The document provides an overview of how the Affordable Care Act (ACA) will affect employers, including: 1) The individual mandate and employer mandate ("pay or play") provisions are still in effect but some have been delayed, such as the employer mandate being delayed until 2015. 2) The employer mandate applies to "applicable large employers" (ALEs) defined as those with 50 or more full-time equivalent employees. 3) ALEs face penalties under the employer mandate if they do not offer affordable minimum essential coverage to their full-time employees, with different penalties for failing to offer coverage ("A penalty") versus failing to offer affordable/minimum value coverage ("B penalty").

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. 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. • Originally
scheduled
to
take
effect
on
January
1,
2014
• Now
scheduled
to
take
effect
on
January
1,
2014
• Generally
requires
that
all
nonexempt
individuals
be
enrolled
in
“minimum
essen@al
coverage”
or
pay
a
tax
penalty
Individual
Mandate

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. • Two
separate
penal@es:
• 4980H(a)
or
“A-­‐Penalty”
• 4980H(b)
or
“B-­‐Penalty”
“Pay
or
Play”

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. 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. • 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. • 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. • 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. 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. • 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. • 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. • “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. • 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. • 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. • 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. • 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. • 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. • 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. • 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. • 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. • 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. • 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. • 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. • 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. • 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. • 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. • 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. • 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. • 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. Questions
info@gnapartners.com
1-800-253-8562
** This webinar will be posted to the G&A website by Friday
32