American Benefits Council Preparing for PPACA Webinar

1. American Benefits Council Preparing for PPACA Webinar Definition of Full-Time Employees Brigen Winters June 7, 2011

2. Overview • Notice states that Treasury, Labor and HHS are taking coordinated approach in developing regulations -- • Shared responsibility requirements (Treasury/IRS guidance) • Automatic enrollment (DOL guidance) • 90-day waiting period limitation (3 agency guidance) • Other PPACA provisions (Exchange rules)

3. Automatic Enrollment • PPACA amends FLSA § 18A to require employer with 200 plus full-time employees to automatically enroll new full-time employees in one of the plans offered by employer and continue enrollment of current employees • Enrollment can occur after a permissible waiting period • Automatic enrollment program must include adequate notice and opportunity for employee to opt out • Neither PPACA amendment nor FLSA define full-time employee for this purpose • April 8 DOL Automatic Enrollment Forum

4. Automatic Enrollment Issues • Definition of full-time employee • Use of same definition as that under shared responsibility requirements? • Employer flexibility to define? • Timing of notice requirement • At hire? • Upon satisfaction of any eligibility and/or waiting period? • Timing of employee opt out period • Commencement • Length • For current employees, limited to full-time? • Is default employer plan limited to “minimum essential coverage”?

5. Seasonal Employees • Code § 4980H and Notice define "seasonal employee" as one who performs labor or services on a seasonal basis as defined by DOL, including— • Agricultural workers working during certain seasons or periods of year • Retail workers employed exclusively during holiday seasons • All employees (including seasonal employees) not meeting 30 hours per week/130 hours per month threshold generally included in calculating FTEs for "applicable large employer" definition • Special rule: if employer's workforce exceeds 50 FT employees for 120 days (or 4 months) or fewer and excess employees employed during 120 day/4 month period were seasonal employees, employer is not applicable large employer

6. Seasonal Employees • A full-time employee (30 hours per week/130 hours per month) may include seasonal employees • Length of look-back/measurement period could determine whether seasonal employees treated as full-time • Notice states that employer offering coverage to substantially all of its full-time employees generally not subject to $2,000 annual penalty for each full-time employee (minus 30) • Notice requests comments on challenges employers may face in offering coverage to certain categories of employees • Whether there are appropriate exceptions that should be provided under the shared responsibility provisions and how consistent with statute • Possible exception for seasonal employees?

7. Waiting Period Limitation • Effective in 2014, group health plans and group health insurance issuers may not impose a waiting period that exceeds 90 days • Limitation in PHSA § 2708 and incorporated into ERISA and Code group health plan requirements • Departments of Health and Human Services, Labor and Treasury share jurisdiction • $100 per day excise tax applies to violations (generally capped at lesser of 10 percent of the aggregate amount paid for prior year or $500,000) and employers have an affirmative obligation to report on Form 8928 • DOL, participants and beneficiaries may sue to enforce provision under ERISA

8. Waiting Period Definition • PHSA § 2704(b)(4) definition of "waiting period": "with respect to a group health plan and an individual who is a potential participant or beneficiary in the plan, the period that must pass with respect to the individual before the individual is eligible to be covered for benefits under the terms of the plan" • Joint final regulations under HIPAA define "waiting period" as "the period that must pass before coverage for an employee or dependent who is otherwiseeligible to enroll under the terms of a group health plan can become effective [emphasis added]"

9. Notice Requests Comments on Waiting Period Issues • Which employees are subject to limitation • When a waiting period may apply consistent with PPACA limitation • How 90-day limit should be calculated • Coordination of 90-day waiting period limitation with shared responsibility requirements • Application of 90-day limit to common employer eligibility and enrollment practices (including appropriate modifications to those practices)

10. Eligibility and Enrollment Practices • Employees become eligible based on average hours during look-back period, with 90-day waiting period starting once employee determined to be eligible • Newly-hired, full-time employees eligible subject to 90-day service requirement calculated from date of hire, with enrollment first day of month (or quarter) after 90-day service period • Employees covered by CBA eligible under multiemployer plan for calendar quarter after completing specified number of hours during previous quarter, with possibility of hours "banking"

11. Eligibility and Enrollment Practices • Employees eligible after completing service-based "probationary" period • Seasonal employees who are not eligible, even if working hours needed to satisfy eligibility requirement for non-seasonal employees • Part-time employees offered coverage only after working for longer than 90-day period

12. Questions

13. Brigen Winters Principal Groom Law Group 1701 Pennsylvania Avenue, NW Washington, DC 20006 Phone: (202) 861-6618 blw@groom.com