The Patient Protection and Affordable Care Act: What Employers Need to Know LIVE Webcast

Speaker Firms and Organization:
Truven Health Analytics
Thomas Halvorson
Analytic Consulting Manager, Practice Leadership
Krieg DeVault LLP
Patricia L. Beaty
Partner
Butler|Snow LLP
Michael W. Sheridan
Partner
WeiserMazars LLP
David Wasserstrum, CPA
Partner

Partner Firms:

Presented By:

WeiserMazars LLP

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January 14, 2014

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January 14, 2014

Thank you to our partner firms:

Truven Health Analytics delivers unbiased information, analytic tools,
benchmarks and services to the healthcare industry. Hospitals,
government agencies, employers, health plans, clinicians, and
pharmaceutical companies have relied on its solutions for over 30 years.
Truven Health Analytics combines deep clinical, financial and healthcare
management expertise with innovative technology platforms and
information assets to make healthcare better, collaborating with
customers to uncover and realize opportunities for improving quality,
efficiency, and outcomes. Truven Health Analytics owns some of the
most trusted, proven brands in healthcare such as Micromedex, Action
OI and Advantage Suite. Truven Health Analytics employs approximately
2000 people worldwide and has its principal offices in Ann Arbor, Mich;
Chicago; and Denver. For more information, please visit
www.truvenhealth.com.

For clients throughout the Midwest and across the country,
Krieg DeVault provides clear, practical legal advice that
takes in the big picture without losing sight of the details.
That's how they approach legal challenges and how they
deliver solutions that are focused on your needs, your
business and your world. Krieg DeVault was founded in
Indianapolis over 130 years ago, but their commitment to
listening to their clients has not. Client satisfaction and
loyalty have allowed them to grow from a two-lawyer
general practice in the mid-1870s to their current status as
a premier business-focused law firm. Financial institutions,
global manufacturers, national healthcare providers,
successful organizations of various sizes and market
focus, as well as individuals, all rely on Krieg DeVault for
solutions that create success.

6

January 14, 2014

Thank you to our partner firms:

WeiserMazars LLP

Butler|Snow LLP, is a full-service law firm with more than 250
attorneys representing local, regional, national and international
clients from 15 offices globally. Ranked as one of America's Top
100 law firms in the BTI Power Rankings, Butler Snow is
recognized as one of the nation's top law firms for client service.
The firm was also named by BTI on the Short List of Go-To Law
Firms and also rated as a Hidden Gem. For more information,
visit www.butlersnow.com or
follow
Butler
Snow
on
twitter@Butler_Snow.

Since 1921, WeiserMazars LLP has provided a unique
combination of foresight and experience when fulfilling client
needs in accounting, tax and advisory services. WeiserMazars'
team of over 100 partners and approximately 650 professionals
is based out of six U.S. offices, Israel and the Cayman Islands.
As the independent U.S. member firm of the Mazars Group - a
prominent international accounting, audit, tax and advisory
services organization with nearly 14,000 professionals in more
than 70 countries on six continents - WeiserMazars represents
clients of all types, including owner-managed businesses,
complex, multi-national organizations and high net worth
individuals in a multitude of industries.

7

January 14, 2014

Brief Speaker Bios:
Thomas Halvorson
Tom Halvorson is a Consulting Manager within the Practice Leadership group at Truven Health Analytics, specializing in statistical
analysis and financial modeling. With a degree in Actuarial Mathematics from the University of Michigan, Tom assists large employers
and health plans by designing plans and programs to affect positive change in their member populations. In the past, Tom has
designed models to quantify the implementation of Reference-Based Pricing to promote transparency and consumerism, utilizing
Truven Health's MarketScan dataset and proprietary algorithms. Today, he uses his technical abilities to create models that help
employers, health plans, and brokers assess both the cost impact and competitive effects of the Affordable Care Act.

Patricia L. Beaty
Patricia Beaty concentrates her practice in the area of employee benefits and executive compensation. She has experience in the
design, implementation and administration of single employer and multiemployer defined benefit plans as well as money purchase,
profit sharing, stock bonus, employee stock ownership, performance plans, non-qualified deferred compensation plans, 401(k) and
403(b) plans, Section 125 "cafeteria" plans and Voluntary Employees' Beneficiary Association trusts (VEBAs). Ms. Beaty also audits
plans for compliance failures and represents clients before the Internal Revenue Service and the Department of Labor including audits
by both agencies and correction of operational failures under the IRS Employee Plans Compliance Resolution System and fiduciary
issues under the Department of Labor's Voluntary Fiduciary Correction Program. She also handles issues relating to ERISA, QDROs,
COBRA, HIPAA, new comparability or "cross tested" plans, cash balance plans and recent legislation affecting employee benefits. Ms.
Beaty also speaks on and advices clients with respect to the Patient Protection and Affordable Care Act.

8
January 14, 2014

Brief Speaker Bios:
Michael W. Sheridan
Michael W. Sheridan is a partner in the Nashville, Tennessee office of Butler|Snow LLP. He is a frequent speaker on employer
decision-making in implementation of the Patient Protection and Affordable Care Act ("ACA"). In addition to working with employers
with respect to the ACA, Sheridan's corporate and business practice has an emphasis on financial services and payments companies,
including payment systems and information protection and privacy issues. Prior to joining Butler|Snow, Michael served as Executive
Vice President, General Counsel and Secretary of Minneapolis-based Ceridian Corporation, an international human resources, payroll,
benefits administration and payments company. From 1996 to 2007, he was General Counsel for Ceridian's subsidiaries, Comdata
Network, Inc. and Ceridian Stored Value Solutions, Inc., leading providers of payment, stored value and gift card products to the
transportation, retail and other industries. Michael holds a bachelor of arts degree, cum laude, from Vanderbilt University and received
his doctor of jurisprudence with honors from the University of Tennessee College of Law where he served as managing editor of the
Tennessee Law Review.
David Wasserstrum possesses over 35 years of experience in public accounting. He specializes in providing consulting, technical and
compliance services in the areas of deferred compensation, employee benefits, and executive compensation. David's work includes
assisting clients with all pension, compensation, and employee benefit issues, such as qualified retirement plan self-audits,
nonqualified deferred compensation plan issues, equity based compensation including stock options and restricted stock, separation
pay plans, health and welfare plan issues, merger and acquisition due diligence, services for not-for-profit organizations, IRS
examinations, compliance programs, and DOL compliance programs. David also has extensive teaching experience. For over 20
years, David has served as an Associate and/or an Adjunct Professor for New York University, C.W. Post University, and The Stan
Ross School of Accountancy at Baruch College, all at the graduate school level.

► For more information about the speakers, you can visit:

http://http://www.knowledgecongress.org/speaker_2013_Patient_protection_act.html

9
January 14, 2014

While the Internal Revenue Services (IRS) has deferred some of the reporting and penalty provisions of the Patient
Protection and Affordable Care Act ("PPACA", as amended), employers need to start getting ready as the penalties for
noncompliance could relating to employers' be significant. To help business owners/employers understand how PPACA’s
provisions apply to them, the Knowledge Group has gathered a panel of distinguished practitioners and thought leaders to
address important topics and issues related to PPACA in a substantial two-hour live webcast.
The faculty will discuss the following topics:
•Brief Background of PPACA
•Employer Shared Responsibility: The Penalties
•Small Business Health Care Tax Credit
•Form W-2 Cost of Coverage Reporting
•Health Insurance Reforms
•Automatic Enrollment
•Costs and Access
•Best Practices and Guidance
•Latest regulatory updates
10
January 14, 2014

Featured Speakers:

SEGMENT 1:

SEGMENT 2:

Thomas Halvorson
Analytic Consulting Manager,
Practice Leadership

Patricia L. Beaty
Partner
Krieg DeVault LLP

SEGMENT 3:

SEGMENT 4:

Michael W. Sheridan
Partner
Butler|Snow LLP

Partner
WeiserMazars LLP

WeiserMazars LLP

11
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

Introduction
Tom Halvorson is a Consulting Manager within the Practice Leadership group at Truven Health Analytics,
specializing in statistical analysis and financial modeling. With a degree in Actuarial Mathematics from the
University of Michigan, Tom assists large employers and health plans by designing plans and programs
to affect positive change in their member populations. In the past, Tom has designed models to quantify
the implementation of Reference-Based Pricing to promote transparency and consumerism, utilizing
Truven Health's MarketScan dataset and proprietary algorithms. Today, he uses his technical abilities to
create models that help employers, health plans, and brokers assess both the cost impact and
competitive effects of the Affordable Care Act.

12
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

•
•
•

Signed into law in March 2010 by President Obama
Describes new mandates and associates penalties
in all corners of the healthcare arena
Has survived a number of challenges:
 Presidential Election
 Supreme Court
 Over 30 votes to repeal the act in Congress

The ACA is here to stay; here is what you need to
know…

13
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

Avoid surprises lurking after 2014

14
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

EXCHANGES/MARKETPLACE
•

ACA called for the creation of an Insurance Marketplace in each of the States & D.C. (often called
“Public Exchanges”)
 Leverage existing health plans to provide a menu of benefit options for individuals
 Exchanges also created for small (<50 employees) employers
 Slated to be available for large employers beginning in 2018

15
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

MARKET TRENDS: SHIFTING RISK
•

The uncertainty and flux created by the ACA has created opportunities for parties to share risk and
potential rewards

16
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

WHAT THIS MEANS TO INDIVIDUALS
•

•
•
•

Individuals must be insured or face penalties
 Greater of $95 per individual in household or 1% of household income in 2014
 Exemptions have been granted for a number of reasons
 Currently, failure to pay this penalty will only lead to garnished tax refunds
Generous federal subsidies should make insurance for low income individuals “affordable”
 Those ineligible for subsidies may see premium increases in individual Exchange market (or
not!)
Individuals with insurance will see reduced cost sharing (none) on preventive services,
contraception, and other screenings
Young adults can remain on their parents plan
regardless of education-status until the age of 26

17
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

18
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

WHO IS TRUVEN HEALTH?
HEALTHCARE
Information and decision support tools for healthcare and
information professionals, researchers, scientists,
consumers
OVER 200 EMPLOYERS
GE, Verizon, GM, Boeing,
Eastman Chemical, State
of Tennessee

OVER 100 HEALTH
PLANS
CIGNA, HCSC.

OVER 3,000 HOSPITALS
Triad, Cedars-Sinai,
MSHA

FEDERAL GOVERNMENT
CMS, AHRQ, CDC,
SAMHSA, VA, DOD

PHARMA
All major U.S.
pharma companies

OVER 25 STATE
GOVERNMENTS
North Dakota, South Carolina,
Georgia
19
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

In 2012, we published a white paper on the financial
implications of PPACA based on our data-driven model
http://interest.truvenhealth.com/forms/EMPPayorPlayWhitePaper

20
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

AFFORDABILITY TEST & MINIMUM ACTUARIAL VALUE
•

In addition to offering essential benefits, benefit options must meet a minimum actuarial value
(MAV) of 60%

•

Employees must be offered at least one option that satisfies MAV, and has total employee premium
contributions no more than 9.5% of the employee’s W-2 wage

•

This affordability test is applied only to employee-only coverage
 This opens up new strategies for spouses and dependent child coverage

21
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

•
•
•

•

Spouses typically cost more than employees (34%
more in 2011**)
Many spouses enjoy coverage through their own
employer’s plan
Financial necessity has compelled many
employers to reevaluate spouse and dependent
subsidy levels in the past few years
Some employers are beginning to implement
spousal surcharges or exclusions for spouse’s
with own employer coverage

* NBGH/Towers Watson. 2013. Reshaping Healthcare: Best Performers Leading the Way
** 3q12 MarketScan Semi Annual Employer Norms Report , p. 44

22
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

PARTIAL “PLAY” STRATEGY
•

Employers with low-wage employees are re-examining group health premium contribution rates
 Low cost plan may fail Affordability test for low wage employees
 These employees will be eligible for subsidy on Exchange
 The 3,000 penalty may be less than the net healthcare cost to the employer
 The employee may have lower premium costs, post subsidy, on the Exchange
 Potential “win-win” for employer and employee

23
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

HOUSEHOLD MODELING


Eddie and his family live in Spokane, WA and Eddie
works at a local retailer

•

Eddie and his family live in Philadelphia, PA and Eddie works at a local retailer. His wife, Rachel,
works part-time at a nearby gas station

•

Combined, the family has a household income of $38,000 (163% of Federal Poverty level for a family
of 4)

•

Eddie has elected the lowest premium available in the CDHP at $2400 annually
 Eddie passes the 9.5% affordability test and is ineligible for subsidies on the Public Exchange

•

Truven Health’s modeling at the household level projects that Eddie would pay over $11,000 in
premiums for a Silver Exchange plan
 With subsidies, the same Silver plan would cost Eddie $1150
 With subsidies, a Bronze plan would be free!
24
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

EMPLOYER CASE STUDY
•

•

•

CHALLENGE: Determining the financial
outcomes of both group health and Public
Exchanges for a large employer and their
employees – for the next 8 years
ACTION: We utilized the PPACA Impact
Model to aggregated employee-level
household information, allowing for granular
evaluation of business units and plan risk
migration
RESULT: Determined that lower wage
individuals were also lower risk, and so partial
Exchange migration was not beneficial for this
employer

“These decisions have huge employee relations and
retention implications and a misstep in approach
could have serious adverse impact on business
operations.”
25
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

Beginning January 2018 a non-deductible excise tax for
high-cost “Cadillac” plans will be levied on both
insured and self-funded employers
40% tax applied to accrual / premium rates in
excess of statutory thresholds. Premium
thresholds for active employees:
$10,200 for individual coverage
$27,500 for family coverage
These thresholds are increased for retiree groups
by $1,650 for individual coverage, and $3,450
for family
In subsequent years, these thresholds are
indexed to CPI
It is likely healthcare trends exceed standard
inflation

26
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

27
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

28
January 14, 2014

SEGMENT 1:
Thomas Halvorson
Practice Leadership

Employers offering group health will pay $63 per member in 2014
for Transitional Reinsurance and $2 per member for PCORTF

Large (50+ Employees) electing to not offer group health will
have to pay a $2,000 penalty for every full time employee

Exiting group health may also have a profound impact on the overall
compensation structure of employers, affecting their ability to
recruit and retain talent

Employers that are currently very engaged in total workforce
management may find data hard to come by if claims are
paid via Public Exchange
29
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Introduction
Patricia Beaty concentrates her practice in the area of employee benefits and executive compensation.
She has experience in the design, implementation and administration of single employer and
multiemployer defined benefit plans as well as money purchase, profit sharing, stock bonus, employee
stock ownership, performance plans, non-qualified deferred compensation plans, 401(k) and 403(b)
plans, Section 125 "cafeteria" plans and Voluntary Employees' Beneficiary Association trusts (VEBAs).
Ms. Beaty also audits plans for compliance failures and represents clients before the Internal Revenue
Service and the Department of Labor including audits by both agencies and correction of operational
failures under the IRS Employee Plans Compliance Resolution System and fiduciary issues under the
Department of Labor's Voluntary Fiduciary Correction Program. She also handles issues relating to
ERISA, QDROs, COBRA, HIPAA, new comparability or "cross tested" plans, cash balance plans and
recent legislation affecting employee benefits. Ms. Beaty also speaks on and advices clients with respect
to the Patient Protection and Affordable Care Act.

30
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Employer Shared Responsibility – the “Play or Pay” Provisions
•
•

Beginning January 1, 2015, employers must choose between providing health coverage to full-time
employees (FTEs) at minimum cost and benefit levels, or the assessment of a federal tax penalty
Only “applicable large employers” as defined in the ACA are subject to the penalty assessment;
employers with fewer than 50 FTEs are exempt

31
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Employer Shared Responsibility the “Play or Pay” Provisions
•
•

Both full-time and part-time employees must be included in calculating employer size for application
of penalty provisions
Employee is considered a full-time employee if working 30 or more hours per week

32
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

•

Who are Employees?
 Not defined in the ACA
 IRS guidance provides that “common law employees” are employees
 Will not include a leased employee (414(n)), a greater than 2% S Corporation shareholder, a
partner in a partnership or a sole proprietor
 Consider consequences if independent contractor later determined to be common law employee

33
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

•
•
•
•
•

How Do You Define Who is a Full Time Employee?
Full-time employee is one who works, on average, 30 or more hours per week.
Because determined on monthly basis, may use monthly equivalent of 130 hours per month
Hours are generally hours for which paid or entitled to payment
Definition is similar to the hours of service definition used for purposes of determining vesting under a
qualified retirement plan

34
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

•
•

For hourly employees, determination of hours is relatively simple – count hours
For those for whom hours are not maintained (salaried employees) - may use equivalencies:
 Eight hours per day or
 Forty hours per week
 Employer determines which to use and for which categories
 May not use these equivalencies if it does not reflect actual hours worked – 12 hours shifts in
hospitals for example

35
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Employer Shared Responsibility
Continued
Determining Who Are Your
Full-Time Employees
Penalties

36
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

•
•

Employer Shared Responsibility Determining Full Time Employees
Why?

Potential Penalty Assessment
Determination has been made that an employer is an “applicable large employer” for the purpose of
whether or not the employer may become subject to penalties.
 Employer will need to determine which of its employees are considered “full-time employees” for
the purpose of applying the penalty rules, whether any penalties apply for a particular month and
the amount.

37
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Hours of Service
•

Penalties are calculated based on the number of “full-time employees”.
 Imperative that an employer understand which of its employees are considered “full-time” and
for which months.
 Statute defines a full-time employee as an employee who was employed on average at least 30
hours of service per week or 130 hours of service per calendar month.
 What is an hour of service?
• Each hour for which the employee is paid, or entitled to payment, for the performance of
duties for the employer; AND

38
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Hours of Service
• Each hour for which the employee is paid, or entitled to payment, on account of a period of
time during which no duties are performed due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty military duty, or leave of absence (uncapped except in
case of employer that is an educational organization, in which case cap is 501 hours)
 must also credit certain unpaid leaves of absence
 FMLA, USERRA, jury duty (averaging method)
• Hourly Employees
• Must calculate actual hours of service from records of hours worked and for non-worked
hours for which employee entitled to payment

39
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Hours of Service
• Non-Hourly Employees
 3 options
1. same as hourly employees
2. equivalency method of 8 hours of service for each day the employee is entitled to
payment (hours worked or not worked such as vacation, etc.)
3. equivalency method crediting 40 hours of service per week for each week the employee
is entitled to payment (hours worked and not worked such as vacation, etc.)

40
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Hours of Service
• May apply different methods for different classifications of non-hourly employees so long
as classifications are reasonable and consistently applied.
• May change method for each calendar year.
• IRS has stated that an employer may not use an equivalency method if the result is to
substantially understate an employee’s hours of service in such a way as to cause an
employee not to be treated as full-time.
 Example: nurse works three days (12 hours per day) a week, actual hours are 36
per week, using 8 hours for each day results in only 24 hours which is less than the
30 for full-time status.
NOTE: All hours of service performed for all entities treated as a single employer under
the controlled and affiliated service group rules must be taken into account.

41
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Hours of Service
•

Additional guidance expected – IRS has requested comments on how to determine fulltime status where an employee’s hours are limited (airline pilots), not coordinated with
hours worked (commissioned sales people) or untracked (adjunct professors). Until more
guidance issued must use a reasonable method. IRS has stated that it would be
unreasonable to not consider class preparation time for adjunct professors and travel time
for a traveling salesman compensated on commission.

42
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Measurement Periods
•

Applicable Time Periods
 Impracticable to determine which employees are “full-time” in real time for purpose of providing
qualified health coverage - so IRS came up with system using a measurement, administrative
and stability period for purpose of determining whether an employee is full-time for the purpose
of the penalties.

43
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Measurement Periods
•
•
•

Look-back period during which you calculate an employee’s hours of service and determine
whether they averaged 30 or more hours per week during that period.
Must be 3 to 12 consecutive calendar months in length.
New employees who are reasonably expected at their start date to be employed an average of
30 hours of service per week must be offered coverage at or before the conclusion of the
employee’s initial 3 months of employment in order for the employer to avoid being subject to a
penalty for that 3-month period.

44
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Measurement Periods
•

Initial Measurement Period for new variable hour and seasonal employees who have not been
employed for one full standard measurement period. For now, seasonal employees are treated
as variable hour employees.
 Requirement:
 Must begin between the employee’s start date and the first day of the next month.
 The IMP and the administration period combined cannot extend beyond the last day
of the first month following the employee’s 1-year anniversary (13 months and a
fraction of a month).

45
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Measurement Periods
• Standard Measurement Period for on-going employees who are employees who have been
employed for at least one full standard measurement period.
 3 to 12 months in length
 Must be uniform for all employees within applicable category
 Permitted categories: collectively bargained and non-collectively bargained, salaried
and hourly employees, employees covered by different collective bargaining
agreements and employees in different states.

46
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Measurement Periods
•

Stability Period

Period for which an employee’s status as a full-time or part-time employee, based on hours
during the measurement period, is locked-in.

Status cannot be changed during this period regardless of the number of hours the
employee works during the stability period.

Stability period begins at the end of the measurement or administrative period.

47
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Measurement Periods
•

•

Employee averages 30 or more hours per week:

Stability period must be the longest of: (a) 6 months; (b) length of the initial measurement
period; or (c) the length of the standard measurement period.

Length must be the same for new employees and ongoing employees.
Employee averages less than 30 hours per week:

Stability period for ongoing employees can be no longer than the standard measurement
period.

Stability period for new employees (VH and Seasonal) can be no longer than the initial
measurement period and the employee’s status must be redetermined during the first
overlapping standard measurement period.

48
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Measurement Periods
•

Administrative Period

Optional – not required to have one.

Begins at the end of the measurement period and ends before the beginning of the next
stability period.

The period of time during which an employer calculates the number of hours during the
measurement period, provides enrollment materials and conducts the open enrollment
process.

Cannot exceed 90 days.

49
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Examples

•

SMP = October 15 – October 14

•

SP = January 1 – December 31

•

AP = October 14 – December 31

•

Employee A averaged 30 hours of service/wk during SMP 10/15/15 -10/14/16 and all prior SMPs.
Employee B averaged less than 30 hrs. during SMP 10/15/15 - 10/14/16 but averaged 30 hrs. during
all prior SMPs.

•

Employee A is an on-going, full-time employee for 1/1/17 - 12/31/17 SP and must be offered
coverage for that period.

•

Employee B is also an on-going employee for the 1/1/17 - 12/31/17 SP but is not considered a fulltime employee for that period and employer not required to offer coverage for that period.

50
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

•

Examples

Same as prior example
 12 mo. IMP with 1 and partial mo. AP
 Employee C hired 5/10/15
 IMP 5/10/15 - 5/9/16; AP 5/10/16 - 6/30/16; SP 7/1/16 - 6/30/17
 Employee C averages 30 hrs/wk during IMP. Employee C must be offered coverage for the
entire SP.
 Employee C would be tested again by looking at hours for the 10/15/15 - 10/14/16 (the first SMP
that begins after C’s start date).

51
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

•
•
•
•
•
•
•

Examples

IMP - begins on start date, length 6 months
AP - end of IMP through end of 1st month beginning after end of IMP
SP - January 1-June 30
Employee D hired 10/10/15
IMP 10/10/15 - 4/9/16; AP 4/10/16 - 5/31/16; SP 6/1/16 - 11/30/16
Employee D averages 30 hr/wk during IMP must be offered coverage for the entire SP 6/1/16 11/30/16.
Employee D must be tested again by looking at hours during the period 1/1/16 - 6/30/16 (first SMP
that begins after start date)

52
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

•
•
•
•
•
•

Examples

Continue with Employee D – same facts
Employee D averages <30 hrs/wk 1/1/16 - 6/30/16
Employee D not considered full-time for the SP 7/1/16 - 12/31/16
Employee D must continue to be offered coverage through 11/30/16 (the end of the initial SP based
on the IMP).
Employee D need not be offered coverage for the SP 7/1/16 - 12/31/16 which means he need not be
covered in December of 2016.
He would need to be retested during MP 7/1/16 – 12/31/16 to determine if he receives coverage
1/1/17.

53
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

•

Change in Status

What happens where an employee has a change in employment status?
 If an on-going employee’s (employed for one full standard measurement period) status changes
before the end of a stability period, the change will not affect the employee’s status as full-time
or not full-time for the remainder of the stability period.
 If a new employee has a status change during his initial measurement period such that had the
employee started his employment under this new status he would have been reasonably
expected

54
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Change in Status
•

to avg. 30 or more hours per week and therefore would not have been treated as a variable hour
employee, the employee will be considered full-time on:
1. the first day of the 4th month following the change in employment status, or
2. if earlier and the employee averages 30 or > hours per week during the initial
measurement period, the first day of the 1 st month following the end of the IMP (including any
associated administrative period).

55
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Change in Status: Example
•

Example: Employer A, 12 mo. IMP begins on date of hire, AP=end of IMP through end of the first
calendar month beginning on or after the end of the IMP. John is a new variable hour employee
hired 5/10/15.
 IMP would be 5/10/15-5/10/16
 AP would be 5/10/16-6/30/16
Effective 9/15/2015 John is promoted to a position where he is reasonably expected to work at least
30 hours per week.

56
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Change in Status: Example
•
•
•

The first day of the 4th month following John’s change in status is January 1, 2016;
The first day of the month following John’s IMP and its associated AP is July 1, 2016 (IMP 5/10/155/10/16, AP 5/10/16-6/30/16).
Because January 1, 2016 is before July 1, 2016, John will be treated as a full-time employee for
penalty purposes as of January 1, 2016.

57
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Rehired Employees
•
•
•

Two methods of determining whether the employee will be a continuing employee and thus retain his
status as full-time or not full-time upon re-employment:
1. 26 week break – if the employee had at least 26 consecutive weeks without an hour of service he
can be treated as a new employee.
2. Rule of Parity – must elect (not sure how yet) if want to use a break shorter then 26 weeks

58
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Rehired Employees
•

if the employee’s number of weeks during which no services were performed is at least 4 weeks long
and if it exceeds the number of weeks he was employed immediately preceding the period during
which no services were performed, the employee can be treated as a new employee.

59
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Special Unpaid Leaves of Absence
•

Averaging rule for “Special Unpaid Leave” – FMLA, USERRA and Jury Duty 2 Options:
1. Average hours by excluding break; or
2. Impute hours during the break at a rate equal to the average weekly hours of service for
weeks that are not part of the break.

60
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Educational Organizations
•
•

•

Averaging rule, similar to special unpaid leave, to prevent periods during which classes are not in
session from artificially reducing an employees hours during a measurement period.
2 Options for Employer:
1. exclude any break when calculating hours during the measurement period; or
2. impute hours for the break at rate equal to the average weekly hours for weeks other than the
break.
Note: An educational organization is not required to take into account more than 501 hours of
service for all breaks during a single calendar year.

61
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Employer Shared Responsibility Penalties for Not Playing
•

Decide Not to Offer Minimum Essential Coverage to Employees
 If one or more full-time employees receive a premium subsidy through an exchange, the
employer is subject to a monthly penalty equal to the number of full-time employees in excess of
30 multiplied by 1/12 of 2,000 or $166.67 for each applicable month.

62
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

•

Offering Coverage that is Unaffordable or Below Minimum Value
 If one or more full-time employees receive a premium subsidy through an exchange and the
employer offers coverage but that coverage is either unaffordable or does not provide minimum
value, the employer is subject to a monthly penalty equal to the number of full-time employees
receiving a subsidy multiplied by 1/12 of $3,000 or $250 for each applicable month.
 This penalty is subject to cap equal to the penalty the employer would have been
assessed if no coverage offered.
 No penalty if employer provides a free choice voucher to employees for whom coverage is
unaffordable

63
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Employer Shared Responsibility Considerations in Deciding to Play or Pay
Penalties for Not Playing
•

Employees who are offered employer coverage but who do not enroll may be eligible to receive
a premium subsidy if either:
 Their employer coverage is unaffordable, or
 Their employer coverage does not provide minimum value

64
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Penalties for Not Playing
•
•

Employer provided coverage is unaffordable if the employee’s cost of self-only coverage exceeds
9.5% of their household income – employee’s W2 under IRS safe harbor.
Employer provided coverage does not provide minimum value if it pays for less than 60%, on
average, of covered health care expenses.

65
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Examples
•

Large employer with 50 full-time employees unchanged throughout the plan year:

Employer does not offer health coverage to its employees.

No employee obtains a premium credit for exchange coverage.

Penalty Amount = $0

66
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Examples
•


Employer does not offer minimum essential health coverage to its employees.

Three full-time employees obtain coverage through the exchange and a premium credit.

Penalty Amount = $40,000 for the plan year
(50 full-time employees minus 30) * $2,000

67
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Examples
•


Employer offers coverage to its employees.

Three full-time employees receive a premium credit for exchange coverage.

Penalty Amount = $9,000
o
Lesser of:
−
3 * $3,000 = $9,000; or
−
(50-30) * $2,000 = $40,000

68
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Other than the Penalties
•
•
•
•
•

Employees have come to expect certain benefits
 Recruiting, retention, motivation
Gross up wages to combat loss of coverage
 May need to gross up more to cover tax for employee
Penalties will go up and are not tax deductible
Law is new, complex and still changing
Employee Distractions

69
January 14, 2014

SEGMENT 2:
Patricia L. Beaty
Partner
Krieg DeVault LLP

Disclaimer
•

These slides and the accompanying presentation are for educational purposes only and are not
intended, and should not be relied upon, as legal advice.
Patricia L. Beaty, Esq.
Krieg DeVault, LLP
One Indiana Square, Suite 2700
Indianapolis, IN 46204
pbeaty@kdlegal.com
(317)238-6278
KD5929832v1pbeaty@kdlegal.com

70
January 14, 2014

SEGMENT 3:
Michael W. Sheridan
Partner
Butler|Snow LLP

Introduction
Michael W. Sheridan is a partner in the Nashville, Tennessee office of Butler, Snow, O'Mara, Stevens & Cannada,
PLLC. He is a frequent speaker on employer decision-making in implementation of the Patient Protection and
Affordable Care Act ("ACA"). In addition to working with employers with respect to the ACA, Sheridan's corporate
and business practice has an emphasis on financial services and payments companies, including payment
systems and information protection and privacy issues. Prior to joining Butler|Snow, Michael served as Executive
Vice President, General Counsel and Secretary of Minneapolis-based Ceridian Corporation, an international
human resources, payroll, benefits administration and payments company. From 1996 to 2007, he was General
Counsel for Ceridian's subsidiaries, Comdata Network, Inc. and Ceridian Stored Value Solutions, Inc., leading
providers of payment, stored value and gift card products to the transportation, retail and other industries. Michael
holds a bachelor of arts degree, cum laude, from Vanderbilt University and received his doctor of jurisprudence
with honors from the University of Tennessee College of Law where he served as managing editor of the
Tennessee Law Review.
71
January 14, 2014

SEGMENT 3:
Michael W. Sheridan
Partner
Butler|Snow LLP

Treasury Department’s July 2, 2013
Delay of Employer Shared Responsibility Provision
•

•

Delay did NOT postpone:
 Other ACA provisions:
 The individual mandate – still effective January 1, 2014
 Roll-out of federal and state insurance marketplaces or exchanges
 Potential tax subsidies for individuals
 New fees and taxes (i.e., PCORI, reinsurance fee, health insurer tax, Medicare tax, etc.
BUT – marketplaces limited in ability to verify an applicant’s:
 Income
 Insurance coverage offered through employer

72
January 14, 2014

SEGMENT 3:
Michael W. Sheridan
Partner
Butler|Snow LLP

Individual mandate

73
January 14, 2014

SEGMENT 3:
Michael W. Sheridan
Partner
Butler|Snow LLP

The Individual Mandate
•

•

•
•

Supreme Court upheld on June 28, 2012
(National Federation of Independent Business
v. Sebelius)
Effective January 1, 2014, individuals must
have minimal health coverage or pay an
annual penalty
Penalty: Greater of $ amount or specified % of
income
Question: Is penalty substantial enough to
encourage healthy and/or younger persons to
obtain health coverage?

74
January 14, 2014

SEGMENT 3:
Michael W. Sheridan
Partner
Butler|Snow LLP

•
•
•

§5000A of the Internal Revenue Code (§1501(a) of the Affordable Care Act)
Final Rule issued August 27, 2013
General Rule: Individuals must pay a “shared responsibility payment” for each month a person (or a
person’s dependent) does not have “minimum essential coverage” (MEC)

75
January 14, 2014

SEGMENT 3:
Michael W. Sheridan
Partner
Butler|Snow LLP

Exempt Individuals
•Individuals who lack access to “affordable” coverage are exempt
 For year 2014: coverage costing taxpayer 8% or less of household income is considered
affordable
•Short coverage gap exemption
 <3 full calendar months
•Retirees and COBRA eligible persons
•Hardship Exemptions
 Persons whose policies were cancelled in 2013
•Native American Tribes

76
January 14, 2014

SEGMENT 3:
Michael W. Sheridan
Partner
Butler|Snow LLP

Penalty Amounts
 (a) 1% of household income in excess of applicable filing threshold, increasing to 2.5% in 2016;
 (b) $95 per uninsured adult, increasing to $695 in 2016
•Under (a), liability could not exceed national average premium for bronze coverage
•Under (b), liability for uninsured minor dependents is ½ that of adults, though penalties would not exceed
300% of penalty for a single adult
•No Escape for Liability for Dependents: Even if a taxpayer does not claim the dependent or the other
parent has a legal obligation to provide health coverage (e.g., pursuant to terms of divorce)

77
January 14, 2014

SEGMENT 3:
Michael W. Sheridan
Partner
Butler|Snow LLP

Exchanges
or
marketplaces

78
January 14, 2014

SEGMENT 3:
Michael W. Sheridan
Partner
Butler|Snow LLP

Exchanges or Marketplaces
•
•

Insurance marketplace where individuals and small businesses may purchase health insurance
which meets the minimum ACA requirements
Purpose: to assist individuals with the purchase of qualified health coverage
 Subsidies will be available for individuals to purchase insurance:

Household Size

79
January 14, 2014

SEGMENT 3:
Michael W. Sheridan
Partner
Butler|Snow LLP

•
•
•
•

Employers must have provided notice of Marketplace by Oct. 1, 2013 (Dept. of Labor Tech. Release
2013-02)
Administered by the government
 States or Federal Government
Health Plans provided by private insurers and non-profit organizations
Enrollment began October 2013

80
January 14, 2014

SEGMENT 3:
Michael W. Sheridan
Partner
Butler|Snow LLP


*Source: New York Times, October 27, 2013, §1 at 16. Updated December 11, 2013.
Data based on Department of Health and Human Services Office of the Assistant Secretary for Planning and Evaluation Issue Brief:
Health Insurance Marketplace December 2013 Enrollment Report

81
January 14, 2014

SEGMENT 3:
Michael W. Sheridan
Partner
Butler|Snow LLP

Small Business Health
Options Program (SHOP)
Marketplace

82
January 14, 2014

SEGMENT 3:
Michael W. Sheridan
Partner
Butler|Snow LLP

Small Business Health Options Program (SHOP) Marketplace
•
•
•

Available now to employers with 50 or fewer Full-time Equivalent Employees (FTEs)
 January 1, 2016 : available for businesses with 100 or fewer FTEs
Generally required participation rate of SHOP plan: 70%, but varies
 6 states require 75% participation rate; Tennessee requires 50%
Online SHOP enrollment delayed until November 2015
 Direct enrollment process in effect for 2014 plan year through an agent or broker

83
January 14, 2014

SEGMENT 3:
Michael W. Sheridan
Partner
Butler|Snow LLP

•

•

•

In 2014: Employee choice model delayed in federally-operated SHOP states
 Multiple plan offerings for SHOP enrollees optional in 2014, although most state-run models
offer multiple plan offerings
In 2015 and following years:
 SHOP must offer employee choice of all plans in a metal level
 Additional options may be made available to employers by entity operating SHOP exchange
Employers choose among metal levels of premium contribution:
 Bronze (60%)
 Silver (70%)
 Gold (80%)
 Platinum (90%)

84
January 14, 2014

SEGMENT 3:
Michael W. Sheridan
Partner
Butler|Snow LLP

•

Tax Credit: For Tax Year 2014, small business tax credit available only for plans purchased in SHOP
Marketplace
 Fewer than 25 FTE’s
 This credit will only be available for a 2-year consecutive period
 Maximum Tax Credit rate for years 2014 and beyond: 50% of cost to employer (35% for taxexempt employers)
 Credits decrease as groups size and employee wages increase

85
January 14, 2014

SEGMENT 4:

WeiserMazars LLP

Partner
WeiserMazars LLP

Introduction
David Wasserstrum possesses over 35 years of experience in public accounting. He specializes in
providing consulting, technical and compliance services in the areas of deferred compensation, employee
benefits, and executive compensation. David's work includes assisting clients with all pension,
compensation, and employee benefit issues, such as qualified retirement plan self-audits, nonqualified
deferred compensation plan issues, equity based compensation including stock options and restricted
stock, separation pay plans, health and welfare plan issues, merger and acquisition due diligence,
services for not-for-profit organizations, IRS examinations, compliance programs, and DOL compliance
programs. David also has extensive teaching experience. For over 20 years, David has served as an
Associate and/or an Adjunct Professor for New York University, C.W. Post University, and The Stan Ross
School of Accountancy at Baruch College, all at the graduate school level.

86
January 14, 2014

SEGMENT 4:

WeiserMazars LLP

Partner
WeiserMazars LLP

Special Considerations under the ACA
•

Minimum Essential Coverage defined

•

Controlled Groups

•

Employees inside and outside the United States

•

Variable and seasonal employees

•

Multi-employer plans

•

PCORI Fees

•

STRATEGIES to REDUCE COST of EMPLOYER PROVIDED BENEFIT PLANS

87
January 14, 2014

SEGMENT 4:

WeiserMazars LLP

Partner
WeiserMazars LLP

Minimum essential coverage
• Beginning in 2014, all US citizens and legal residents will be required to have “minimum essential
coverage“ (“MEC”) for themselves and dependents or face a “shared responsibility payment”
(“SRP”)”
 AKA the Mandate
 The Congressional Budget Office estimates that below 2% of Americans will owe a SRP
• MEC means the coverage is “affordable” and provides “minimum value”
• Individuals have MEC if they are covered by a(n):
 Government sponsored plan
 Medicare Part A
 Medicaid
 CHIP
 TRICARE (for uniformed services personnel)
88
January 14, 2014

SEGMENT 4:

WeiserMazars LLP

Partner
WeiserMazars LLP

Minimum essential coverage
“Minimum Essential Coverage” (cont’d from prior slide)
• Employer sponsored plan, including COBRA Coverage
• Individual plan from an insurance exchange when individual may be eligible for
premium assistance if his/her income is between 100% and 400% of the Federal
Poverty Level (FPL)
• Insurance plan purchased directly from insurance company agents
• MEC excludes:
 Dental care
 Vision Care
 Worker’s compensation

89
January 14, 2014

SEGMENT 4:

WeiserMazars LLP

Partner
WeiserMazars LLP

APPLICABLE LARGE EMPLOYER: Controlled groups
• Controlled Group Rules
 An employers that is not an Applicable Large Employer also may be subject to the employer
mandate if it is a member of a commonly controlled group of trades or businesses, known a
“controlled group".
 A controlled group is considered a single employer for purposes of determining whether the
50-employee threshold is met.
 The requirements then apply to each individual employer in the group, regardless of
whether the employer itself has 50 employees.
 The 30-employee exclusion is allocated pro rata among the members of a controlled group
based on the number of full-time employees of each.
 Where the combined total of full-time or full-time equivalent employees in a controlled
group is at least 50, each individual employer is subject to the employer mandate, even if
such employer itself does not employ enough employees to meet the threshold.
 The rules for combining related employers do not apply for purposes of determining
whether an employer owes an Employer Shared Responsibility payment or the amount of
any payment

90

January 14, 2014

SEGMENT 4:

WeiserMazars LLP

Partner
WeiserMazars LLP

APPLICABLE LARGE EMPLOYER: Controlled Groups
• Under §§414(b), (c), and (o), of the Internal Revenue Code (the "Code"), a controlled group exists
when any two or more entities are connected through ownership in a parent-subsidiary controlled
group, a brother-sister controlled group, or a combination of the foregoing. Any type of business entity
can be a member of a controlled group for benefit plan purposes, for example, a corporation,
partnership, sole proprietorship or limited liability company. There generally are three types of
controlled groups:
 A "parent-subsidiary" controlled group exists when a parent company directly or indirectly owns
80% of a subsidiary organization;
 A "brother-sister" controlled group exists where the same five or fewer persons own more than
80% of two or more other entities and own more than 50% when taking into account the
ownership of each person only to the extent that it is identical with respect to each such entity;
and
 A "combined" controlled group exists where a group includes both parent-subsidiary and
brother-sister members.

91
January 14, 2014

SEGMENT 4:

WeiserMazars LLP

Partner
WeiserMazars LLP

APPLICABLE LARGE EMPLOYER: Controlled Groups
•

The controlled group rules apply for purposes of determining whether an employer meets the 50 fulltime employee threshold, regardless of whether the parent or owner is located in the United States.
 For example, a foreign-based company with several subsidiaries in the United States must aggregate
the employees of the parent and all subsidiaries who work in the United States for purposes of
complying with the ACA. This requirement may be problematic for foreign-owned subsidiaries
operating in separate lines of business that may or may not know of the existence of the other related
companies because of the pro rata allocation of the 30-employee exclusion and required coverage of
all but 5% of employees, or five full-time employees, if greater.

92
January 14, 2014

SEGMENT 4:

WeiserMazars LLP

Partner
WeiserMazars LLP

APPLICABLE LARGE EMPLOYER: Work outside the united states
Companies with Employees Working outside the United States
• For purposes of determining whether an employer meets the 50 FT or FT plus FTEs threshold, an
employer generally will take into account only work performed in the United States.
• For example, if a foreign employer has a large workforce worldwide, but fewer than 50 FT or FTEs in
the United States, the foreign employer generally would not be subject to the Employer Shared
Responsibility provisions.
• If a company employs U.S. citizens working abroad, the company is subject to the employer
mandate only if it had at least 50 FTs or a combination of FTs and FTEs, determined by taking into
account only work performed in the United States.
 The Individual Mandate applies to the U.S. citizens
• Employees working only abroad, whether or not U.S. citizens, generally will not be taken into account
for this purpose.

93
January 14, 2014

SEGMENT 4:

WeiserMazars LLP

Partner
WeiserMazars LLP

Identifying full-time employees
•

Full-time Employee: All employees who work on average at least 30 hours of service per week (or 130 hours of service
per month)

•

Full-time Equivalent Employee: Any employee who was not a FT for any month in the preceding calendar year is
included in the calculation by:
 Step 1: Calculate aggregate hours of service per month for non-full time employees (up to 120 hours per
employee)
 Step 2: Divide total aggregate hours by 120

•

For hourly employees, Hours of Service include
 Paid performance: Each hour for which an employee is paid, or entitled to payment, for performance of duties
for the employer
 Paid leave: Each hour for which employee is paid, or entitled to payment, but no duties are performed (e.g.
vacation, holiday, illness, disability, layoff, jury duty, military leave)

•

Three methods for measuring hours of service for non-hourly employees:
 Actual hours worked
 Daily Equivalency- credit 8 hours of service per day that 1 hour is performed
 Weekly Equivalency- credit 40 hours of service per week that 1 hour is performed

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SEGMENT 4:

WeiserMazars LLP

Partner
WeiserMazars LLP

Variable hour or seasonal employees
• Variable Hour or Seasonal Employees: if the employer uses the look-back measurement method for
its ongoing employees, the employer may use the same method for new variable hour and seasonal
employees
 Variable hour employee: based on the facts and circumstances at the start date, it cannot be
determined that the employee is reasonably expected to work an average of 30 hours of service
per week
 Initial measurement period: must be at least 3 but not more than 12 months and begin on any
date between the employee’s start date and the first day of the first calendar month following the
employee’s start date
 Initial stability period: must be the same as the stability period for ongoing employees and
begins immediately after the initial measurement period and any applicable initial administrative
period

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WeiserMazars LLP

Partner
WeiserMazars LLP

Multiemployer plans
• Employers that Contribute to Multiemployer Plans
 Service at participating employers in a multiemployer health plan generally is aggregated to
determine an employee's hours even though the participating employers generally are not
related.
 Employers contributing to a multiemployer health may not know how many hours any individual
employee worked because collective bargaining agreements may provide that contributions are
based on requirements other than hours worked, such as on a days worked, projects
completed, or a percentage of earnings.
 The proposed regulations provide a transition rule that will apply through 2014 for contributions
made by large employers participating in a multiemployer health plan. The transition rule
provides that a large employer will not owe the SRP for a full-time employee if the following
three criteria are met:
 The employer is required to contribute to a multiemployer plan with respect to that
employee pursuant to a collective bargaining agreement or participation agreement,
 Coverage is offered under the multiemployer plan to the full-time employee (and the
employee’s dependent children), and
 The coverage offered to the full-time employee is affordable and provides minimum
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SEGMENT 4:

WeiserMazars LLP

Partner
WeiserMazars LLP

Patient-Centered Outcomes Research Institute
• PCORI Fees
 Funds Patient-Centered Outcomes Research Institute (“PCORI”)
 The Institute will assist patients, clinicians, purchasers and policy-makers in making informed
health decisions by advancing clinical effectiveness research
• IRC §4376(a) imposes the PCORI fee on an applicable self-insured health plan for each plan year
ending after September 30, 2012 and before September 30, 2019. An applicable self-insured health
plan is a plan that provides for accident or health coverage where any portion of the plan’s coverage
is not provided through an insurance policy and such plan is established or maintained:
 by one or more employers for the benefit of their employees or former employees
 by one or more employee organizations for the benefit of their members or former members
 jointly by one or more employers and one or more employee organizations for the benefit of
employees or former employees
 by a voluntary employee’s beneficiary association
 by other specified organizations including a multiple-employer welfare arrangement

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SEGMENT 4:

WeiserMazars LLP

Partner
WeiserMazars LLP

Patient-Centered Outcomes Research Institute
Calculation and payment of PCORI Fee for Self-Insured Health Plans
• The PCORI fee is calculated as follows:
 For plans ending after September 30, 2012 and before October 1, 2013 - $1 x the average number of
lives covered during the policy period
 For plans ending after September 30, 2013 and before October 1, 2014 - $2 x the average number of
lives covered during the policy period
 For plans beginning on or after October 1, 2014 the fee per life covered will be determined by the
Secretary of Health and Human Services based on the inflation in national health expenditures
• Self-insured plans may determine the “average number of covered lives” as follows:
 Actual Count Method – Calculate the sum of lives covered for each day of the plan year and divide that
sum by the number of days in the plan year
 Snapshot Method – Calculate the total number of lives covered on a date in each quarter of the plan
year (or more dates if an equal number of dates is used for each quarter) and divide that total by the
number of dates on which a count was made
 Form 5500 Method – Determine the number or reportable participants on the plan’s Form 5500. If the
plan covers individuals other than the employee (spouses and dependents), calculate the sum of the
total participants reported on Form 5500 at the beginning and at the end of the plan year.
• The first annual fee payment for plan years ending after September 30, 2012 and before October 1,
2019 is due by July 31, 2013. The fees are due annually and reported on IRS Form 720 . Payment is
made with Form 720-V.
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WeiserMazars LLP

Partner
WeiserMazars LLP

Strategies to reduce cost of employer provided benefit plans
• Health Savings Accounts (HSAs)- These accounts are tied to High Deductible Health Plans and
shift to employees.
 Also super-charged IRAs
• Wellness programs that reward and incentivize employees go hand-in-hand with HSA and HRA
plans. Biometric screenings, health fairs, weight loss, exercise and stop smoking programs ultimately
will help lower healthcare costs through lower claims.
 Empirical evidence- Americans do not take advantage of wellness programs
• Conduct dependent audits
• Small and mid-sized companies should consider self-insured plans.
 Insurers are coming out with new products for this group who wants to control costs and plan
design.
• Negotiate commissions with brokers (generally groups 100 and above)
• Reduce employer cost for ancillary plans such as long term disability and life insurance through use of
voluntary (after-tax) employee paid plans
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January 14, 2014

Q&A:

SEGMENT 1:

SEGMENT 2:

Thomas Halvorson
Practice Leadership

Patricia L. Beaty
Partner
Krieg DeVault LLP

SEGMENT 3:

SEGMENT 4:

Michael W. Sheridan
Partner
Butler|Snow LLP

Partner
WeiserMazars LLP

WeiserMazars LLP

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