Please note: Seasonal employees ARE counted in the calculation for FTEs for the month that they work. However, if they work less than 120 days and cause the 50 FT threshold to be breached, then the employer is not considered a large employer.

1. Patient Protection and
Affordable Care Act:
What You Need To Know
Travis A. Sinquefield, MBA
February 13, 2013

2. OVERVIEW
o Timeline of Key Events
o Employer Mandate
o W-2 Reporting
o Other Items of Note

3. TIMELINE OF KEY EVENTS
2013
• Health flexible spending account limit of $2,500.
• Restricted annual limit on essential benefits at $2 million.
• Exchange notices to all employees due in Fall 2013 – exchanges set to
open for purchase October 1
• Elimination of Medicare Part D subsidy tax advantage (any Medicare
subsidies received must be reported as taxable income)
• 0.9 percent increase in Medicare tax for employees earning at least
$200,000 for individuals ($250k for joint filers), which affects
withholding and W-2 forms – employees only!
• Medicare expense deduction increase to 10% threshold of AGI for those
under 65 (increase in 2016 for those 65+)

4. TIMELINE OF KEY EVENTS
2013 (continued)
• Medicare tax on unearned income of 3.8% (MAGI of $200k for
individuals, $250k for joint filers)
• Lower HSA deductions for high deductible health plans
• $3250/$6450 maximum annual contribution deduction
• $1250/$2500 minimum
• Max out of pocket (deductibles and copays) of $6250/$12,500

5. TIMELINE OF KEY EVENTS
2014
• Individual mandate
• Health insurance premium tax credit (refundable)
• Exchange coverage
• Employer “pay-or-play” mandate
• Waiting periods limited to 90 days
• No annual dollar limit on essential health benefits
• Cost-sharing limits of $6,250 for individual coverage/$12,500 for in-
network family coverage (to be adjusted for 2014 based on inflation).

6. TIMELINE OF KEY EVENTS
2014 (continued)
• Deductible limit of $2,000 for individual coverage/$4,000 for
family coverage.
• Section 6055 IRS reporting for plans that provide minimum
essential coverage (IRS Notice 2012-32)
• Section 6056 IRS reporting for large employers (at least 50 full-
time employees), presumably to verify individual mandate and
pay-or-play information. (IRS Notice 2012-33)
• Small business tax credits if under 25 employees and average
annual wages of less than $50k of up to 50% of employer’s non-
elective contribution towards health care premium; employer
must pay at least 50% of employee’s premium; less than 10 EEs
and $25k average can receive full credit (2013 – must purchase
through exchange in 2014 & 2015 to receive credit)

7. EMPLOYER MANDATE
Who is subject to the new employer mandate rules?
“Large Employers” - Employers with 50 or more full-time equivalents
(FTEs)
• Definition of full-time employee: reasonably expected to work 30
or more hours per week or 130 hours per month
• Part-time employees are included in the FTE calculation by taking
aggregate hours for the month and dividing by 120
• Total full-time employees plus full-time equivalents must be over
50
• Seasonal employees are not included (<120 days/year)
• 30 or less Full-Time employees: exempt from fines
• You only have to cover full-time (30+ hrs/wk) employees – not
part-time or season employees

8. EMPLOYER MANDATE
IRS Notice from January 2, 2013:
• Proposed Rule: 95% standard – won’t face penalties if coverage
offered to at least 95% of eligible employees
• Large employer calculation done on a monthly basis
• Keep any fractions for the monthly calculation
• Look back periods:
• Previous calendar year (12 months)
• A 6 month consecutive period that occurred during 2013
(transition relief period)
• Take an average of the FTE calculation for your look back period
• Fractions are dropped from the annual average
• Example: 49.9 FTEs is 49 – not a large employer
• Monthly hours include vacation time, sick time, etc.

9. EMPLOYER MANDATE
Safe Harbor Provisions (IRS Notice 2012-58)
• Through 12/31/14, employers can utilize a Safe Harbor provision as
outlined in IRS notice 2012-58
• Utilizes a measurement period followed by a stability period
• If an employee is deemed to be full-time (worked 30+ hours per
week) during the measurement period, they are considered full-
time for the stability period regardless of hours worked during the
stability period
• Standard measurement period of 3-12 months that is used for
all on-going employees
• Stability period of at least 6 months but not less than the
standard measurement period
• Optional administrative period no longer than 90 days
• Same method used for new hires, will have a different
measurement period based on start date
• Calculated on an on-going basis as needed

10. EMPLOYER MANDATE
Even if you offer insurance, you may still be subject to a penalty!
So, how do I avoid paying a penalty?
• Offer minimum essential coverage
• Must be affordable
– Employees required contribution to plan is less than 9.5%
of W-2 wages (safe harbor through 2014) for employee
portion only
• Must offer minimum value
– Plan has actuarial value of greater than 60% - i.e. plan
must cover at least 60% of health care costs
• If you offer insurance but yet fail to meet the standards for
minimum essential coverage, you will pay the penalty

11. EMPLOYER MANDATE
More from the IRS Notice on 1/2/13:
Affordability safe harbor provisions:
• W-2 Wage Safe Harbor
• For 2014 affordability, use W-2 wages for 2014 issued in 2015
• Annual basis, by employee
• Rate-of-pay Safe Harbor
• Based on hourly or monthly wages
• Contribution is affordable if under 9.5% of computed monthly
wages
• Federal Poverty-Line Safe Harbor
• Considered affordable is employee’s cost for self-coverage
only does not exceed 9.5% of the federal poverty line for
single individual

12. EMPLOYER MANDATE PENALTIES
What are the possible penalties?
• Do not offer insurance and one or more full-time employees
received federal subsidy and gets insurance on exchange: $2,000
per FT employee less the first 30 FT employees
• Offer insurance and one or more FT employees receives subsidies
and insurance from exchange because your plan fails to provide
minimum essential coverage, pay either $3,000 per subsidized
employee OR $2,000 per full-time employee (minus first 30
FT), whichever is less
• Penalties are paid on a monthly basis
• IRS Rule Proposal on 1/2/13: penalties only apply if fail to offer
affordable coverage to 95% of eligible full-time employees

13. EMPLOYER MANDATE PENALTIES
What are the possible penalties? (cont.)
• Who is eligible for credits:
• Full-time employees with household income below 400% of
federal poverty level (currently $88,200) for family of four
• Eligible for health plan but plan does not meet affordability
standards
– 9.5% of household income (not W-2 wages)
• Eligible for health plan but plan does not provide minimum
value
• Employers will need to weight the costs and benefits of possibly
dropping insurance coverage
• Penalties are not deductible, but insurance premiums are
• Effect on recruiting and employer brand, along with
employee morale

14. EMPLOYER MANDATE PENALTIES

15. EMPLOYER MANDATE PENALTIES
Employee Category How Category is used to Subject to penalty if
determine “Large “Large Employer” and
Employer” employee receives
credit
Full-Time Counted as one Yes
employee, based on 30
hour work week
Part-Time Prorated (total PT hours No
worked per month
divided by 120)
Seasonal Not counted if working Yes, for month in which
less than 120 days per a seasonal worker is full-
year time
Temp Agency Yes, for the temp agency Yes, for the temp agency

16. EMPLOYER MANDATE PENALTIES
Can employer purchase coverage through exchange? Possibly…
• Depends on number of FTEs and state statutory guidelines
• Per the law:
• Have average of greater than 1 employee
• No more than 100 employees during any business during
previous year
• Employee at least one employee at beginning of plan year
• Before 1/1/2016, states may lower requirement to 50 employees

17. W-2 REPORTING
Who has to report the cost of insurance on their W-2?
• Employers with 250 or more employees must report cost of the
insurance benefits on W-2’s issued for 2012
• Based on individual employer, not controlled group
• IRS Notice 2012-9 provides guidance and a handy chart for
determining reporting
• Must report “aggregate reportable cost” it provided
• Total cost of all applicable insurance coverage, includes both
employee and employer portion of cost
• Do not have to issue a W-2 for the sole purpose of reporting
insurance cost (i.e. to a retiree)

18. OTHER ITEMS OF NOTE
Summary of Benefits and Coverage
• Issued to all participants of the health insurance plan
• Is issued by the insurance company and uses a standard template
provided by the government
• Self insured plans must create with the help of the TPA
• Is in addition to the SPD and must be issued by all plans, even if
exempt from ERISA
• Also provided at other times (initial enrollment, etc.)
• Not required for stand-alone benefits (vision, dental, etc.)
• Must be linguistically and culturally appropriate
• $1,000 fine per individual who didn’t receive properly for non-
compliance
Non-discrimination Testing
• Non-grandfathered insured plans must undergo discrimination
testing; details TBD per the IRS

19. OTHER ITEMS OF NOTE
Automatic Enrollment
• Employers with 200 or more employees must automatically enroll
their employees in the plan; employees can opt-out
• Originally scheduled for 2014 but is now delayed
Cadillac Plans
• Effective in 2018
• 40% excise tax charged to the plan sponsor
• Excise tax is based on difference between the actual plan value
and the plan limits below, and is per participant in the plan
• Based on aggregate annual value amounts
• Individual coverage: $10,200
• Family: $27,500
• Based on total cost of benefits
• Ex: If plan value is $1,000 over the individual limit, pay $400 per
participant in excise tax

20. OTHER ITEMS OF NOTE
SIMPLE Cafeteria Plans
• Available to small employers – average 100 or less employees
• Meet certain eligibility requirements for employees
• 1000 hours service and 1 year of service
• 21 years of age
• Not covered under CBA
• Contribution Requirements
• Non-elective contribution: uniform amount of salary not less
than 2%
• Matching contribution: equals or exceeds lesser of
– 6% of employees compensation for plan year
– Twice the employee’s salary reduction contribution
• Must choose between the two
• Has to be a true employer contribution
• Has to be uniform for all employees

21. QUESTIONS
For more information visit:
http://www.hscompanies.com/PPACA