PPACA Update: How The Affordable Care Act Will Affect Employers

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,
2015
• 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