The document outlines recent changes to the Affordable Care Act (ACA), focusing on employer responsibility requirements and updated classifications for full-time employees. Modifications include delayed penalties for large employers, revised definitions for seasonal employees, and exemptions for certain types of workers. It highlights significant deadlines and compliance requirements crucial for non-profits and governmental units, as well as the tax implications of ACA provisions.

1. More things Non-Profits and Governmental Units
Insert Presentation
need to know about The Affordable Care Act
Title Here
Presented by :
Don McAnelly, CPA, ABV, CGMA
Michael P. James, JD, MBA, CSSGB

2. Overview of Recent Changes
to the Requirements and
Deadlines under the
Affordable Care Act

3. Overview of Recent Changes
Employer Responsibility Requirements
Large Employer Mandate Delayed
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•
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Applies to large employers with 50-99 FTEs.
Will not be penalized for not providing insurance to full-time employees until 2016.
Previous requirement: Provide insurance to full-time employees in 2015 or face penalties.
Large Employer Mandate Modified
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•
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Applies to large employers with 100+ FTEs.
Only required to provide adequate and affordable coverage to 70% of full-time employees in
2015.
In 2016, these employers must provide appropriate coverage to 95% of full-time employees.
Previously requirement: Large employers were required to provide appropriate coverage to
95% of full-time employees starting in 2015.

4. Overview of Recent Changes
Employer Responsibility Requirements
“Pay or Play” Penalties Modified for 2015
• Applies to large employers with 100+ FTEs.
• If employer fails to provide health insurance coverage to full-time employees, a
100+ FTE Employer is subject to a penalty equal to:
– $2,000 x (# of full-time employees – 80)
• Previous requirement: The penalty was calculated as:
– $2,000 x (# of full-time employees – 30)
• 2015 modification applies to “Unaffordable / Minimum Value” Penalty as well
(discussed later).
• In 2016, the “no coverage” penalty for all large employers is equal to:
– $2,000 x (# of full-time employees – 30)

5. Overview of Recent Changes
Seasonal Employees Redinfied
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•
A “Seasonal Employee” is an employee in a position for which the customary
annual employment is 6 months or less. The seasonal period should begin around
the same part of the year each year.
Seasonal employment may be extended under certain circumstances.
Members of Religious Orders
•
In determining whether its members are full-time employees, a religious order is
permitted to not count the hours of service related to any work performed by an
individual who is subject to a vow of poverty as a member of that order when the
work is in the performance of tasks usually required for active members of the
order.

6. Overview of Recent Changes
Bona Fide Volunteers
•
Government entities and 501(c) organizations with tax-exempt volunteers do not
need to count the hours of service provided by bona fide volunteers when
determining their status as a large or small employer under the ACA.
Work Study Program Student Employees
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•
Educational institutions do not need to count the hours worked by students that are
employed in positions subsidized through the federal work study program or a
substantially similar program at the State or local level in determining whether they
are a large or small employer under the ACA.
However, the hours worked by students employed outside of these programs must
be counted by the educational institution to determine whether it is subject to the
shared responsibility requirements of the ACA.

7. Overview of Recent Changes
Approved Methodology for Determining Adjunct Faculty Hours
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Institutions that employ adjunct faculty are required to use a reasonable method to
identify and track the hours of service for adjunct faculty.
The IRS has identified one method that it deems reasonable:
– The institution must credit the adjunct faculty member with:
• (a) 2 ¼ hours of services per week for each hour of teaching or classroom
time (this would add an addition 1 ¼ hours for activities such as class
preparation and grading); and, separately
• (b) 1 hour of service per week for each additional hour outside of the
classroom that the faculty member spends performing duties required to
perform (office hours and faculty meetings).

8. Overview of Recent Changes
HealthCare.gov
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Open enrollment:
October 2013 ???
Plans go into effect: January 1, 2014
Enrollment ends:
March 31, 2014
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Glitches, delays and functionality problems:
– Slow start to enrollment through HealthCare.gov.
– 22,000 appeals need to be resolved.
– State Medicaid programs not finalized.

9. Overview of Recent Changes
Individual Mandate Delayed
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Deadline for individuals to sign up for health insurance before facing tax penalties
extended to March 31, 2014.
“Short Coverage Gaps” protect individual for not having coverage for up to 3
months.
– Would have protected uninsured individuals from penalties until March 31, 2014.
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In practice, an individual must sign up by the 15th of a given month in order for
health insurance to start the first day of the next month.
Would have required insurance application by February 15, 2014 to qualify for
Short Coverage Gap protection.

10. Overview of Recent Changes
Cancelled Health Plans
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•
“If you like your health insurance plan, you can keep it.”
Plans cancelled because plan was not compliant with ACA requirements.
– Individuals impacted in 2013 for 2014 coverage.
– Some small businesses impacted in 2013 for 2014 coverage, but many will see affects in
2014 for 2015 coverage.
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4% of U.S. population affected, 11 Million consumers.
Michigan Department of Insurance and Financial Services:
– Insurers allowed to reinstate cancelled policies.
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Some Michigan insurance carriers elect not to reinstate policies.
Job Killer – The CBO indicates ACA will kill 2.3M jobs by 2021.

11. Overview of Recent Changes
Small Business Health Option Programs (SHOP)
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SHOP enrollment: October 1, 2013  November 1, 2013  November 30, 2013…
SHOP system down. Can still enroll in SHOP insurance products through
authorized agents.
Must enroll in a SHOP insurance product to be eligible for Small Business Health
Care Tax Credits.
– 2010 - 2013:
• Non-profit employer may receive tax credit of up to 25% of employer’s contribution to
employees’ health insurance premiums.
– 2014 - 2016:
• Non-profit employer may receive tax credit of up to 35% of employer’s contribution to
employees’ health insurance premiums.

12. Timeline of Key Effective Dates
Provisions not effective until
regulations issued
•
Employer coverage notices under Fair Labor
Standards Act
Non-discrimination rules
Automatic enrollment of employees
2013
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Open enrollment in
the Individual
Exchange begins
(10/1/2013) (SHOP
Exchange moved to
11/15/14)
Increase Medicare
payroll tax by 0.9%
on earned income
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Impose 3.8% tax on
unearned income
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2014
•
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PCORI fee
Employers generally
must be in compliance
with coverage
requirements
(1/1/2014) * Delayed
to 1/1/15 and 1/1/16
Individual
mandate, premium
and cost sharing
credits go into effect
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Medicaid expansion
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Other insurance
market reforms
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Temporary
reinsurance fee begins
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SHOP Exchange online
enrollment opens
100+ FTE Employers
generally must be in
compliance with applicable
large employer coverage
requirements (1/1/2015)
2015
•
2016
•
Temporary reinsurance
fee ends
•
Employer information
reporting to the IRS on
employee coverage (due
by 1/31/2016), even if
not subject to penalties.
•
50-99 FTE Employers
generally must be in
compliance with
applicable large
employer coverage
requirements (1/1/2016)
States may open
Exchanges to large
group market
2018
2017
•
40% excise tax on highcost health plans “the
Cadillac Tax”

13. Understanding Employer
Classifications

14. Employer Classifications
Are You a Large or Small Employer?
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Large Employer:
– Over 50 FTEs.
• 50-99 FTEs: Do not have to provide coverage until 2016.
• 100+ FTEs: Employer must offer minimally essential insurance.
– Insurance must cover at least 60% actuarial value.
– Insurance must be offered to:
» 70% of full-time employees in 2015.
» 95% of full-time employees in 2016.
•
Small Employer:
– Under 50 FTEs.
– Employers do not have to offer insurance....at least not yet.
– However, if health insurance is offered, it must meet the essential health benefits, metal
levels and be available to full-time employees.

15. Employer Classifications
Which Entities Are Subject to the ACA Requirements?
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Governmental Entities
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Institutions of Higher Education
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Parochial Schools
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Non-Profit Organizations
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Churches
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Public Schools

16. Employer Classifications
Play or Pay Penalty for Large Employers
No Coverage
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Effective 2015 for 100+ FTE Employers; 2016 for 50-99 FTE
Employers.
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IRS Code 4980H(a).
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Is triggered if an eligible employer does not offer coverage:
– In 2015, 100+ FTE Employers subject to this penalty must pay a
$2,000 annual excise tax for each full-time employee in excess of
80 (does not include FTE’s generated by variable employees).
– In 2016, all large employers subject to this penalty must pay a
$2,000 annual excise tax for each full-time employee in excess of
30 (does not include FTE’s generated by variable employees).
•
The tax will go up annually.

17. Employer Classifications
Play or Pay Penalty for Large Employers
Coverage Unaffordable or Lack of Required Value
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Effective 2015 for 100+ FTE Employers; 2016 for 50-99 FTE
Employers.
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IRS Code 4980H(b).
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Is triggered if an eligible employer offers coverage that is either:
– (1) Unaffordable, or (2) does not provide a minimal value of coverage;
and
– A full-time employee goes to the Marketplace and receives a tax credit
or subsidy.
•
The Excise Tax is the lesser of:
– The “no coverage” penalty (different in 2015 and 2016); or
– $3,000 for each full-time employee who enrolls in insurance through the
Marketplace and receives a tax credit or subsidy.
•
The tax will go up annually.

18. Employer Classifications
Applicable Large Employer and
Applicable Large Employer Member
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Employer Shared Responsibility Requirements apply to applicable large
employers and to all of the applicable large employer members that
comprise that applicable large employer.
Final Regulations from Department of Treasury:
– Continue to reserve a section of 54.4980H-2(b) for special rules for
government entities, churches, and conventions and associations of
churches to determine whether they are applicable large employers.
•
Expect further guidance from the IRS.

19. Understanding How to
Classify and Count Your
Employees

20. Employee Classification
Which Employees Count Toward FTEs?
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Government Employees?
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Elected Officials?
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Election Workers?
•
Adjunct Faculty?
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Coaches?
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Hourly Employees?
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Seasonal Employees?
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Independent Contractors?
All employees are subject to the Act’s requirements!

21. Employee Classification
Full-Time Employees
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Evaluated based on monthly hours:
– Average at least 30 hours per week; or
– 130 hours of service in a calendar month.
•
Must consider each hour an employee is paid or entitled to be paid.
– Include: vacations, holidays, illnesses, incapacity (including disability), layoffs, jury
duty, military duty or leaves of absence (up to a maximum of 160 hours for any
continuous period).
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Each full-time employee is one (1) FTE.
It is possible that an employee paid on an hourly basis could be considered a
full-time employee based on the weekly or monthly hours logged by the
worker.

22. Employee Classification
Part-Time Employees
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If an employee does not meet the definition of full-time, his or her individual hours
are included in your monthly full-time equivalent (FTE) calculation.
How do part-time employees affect your classification as a large or small employer:
– 1) Monthly Calculation:
• Add up the hours for all part-time employees in a month and divide by 120.
– This is your monthly FTE for part-time employees.
• Add the number of full-time employees.
• Result is that month’s FTE number.
– 2) Annual Calculation:
• Add up the calculations for each month and divide by 12, round down.
• This is your annual FTE number.
– 3) Determine status based on annual FTE number.

23. Employee Classification
Variable Hour Employees
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Employees that may work full-time hours at various intervals throughout the year
and part-time hours the rest of the year cause difficulties for employers.
– If you offer health insurance to full-time employees, variable hour employees may migrate
in and out of the employer’s insurance coverage throughout the year.
– Administrative difficulties for both employer and employee.
•
Measurement and Stability Period Safe Harbor
– Employer allowed to set a measurement period of 3 to 12 months to determine whether
an employee averaged at least 30 hours of service per week or 130 hours of service per
calendar month during the defined period.
– Employer then has a stability period of at least 6 months (must be equal to measurement
period) where employees who were full-time during the measurement period are treated
as full-time an permitted to participate in employer health plan.

24. Employee Classification
Measurement and Stability Period Safe Harbor

25. Employee Classification
Seasonal Employees
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Seasonal employees include:
– An employee in a position for which the customary annual employment is 6 months or
less.
– What does “customary” mean?
• By the nature of the position an employee in the position typically works for a period
of 6 months or less; and
• That period should begin each calendar year in approximately the same part of the
year, such as summer or winter.
– Seasonal employment may be extended under certain circumstances.
•
Seasonal employees are included in initial FTE calculation for employer.
– If an employer's workforce exceeds 50 FTEs for 120 days (four calendar months) or
fewer during a calendar year and the employees in excess of 50 FTEs who were
employed during that period were seasonal employees, the employer would not be an
applicable large employer.
– The 4 calendar months / 120 days are not required to be consecutive.

26. Employee Classification
Employees of Controlled/Affiliated Groups
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Employees of a controlled or affiliated group may be treated as the employees of a
single employer to determine whether an employer is a large or small employer
under the ACA.
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IRS: final controlled group rules do not apply to certain church entities, a state or
local government or a federal government entity.
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Until further guidance is issued, certain church entities and state or local
government public schools that sponsor section 403(b) plans can continue to rely
on a reasonable, good faith interpretation of the common control rules to determine
whether they are large employers under the ACA.

27. THANK YOU!
Don McAnelly, CPA, ABV, CGMA
Michael P. James, JD, MBA, CSSGB
Phone: (989) 799-9580
Phone: (517) 377-0823
(313) 237-7300
Email: Don.McAnelly@rehmann.com
Lansing
Detroit
Email: mjames@fraserlawfirm.com
www.linkedin.com/in/MichaelJamesLaw