Bulletin. Highlights include updates on Pay or Play Penalties and an overview of what\'s next now that the election is over.

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Q4 2012 F&P Benefits Bulletin

  1. 1. Fourth Quarter 2012IN THIS ISSUEObama Wins Re- IRS Issues New Cost of Family WellnessElection: Health Guidance on Coverage Rises 4 Programs SaveCare Reform Law Employer PercentHere to Stay Penalties PAGE 2 PAGE 4PAGE 1 PAGE 1 IRS Issues New Guidance on Employer Penalties Obama Wins Re-election: Health Beginning in 2014, large employers may face penalties if they do not Care Reform Law Here to Stay offer any health coverage to full-time employees, or if they offer health coverage that is unaffordable or does not provide minimumAfter hard-fought campaigns by both candidates, value. The penalty is known as a “shared responsibility payment,”President Barack Obama has been re-elected for a and is triggered if one of the employer’s full-time employees receivessecond term in office. Obama’s victory in the election, a premium tax credit or cost sharing reduction for coverage obtainedalong with last summer’s Supreme Court decision through a health insurance exchange.upholding the health care reform law, cements theDemocratic Party’s dedication to the legislation. On Aug. 31, 2012, the IRS issued Notice 2012-58, which describes safe harbor methods and rules that employers may use to determineWhile opponents of the law have called for its repeal, which employees are considered fulltime for the purposes of thehealth care reform’s supporters consider the legislation Affordable Care Act (ACA)’s shared responsibility be the major achievement of Obama’s first term.Obama’s re-election, along with continued Democratic This notice also addresses a safe harbor based on Form W-2 wagescontrol of the Senate, means that implementation of the for employers to use in determining whether their health coverage islaw will now continue without additional roadblocks. affordable. Employers will not be required to comply with any futureWHAT DO EMPLOYERS HAVE TO DO NEXT? guidance that is more restrictive until at least January 2015.With the landscape of employer-provided health care CONTINUED ON PAGE 2potentially changing over the next few years, employersshould consider their future plans related to their role in ANNOUNCEMENT – EDUCATIONAL OUTREACHemployee health care. Flood and Peterson will be hosting a Health Care Reform andCONTINUED ON PAGE 3 Insurance Exchange Educational Outreach during the 1st quarter of 2013. Dates and Information will be released soon.
  2. 2. Fourth Quarter, 2012 IRS Issues New Guidance on Employer Penalties (cont. from page 1) value must not exceed 9.5 percent of the employee’s W-2 Notice 2012-58 includes safe harbor rules for determining wages. full-time status for ongoing employees and new employees, Employers satisfying these requirements will not be subject to including employees with variable hours and seasonal penalties for providing unaffordable coverage for that employees. Under the safe harbor for ongoing employees, employee, even if the employee receives a premium tax credit employers may use three-month to 12-month measurement or cost sharing reduction through a health insurance and stability periods to determine whether ongoing exchange. Employers can be proactive, however, and employees work at least 30 hours per week. Also, employers structure their plans and operations so that the employee may utilize an “administrative period” of up to 90 days contribution amount does not exceed 9.5 percent of any between the measurement and stability periods to determine employee’s W-2 wages for that year. which ongoing employees are eligible for coverage and to notify and enroll employees. It is also important to note that the safe harbor does not For new employees, Notice 2012-58 provides that employers affect employees’ eligibility for premium tax credits, which will not be subject to a shared responsibility penalty for an are based on the affordability of employer-sponsored employee who is expected at his or her start date to work full- coverage relative to employees’ household incomes, rather time, as long as coverage is offered no later than 90 days than W-2 wages. following the employee’s start date. Cost of Family Coverage Rises 4 Percent The safe harbor for new variable hour and seasonal The annual Kaiser Family Foundation / Health Research & employees is similar to the one for ongoing employees, Education Trust Employer Health Benefits Survey reports a meaning that employers may use the measurement and modest increase compared with last year’s 9 percent spike, and stability periods to determine if the employees are fulltime. half the 8 percent average of the previous decade. The cost of Employers may also use an administrative period following health benefits for employers and employees rose 4 percent this the measurement period for new variable hour and seasonal year for family coverage. employees. When the stability period ends, employers must repeat the process, beginning with another measurement On average, employer premiums are at $15,745 for family period. coverage, with employees paying an average of $4,316. In addition, Notice 2012-58 discusses the affordability of Employers and employees faced a 3 percent rise in cost for single health care and how to determine if an employer will be coverage, paying on average $5,615 and $951, respectively. subject to a shared responsibility penalty. ACA dictates that coverage is considered affordable if the employee’s required Though the 4 percent cost increase is still greater than the 2.3 contribution is less than or equal to 9.5 percent of his or her percent rate of inflation, it follows a trend that sees the size of household income for the taxable year. To address the issue increases shrinking in recent years. The cost of premiums in 2003 of employers being unaware of their employees’ family saw a 13 percent increase from the previous year, and a 10 percent members’ income levels, the safe harbor allows only the increase in 2004. employee’s wages from the employer that is providing coverage to determine coverage affordability. The broader trend also indicates a reduction in the rate of increase; the cost of family coverage increased 51 percent from In order to be eligible for the affordability safe harbor, an 2002 through 2007, and only 30 percent from 2007 to 2012. employer must offer its full-time employees and their dependents the opportunity to enroll in minimum essential The low level of increase is generally attributed to the slow coverage under an employer sponsored plan, and the economy. In the current economic climate, individuals have been employee portion of the self-only premium for the reluctant to use more health care services, and many are practicing employer’s lowest cost coverage that provides minimum better consumerism by opting for less expensive procedures, or deferring elective surgery altogether. The modest rise may also reflect the higher deductibles that are becoming increasingly common. Around half of employer- covered workers currently have a deductible of at least $1,000 for individual coverage, compared to 21 percent in 2007. Flood and Peterson
  3. 3. Fourth Quarter, 2012 Obama Wins Re-Election: Health Care Reform Law Here To Stay (cont.)Employers may decide that paying the penalty is more cost-effective than continuing to pay the ever-increasing costs of health care foremployees and their families. On the other hand, uncertainty among employees about the quality and cost of individual health coveragecontinues to make employer-provided health coverage an attractive recruiting and retention tool.The additional uncertainty for employers, with compliance obligations hinging on court decisions and the political process, has mademany companies hesitant to make any large-scale changes. Most employers plan to continue offering coverage for now.Whatever their future decisions may be, employers that will continue to sponsor group health plans for the near future must prepare forupcoming deadlines. Significant health care reform provisions with looming effective dates include:  Summary of Benefits and Coverage. Health plans and issuers must provide an SBC to participants and beneficiaries that includes information about health plan benefits and coverage in plain language. The deadline for providing the SBC to participants and beneficiaries who enroll or re-enroll during an open enrollment period is the first open enrollment period that begins on or after Sept. 23, 2012. The SBC also must be provided to participants and beneficiaries who enroll other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees) effective for plan years beginning on or after Sept. 23, 2012.  60-Days’ Notice of Plan Changes. A health plan or issuer must provide 60 days’ advance notice of any material modifications to the plan that are not related to renewals of coverage. Notice can be provided in an updated SBC or a separate summary of material modifications. This 60-day notice requirement becomes effective when the SBC requirement goes into effect for a health plan.  $2,500 Limit on Health FSA Contributions. The health care law will limit the amount of salary reduction contributions to health flexible spending accounts to $2,500 per year for plan years beginning on or after Jan. 1, 2013.  W-2 Reporting. Beginning with the 2012 tax year, employers that are required to issue 250 or more W-2 Forms must report the aggregate cost of employer-sponsored group health coverage on employees’ W-2 Forms. The cost must be reported beginning with the 2012 W-2 Forms, which are issued in January 2013.  Preventive Care for Women. Effective for plan years beginning on or after Aug. 1, 2012, non-grandfathered health plans must cover specific preventive care services for women without cost-sharing requirements. Calendar year plans must comply effective Jan. 1, 2013.  Employee Notice of Exchanges. Effective March 1, 2013, employers must provide a notice to employees regarding the availability of the health care reform insurance exchanges. HHS has indicated that it plans on issuing model exchange notices in the future for employers to use.  Additional Medicare Tax for High-wage Workers. In 2013, health care reform increases the hospital insurance tax rate by 0.9 percentage points on wages over $200,000 for an individual ($250,000 for married couples filing jointly). Employers will have to withhold additional amounts once employees earn over $200,000 in a year.WHAT GUIDANCE WILL WE SEE?Regulations on a number of issues remain outstanding. The regulatory agencies responsible for implementation and enforcement of thehealth care reform law—the Departments of Labor, Treasury and Health and Human Services—began issuing additional guidance oncethe Supreme Court upheld the law. Additional guidance is expected now that the election is overCONTINUED ON PAGE 4 Flood and Peterson
  4. 4. Fourth Quarter, 2012 Obama Wins Re-Election: Health Care Reform Law Here To Stay (cont.)Issues that will likely be addressed in future guidance include:  Employer Pay or Play Mandate. The agencies are expected to, and have indicated that they will, issue more guidance for . employers to help them determine how to comply with the shared responsibility provisions of the law.  Automatic Enrollment. The Department of Labor is required to issue regulations implementing the rule requiring large employers that offer health coverage to automatically enroll new employees in the health plan (and re-enroll current participants).  Nondiscrimination Rules for Fully-insured Plans. Under health care reform, non-grandfathered fully-insured plans will not be able to discriminate in favor of highly-compensated employees with respect to their health benefits. The IRS delayed the effective date of this rule for additional regulations, which have yet to be issued.State governments may also take further steps to establish the health insurance exchanges required by the health care reform law. Thefederal government will step in and set up exchanges for states that fail to establish their own exchanges. Many states have delayedimplementation and will need to accelerate their efforts if they want to run their own exchanges.CHALLENGES FOR IMPLEMENTATIONAs we get closer to full implementation of the health care reform law, questions linger about whether the framework is in place for allpieces to be operational by their deadlines. Insufficient staffing of the responsible agencies is one potential issue, along with employerand state government hesitation or inability to implement certain parts of the law. Compliance efforts are likely to pick up now that theelection is over.Flood and Peterson will continue to monitor progress of the health care reform law and its implementation and will keep you informedof important developments. Wellness Programs SaveA recent report from the International Foundation of Employee Benefit Plans shows that North American employers on average save $1to $3 for every dollar invested in employee benefits.Investing money in workplace wellness programs is one way to increase your health care savings. Many employers that invest inworkplace wellness actually show a savings of $3 or more for each dollar spent. Along with this, wellness programs have been associatedwith higher employee morale, increased productivity and lower absenteeism.Many employers fear that implementing a wellness program will be a waste of money—some even try it for a few months, or a year, andthen throw the idea aside. The mistake here is assuming that positive ROI will be immediate. While a wellness program targeted at onedepartment and its issues may reveal savings within the first year, it may take three to five years to see measurable results in a moregeneral wellness program.While there is no single way to run your wellness program, Closer Look: Wellness ROI shows that organizations that report positive ROIfor their wellness plans commonly offer incentives as a component of their programs, such as health insurance premium discounts, giftcards or non-cash prizes. In addition, communication is key to a successful wellness program. Providing regular emails, newsletters, andinformation on social networks to remind employees of the program and giving them tips is a good way to get more employees toparticipate, leading to greater savings.The information contained in this newsletter is not intended as legal or medical advice. Please consult a professional for more information. © 2012 Zywave, Inc. All rights reserved Flood and Peterson