This document summarizes key aspects of Affordable Care Act reporting requirements for employers. It discusses the employer mandate, counting employee hours, Code Section 6055/6056 reporting, IRS forms, and practical considerations. Government agencies are scrutinizing employer policies like confidentiality agreements and severance agreements for potential "chilling effects" on protected employee conduct. The document provides examples of rules that may be lawful or unlawful and recommendations for compliance.

1. Employment Law Update
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2. Affordable Care Act Reporting
Angelica Fortney
David A. Thornton

4. Topics
The Employer Mandate, in Brief
Counting Hours, in Brief
Code Section 6055/6056 Reporting
IRS Forms
Practical Considerations

5. EMPLOYER MANDATE (“PLAY OR PAY”), IN
BRIEF

6. Employer Mandate Penalties
Beginning 1/1/2015, an applicable large employer is subject to a penalty if at least
one full-time employee receives subsidized exchange coverage and:
No Minimum Essential Coverage Offered
(“No MEC”)
Insufficient Minimum Essential
Coverage Offered
(“Insufficient MEC”)
Employer fails to offer to substantially all
of its full-time employees (and their
dependents) the opportunity to enroll in
minimum essential coverage
Employer’s offer of minimum essential
coverage to full-time employees (and
their dependents) is unaffordable or
does not provide minimum value
Penalty if No MEC Penalty if Insufficient MEC
Penalty (for a month) equals the number
of full-time employees (reduced by 30)
multiplied by 1/12th of $2,000 (indexed)
Penalty (for a month) equals the
number of full-time employees who
receive subsidized exchange coverage
multiplied by 1/12th of $3,000
(indexed); or, if less, the penalty that
would have been imposed for No MEC

7. Applicable Large Employer
(“ALE”)
Applicable large employer – an employer
that employed an average of at least 50
full-time employees (“FTEs”), including
full-time equivalent employees, on
business days in preceding calendar year
► Full-time equivalent employee – (used ONLY
for determining if an employer is an ALE)
Calculate aggregate hours of service for non-
full-time employees for month and divide by
120

8. Minimum Essential Coverage
(“MEC”)
Minimum essential coverage – coverage
under an “eligible employer-sponsored plan,”
which includes any self-insured group health
plan
► Also includes coverage under government-
sponsored programs, individual market plans
► NOT excepted benefits (such as limited scope
dental/vision plans, certain EAPs)

9. Minimum Value
Minimum value – the plan’s share of the
costs of benefits provided must be at least
60%
Approved methods of determining:
► IRS/HHS online calculator
► Design-based safe harbor checklist
► Actuarial certification

10. Affordability
Affordable coverage – coverage where employee’s
required contribution for employee-only coverage under
the lowest cost option does not exceed 9.56% of
household income for the year
Safe harbor alternatives:
► Form W-2 safe harbor (Box 1 wages)
► Rate of pay safe harbor
► Federal poverty line safe harbor

11. Full-Time Employees (“FTEs”)
Employee – generally, a common law employee
Full-time employee – an employee that worked an
average of at least 30 hours of service per week (or
130 hours of service per month)
► May exclude certain types of work (e.g., volunteer
employees, work-study students)

12. Offer
Offer =
► To FTEs and dependent children (not required for
spouses)
► Must provide effective opportunity to enroll/decline
coverage
► Must be for everyday of month (exception for hired
after first day of month/terminated mid-month)
Offer must be to substantially all FTEs:
► Must offer to cover all but 5%* of full-time employees to
avoid No MEC penalty
► If any of the 5%* employees receives subsidized exchange
coverage, the Insufficient MEC penalty applies
* 2015 transition rule – 30% instead of 5%

13. COUNTING HOURS, IN BRIEF

14. What to Count
Each hour for which an employee is paid, or
entitled to payment, for the performance of
duties for any member of the controlled group
or affiliated service group
Each hour for which an employee is paid, or
entitled to payment on account of a period of
time which no duties are performed due to
vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military
duty, or leave of absence

15. How to Count
For hourly employees: count actual hours
For non-hourly (i.e., salaried) employees: count actual
hours or use the following equivalency methods:
► Days-worked equivalency – employee is credited
with 8 hours of service for each day with an hour of
service
► Weeks-worked equivalency – employee is credited
with 40 hours of service for each week with an hour
of service

16. When to Count
ACA requires an employer to determine whether
each employee is a full-time employee on a month-
by-month basis in real time – this creates
administrative challenges, especially with respect to
variable hour employees
Recognizing these challenges, the IRS provided a
look-back safe harbor method under which an
employee’s full-time or part-time status can be
locked-in for a period of time

17. CODE SECTION 6055/6056 REPORTING

18. Section 6055 Reporting
Every provider of MEC must:
► File an information return with the IRS
► Furnish a statement to individuals
Providers include:
► Health insurance issuers (insurance companies)
► Self-insured plan sponsors (that aren’t subject to
employer mandate as ALEs)
Purpose:
► Verifies employee’s compliance with individual
mandate
Forms 1094-B and 1095-B
► If you are a self-insured ALE, you will use Part III of
1095-C

19. Section 6056 Reporting
Every ALE must:
► File an information return with the IRS
► Furnish a statement to individuals
Purpose:
► Verifies employer’s compliance with employer
mandate
► Determines individual’s eligibility for premium
credit
Forms 1094-C and 1095-C

20. IRS FORMS

21. Forms 1095-B and 1095-B
1094-B: transmittal form for 1095-B
► Identifies filer: provider of MEC
1095-B: reports covered individuals
► Names primary covered individual
► Identifies who provides coverage (insurance
company, self-insured plan sponsor, etc.)
► Identifies covered individual if covered one
day in month

22. Form 1094-C
Form through which ALE (or ALE member)
reports information about itself and
transmits Forms 1095-C (like a cover
page)
► ALE member - each member of controlled
group with 50+ employees
► One authoritative transmittal each
Purpose: verifies ALE’s compliance with
employer mandate

23. Information to Collect:
Form 1094-C
Whether ALE offered MEC to at least 95% of FTEs
and their dependents for each month
► Deemed “yes” if certain transition relief applies
► If “no,” no/limited penalty if certain transition relief applies
FTE count for each month
Total employee count for each month as of first or last
day of a) month or b) first payroll period starting in the
calendar month
Whether ALE is part of controlled group
► Members of controlled group
► ALE member’s EIN, contact information
► Number of 1095-Cs for all ALE members

24. Transition Relief: Deemed “Yes”
If offer made to 70% of FTEs or
dependents
Certain plans not offering to dependents
Non-calendar year plans
Offered by first day of first payroll period

25. Transition Relief If “No”
No penalty for smaller ALEs (50-99
employees) if, after 2/9/14:
► No workforce reduction
► No change to plan year
► No elimination/material reduction of existing
coverage
Penalty reduced for 2015: subtract 80
instead of 30 FTEs

26. Information to Collect:
Form 1094-C
Certifications of Eligibility
► Qualifying Offer Method: offered MEC with
minimum value to one or more FTEs (MEC to
spouses and dependents) at cost of no more than
9.5% of FPL
► Qualifying Offer Method Transition Relief: offered
to at least 95% of FTEs for one or more months
► Section 4980H Transition Relief (see previous
slides)
► 98% Offer Method: offered affordable minimum
value coverage for all months to at least 98% of
employees for whom 1095-C is filed

27. Final Form 1094-C

28. Final Form 1094-C

29. Final Form 1094-C

30. Form 1095-C
Form through which ALE reports information about
each FTE (or any covered EE if plan is self-
insured)
► Only one ALE member reports each employee each
month (whichever has more of the employee’s hours
for month)
Purpose: for IRS to determine each FTE’s
eligibility for premium tax credit, ALE’s compliance
with employer mandate
Provide copy to employee as individual statement
► Alternative statement available for qualifying offers if
NOT self-insured plan

31. Information to Collect:
Form 1095-C
The ALE offered to the FTE either (choose):
► MEC providing minimum value to employee, contribution for self-
only is no more than 9.5% of single federal poverty line; at least
MEC to spouse, dependents
► MEC providing minimum value to employee only
► MEC providing minimum value to employee and dependents (not
spouse)
► MEC providing minimum value to employee and spouse (not
other dependents)
► MEC providing minimum value to employee; at least MEC to
spouse and other dependents
► MEC not providing minimum value to employee / employee and
spouse or other dependents / to employee spouse and other
dependents
► MEC was not offered
► Qualifying Offer Transition 2015

32. Information to Collect:
Form 1095-C (continued)
Who is FTE for each month
Cost to FTE for the lowest self-only MEC providing minimum
value that was offered
Whether the employee was enrolled in the MEC
If FTE was NOT enrolled in the MEC for any month, whether
(for that month):
► The FTE was not employed by the ALE on any day of the month
► The FTE was in a waiting period
► The FTE was in initial measurement period or associated
administrative period
► The FTE’s first day of employment was not first day of month
► Employee not FTE
► Employee enrolled
► Minimum value safe harbors met
► Non-calendar year plan

33. Information to Collect:
Form 1095-C (continued)
If self-insured ALE:
► Name of covered EE (whether FTE or not)
and spouse or dependents covered
► SSN (start collecting now)
► Months covered

34. Final Form 1095-C

35. Sample Individual Statement:
Qualifying Offer Method

36. Sample Individual Statement:
Qualifying Offer Method
Transition Relief

37. Submission/Distribution of Forms
For IRS: paper or electronic
► Paper:
- Deadline: February 28 after calendar year to which form
relates
- February 29, 2016 for 2015
► Electronic:
- Deadline: March 31 after calendar year to which form relates
- Electronic required if 250+ employees
For individual statement:
► Deadline: January 31 after calendar year to which form relates
- February 1 in 2016)
► Must get employee consent to receive statements electronically
All deadlines as of day of mailing.
Next business day if holiday/weekend.

38. Practical Considerations
Good faith effort: no penalty for incorrect
or incomplete forms if good faith effort to
comply is shown
Take advantage of transition rules
Employ service providers
Coordinate payroll and HR

39. Confidentiality Agreements
Timothy K. Garrett
Michael S. Moschel

40. Confidentiality Agreements
Under Scrutiny
Under intense scrutiny by several
Government Agencies
► SEC most recently announced settlement
► EEOC
► NLRB
► OIG
Will evaluate for “chilling effect” on lawful
activity
Will evaluate if undermines agency’s
enforcement efforts
Will engage broad reading to find violation

41. SEC Enforcement Action
Internal Company Investigation
Required Employees to Sign
Confidentiality Agreement
► So restrictive that violated whistleblower
protections of Dodd-Frank Act
► No examples of employees actually being
discouraged from going to SEC
► $130,000 penalty
► Revise agreement

42. SEC Enforcement Action
(cont’d)
SEC joining in scrutiny by other
governmental agencies in various settings
Employment Handbook
Code of Conduct
Severance Agreements
Internal Investigation
Policies/Procedures/Practices

43. Handbooks/Codes of Conduct
NLRB
Report of the General Counsel
Offers guidance
► Desire that employers will review their handbooks
and other rules
► And conform as necessary
Employees have Section 7 rights
► To discuss wages, hours and other terms and
conditions
► With fellow employees and nonemployees (i.e.,
union representatives)

44. Prohibited Work Rules
Lutheran Heritage Village-Livonia, 343
NLRB 646 (2004)
► Mere maintenance of a work rule may violate
Section 8(a)(1) of the NLRA
► If rule has chilling effect on Section 7 activity.
Rules explicitly banning protected activity
violate the Act (e.g., rule banning union
activity)

45. Prohibited Work Rules (cont.)
Rules not explicitly banning protected
activity violate the Act if:
► Employees would reasonably understand the
rule’s language to prohibit Section 7 activity;
► The rule was adopted in response to union or
other Section 7 activity; or
► The rule was applied to restrict the exercise of
Section 7 rights.

46. Examples of Unlawful
Confidentiality Rules
You must not disclose proprietary or
confidential information about the
Employer or other associates if the
information was obtained in violation of
law or lawful Company policy
Do not discuss customer or employee
information outside of work including
phone numbers and addresses

47. Examples of Unlawful
Confidentiality Rules (cont’d)
Never publish or disclose the Employer’s
or another’s confidential or other
proprietary information. Never publish or
report on conversations that are meant to
be private or internal to the Company.

48. Examples of Unlawful
Confidentiality Rules (cont’d)
Prohibiting employees from disclosing details
about the Employer.
Sharing of overheard conversations at the
worksite with your co-workers, the public, or
anyone outside of your immediate work group
is strictly prohibited.
Discuss work matters only with other
employees who have a specific business
reason to know or have access to such
information.

49. Examples of Unlawful
Confidentiality Rules (cont’d)
Do not discuss work matters in public places.
If something is not public information, you
must not share it.
Confidential Information is: All information in
which its loss, undue use or unauthorized
disclosure could adversely affect the
company’s interests, image and reputation or
compromise personal and private information
of its members.

50. Examples of Lawful Confidentiality
Rules
No unauthorized disclosure of business
secrets or other confidential information.
Misuse or unauthorized disclosure of
confidential information not otherwise
available to persons or firms outside
Employer is cause for disciplinary action,
including termination.
Do not disclose confidential financial data, or
other non-public proprietary company
information regarding business partners,
vendors or customers.

51. Handbooks/Codes of Conduct
(cont’d)
State Department OIG Report (March 30)
Concerning provisions
► No discussion of confidential information
► Contact company if contacted by government
► Or, instructions to explain must consult with
Company counsel before responding
► Non-disparagement

52. Severance Agreements
Problems
► Waiver of right to file charge
– Traditional “carve-out” explaining expressly that
employee can file EEOC charge
– Now need to be more specific and inclusive in “carve-
out”
► Non-disparagement
► Confidentiality provisions
– Must contact company before disclosing any
“underlying” information
– Seen as limiting participation in government
investigation

53. Recommendations
Review these agreements and practices
Provide internal hotlines with anonymous
reporting procedure
Settlement Agreements
► Include that Employee has made company aware
in writing before signing agreement
► Other government agencies (not just EEOC) in
carve-out
► Not a waiver of right to file charge or participate in
any government investigation

54. Recommendations (cont’d)
Internal Investigation
► Case-by-case analysis of level of
confidentiality needed
► Distinguish between management and non-
management persons in process
► If give confidentiality instruction, explain why

55. Angelica Fortney – afortney@bassberry.com
Tim Garrett – tgarrett@bassberry.com
Michael Moschel – mmoschel@bassberry.com
David Thornton – dthornton@bassberry.com
Follow Us
@BassBerryLabor
Blog: bassberrylabortalk.com
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