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Virginia Society of Certified Public Accountants - Affordable Care Act (ACA) Compliance Pathways Overview
- 2. ACA Business Strategies Workshop for Employers of Vulnerable Wage populations Presented by: Rich Boehling President and CEO of Productiv Inc rboehling@getproductiv.com
- 4. •Property •Provisions •Processes •People ACA has significant impact on some percentage of this “P” 4
- 6. ACME PBJ ACME PBJ: 2012 YE BASELINE: $216,000 6 $216,000
- 7. Population<$15/hr Population 15<23/hr Population >23/hr 0% 10% 20% 30% 40% 50% 60% ACME PBJ Co Census Data Source: Bureau of Labor Statistics 7
- 8. ACME “PAY” ACME 2014 Forecast Down $196,000 PAY Fines$216,000 $20,000 Base Adjustment: -$ Net Sales 7,500,000.00$ Base Adjustment: -$ Cost of Goods Sold 6,100,000.00$ Gross Profit (Loss) 1,400,000.00$ Base Adjustment: HCP savings (140,000.00)$ Total Expenses 900,000.00$ Net Income 500,000.00$ Owner's Tax 200,000.00$ After Tax Income (Loss) 300,000.00$ ACA Penalties:140 FTEs at 2000 each 280,000.00$ SG&A Expenses INCOME Tax EXCISE Tax PAY CASE ACME PBJ 12/31/2014 Financial Statements in U.S. Dollars Revenue Cost of Goods Sold Cancel Plan 8
- 9. ACME Wants to Play $- $1,000.00 $2,000.00 $3,000.00 $4,000.00 $5,000.00 $6,000.00 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 EEPremiumCost Hourly Wage ExpandedMedicaid Subsidized Region EE Cost after Subsidies Max EE Cost “PLAY” plans Data Source: Aetna Group plan for 217 EE (silver), Kaiser Family Health Policy Cost Line 9
- 10. ACME’s Cost to Play Data Source: Aetna Group plan for 217 EE (silver), Kaiser Family Health $- $1,000.00 $2,000.00 $3,000.00 $4,000.00 $5,000.00 $6,000.00 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 EEPremiumCost Hourly Wage ExpandedMedicaid Subsidized Region EE Cost $1600/EE Policy Cost Line ACME wage cut off ACMECOST $2300/EE 10
- 11. ACME “ALL PLAY” ACME 2014 Forecast Down $110,000 Base Adjustment: -$ Net Sales 7,500,000.00$ Base Adjustment: -$ Cost of Goods Sold 6,100,000.00$ Gross Profit (Loss) 1,400,000.00$ Base Adjustment: 2012 HCP Cost 182,000.00$ Total Expenses 1,222,000.00$ Net Operating Income 178,000.00$ Owner's Tax 71,200.00$ After Tax Income (Loss) 106,800.00$ ACA Penalties: None -$ SG&A Expenses INCOME Tax EXCISE Tax ALL PLAY CASE ACME PBJ 12/31/2014 Financial Statements in U.S. Dollars Revenue Cost of Goods Sold Expand coverage $216,000 $106,000 11
- 12. ACME “PLAY with PT” ACME 2014 Forecast Down $65,000 Sales Decline $151,000 Base Adjustment: 1% decline (75,000.00)$ Net Sales 7,425,000.00$ Base Adjustment: save 8000 hours (88,000.00)$ Cost of Goods Sold 6,012,000.00$ Gross Profit (Loss) 1,413,000.00$ Base Adjustment: HCP 30% escalation 121,940.00$ Total Expenses 1,161,940.00$ Net Income 251,060.00$ Owner's Tax 100,424.00$ After Tax Income (Loss) 150,636.00$ ACA Penalties:None -$ SG&A Expenses INCOME Tax EXCISE Tax PLAY w/PART TIME CASE ACME PBJ 12/31/2014 Financial Statements in U.S. Dollars Revenue Cost of Goods Sold Reduce Hours Premium Increase 12 $216,000
- 13. ACME Asks “BUT WHY?” $- $1,000.00 $2,000.00 $3,000.00 $4,000.00 $5,000.00 $6,000.00 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 EEPremiumCost Hourly Wage ExpandedMedicaid Subsidized Region EE Cost $1600/EE Data Source: Aetna Group plan for 217 EE (silver), Kaiser Family Health Projected Policy Cost Line +30% EMPLOYERCOST 13
- 14. ACME “SOME Play” ACME 2014 Forecast Down $92,000 Sales Decline Reduce Hours Pay Max Fine Base Adjustment: 1% decline (75,000.00)$ Net Sales 7,425,000.00$ Base Adjustment: save 8000 hours (88,000.00)$ Cost of Goods Sold 6,012,000.00$ Gross Profit (Loss) 1,413,000.00$ Base Adjustment: 63FTE @ new cutoff (18,284.00)$ Total Expenses 1,021,716.00$ Net Income 391,284.00$ Owner's Tax 156,513.60$ After Tax Income (Loss) 234,770.40$ ACA Penalties37 FTE at $3000 each 111,000.00$ SG&A Expenses INCOME Tax EXCISE Tax "SOME PLAY" CASE ACME PBJ 12/31/2014 Financial Statements in U.S. Dollars Revenue Cost of Goods Sold New Cutoff $123,000 14
- 15. ACME Chooses ALL PLAY with Part Time AND RAISES PRICE by 6.5% Total COST 5.3% of Sales Price Increase 6.5% 15 Scenario Average Results: Owner’s NET = ($115,000) excluding any supply chain price increase.
- 16. RECAP • Play or Pay • Penalties • Price Increase • PED 16
- 17. ACME Steps to ACA Compliance
- 18. What the Law Really Says • Americans must purchase health insurance • Minimum standard • Costs less than 9.5% of their income • Employer fines 18
- 19. How Are the Feds Doing This? • Through 3 insurance markets: 1. Employer Group Plans 2. Expanded Medicaid 3. Govt Assisted Markets / Exchanges 19
- 20. BEST Employee Value • The best value will be expanded Medicaid • The second best will be the Exchange • Group plans 20
- 21. 3 Different Groups ACME Employs • Disadvantaged Wage Class – Minimum wage to 133% FPL ($15,281 W2) • Semi Skilled – 134% to 300% FPL (up to $34,470 W2) • Skilled and Professional – 301% FPL and Up (over $34,470 W2) 21
- 22. Groups and Markets Large EMP Groups BEST VALUE L1 (Disadvantaged Wage Class) Medicaid L2 (Semi Skilled) Exchange with Subsidy L3 (Skilled and Professional) Employer Group Plans 22
- 23. Where is Landfall? Large Employer PART TIME Large Employer FULL TIME P3: Safe Harbor L3: PLAY P2: Safe Harbor L2: PAY or PLAY L1: Medicaid Safe Harbor ACME Risk Exposure to IRS Fines is Directly tied to the L2 population 23
- 24. ACME Started to See the Problem W2 Income Small Employer <50FTE + Seasonal Large Employer 50+ FTE Group 3 >$34,470 S3 L3 Group 2 $15,282 to $34,470 S2 L2 Group 1 <$15,281 S1 L1 24
- 25. Large Employer Determination “Look Back” FTE <49FTE Test ERISA Affiliated Group Test Seasonal EE <120days Test OPTION 1: Maintain Small Biz Safe Harbor OPTION 2: GO TO Large Employer Group OR Is ACME Small? 25
- 26. $0.00 $2,000.00 $4,000.00 $6,000.00 $8,000.00 $10,000.00 $12,000.00 0 100 200 300 400 500 600 700 Series1 Hurricane Preparedness Paid Hours EarnedWage Medicaid Cutoff 300% FPL Cutoff Part Time Cutoff P3 P2 P1 L3 0 + + L2 L1
- 27. So ACME is Large, NOW What? LB “Look Back” FT EE >30hrs TEST PT EE <30hrs TEST EE W2 <15281 TEST OPTION 2 Safe Harbor OPTION 1 Pay or Play and 27
- 28. Paid Hours EarnedWage Medicaid Cutoff 300% FPL Cutoff Part Time Cutoff P3 P2 P1 L3 0 + + L2 L1 $0.00 $2,000.00 $4,000.00 $6,000.00 $8,000.00 $10,000.00 $12,000.00 0 100 200 300 400 500 600 700 Series1 Productiv Inc Example L3 9 P2 L2 35 128 L1 303 Current CENSUS
- 29. Data ACME MUST Use for Storm Tracking • Name • DOB • Hire DATE • Gender • Zip Code • YTD Hours paid • YTD Compensation • Statutory Notifications • Employment Status 29
- 30. Hurricane Preps: Storm Tracking L1 Reduce Wage S2: Change Control L3 Increase Wage P2 Reduce Hours L2 30
- 31. ACME Has an “AH HA” Moment • ACME can control the L2 Outflows but has only limited control of the Inflows • ACME must constantly monitor migrations of people between census blocks • L2 must be constantly checked 31
- 33. ACME CORP Structure HQ (Corporate) Location 1 Physical Plant, shop, store Location 2 Physical Plant, shop, store Location 3 Physical Plant, shop, store Property, Plant Equipment, an d Inventory Processes Core Business Functions (L3) Staff (L1, L2) 33
- 34. ACME Plant Location 1 Group Population Map 34
- 35. Think About Building a House 35
- 36. ACME Hires a General Contractor: “An L2S Safe Harbor Pilot” General Contractor Subcontractor Subcontractor 36
- 37. L2S SAFE HARBOR Structure HQ (Corporate) Location 1 Physical Plant, shop, store Location 2 Physical Plant, shop, store Location 3 Physical Plant, shop, store Property, Plant Equipment, an d Inventory Processes Core Business & Management Independent Subcontractor 37
- 38. ACME “L2S” ACME 2014 Forecast + $53,000 Scenario AVGs = ($115,000) L2S Admin Fee Market Share Up New Cutoff $269,120 38 $216,000 Base Adjustment: Market Share up 1.3% 97,500.00$ Net Sales 7,597,500.00$ Base Adjustment: 49 FTEs in S2 27,250.00$ Cost of Goods Sold 6,127,250.00$ Gross Profit (Loss) 1,470,250.00$ Base Adjustment: 63FTE @ new cutoff (18,284.00)$ Total Expenses 1,021,716.00$ Net Income 448,534.00$ Owner's Tax 179,413.60$ After Tax Income (Loss) 269,120.40$ ACA Penalties37 FTE move to S2 = SG&A Expenses INCOME Tax EXCISE Tax L2S Case ACME PBJ 12/31/2014 Financial Statements in U.S. Dollars Revenue Cost of Goods Sold
- 39. Accountability Instrument (Master Services Agreement) Partitioning Instrument Partitioning A Small Business Solution General Contractor “Process Controller” HOST L2S Inc TripartiteArrangement 39 1. Owner not Highly Compensated 2. Prime has no ownership in sub 3. Host has no ownership in Sub or Prime
- 40. Partitions • Tax ID (Separate Accounting) • No Common Ownership or Affiliated Group status • No Brother/Sister • No co-employment • ACA Safe Harbor <50 FTE’s • Statutory Obligations FICA/FUTA/SUTA/WC • Business Banking • Capital Financing • Payroll Functions • B2B Transactions (Invoicing/Payments) 40
- 41. HOMEBASE™ Payroll eBanking Notifications Client Mobile Accounting and Finance Tax and Insurance MRP “CimPull” Time & Attendance Remote Desktop 41