Hosted by Presented by ACA Employer Responsibility
Who We Are advancegroup.us
Who We Are Leading provider of working capital, outsourced technology, and growth support for staffing firms. advancepayroll.us
Who We Are Bringing together users and suppliers of contract labor nationwide with a focus on small, diverse, and woman-owned firms. advanceworkforce.us
Who We Are The ‘best of banking’ with larger facilities, staffing focus, and Advance’s signature growth services. advancecredit.us
ESC is the largest provider of benefits to the staffing industry, enrolling over 500,000 temps in health insurance each year. • Named to the Blue Cross Blue Shield President’s Honor Council 6 consecutive years, this is the highest award given by BCBS. • Named to the Inc. Magazine 500/5,000 fastest growing companies for the 3rd time.
Awarded the 2011 and 2012 Golden Eagle Award by the National Association of Health Underwriters (NAHU) for “Demonstrating outstanding leadership within the Health Insurance Industry”. • Awarded the 2012 Soaring Eagle Award, the highest award presented by The National Association of Health Underwriters to members “Who have achieved the greatest success in demonstrating professional knowledge and outstanding client service”.
Disclaimer The opinions offered in this presentation are from licensed insurance professionals and should in no way be construed as legal advice. This presentation is based on our interpretation of the current laws, rules and regulations of both PPACA* and the health insurance market. These are subject to change. If you have any questions as to how the legal aspects of Health Care Reform will affect your specific company, please contact your legal counsel for advice. *Patient Protection and Affordable Care Act
Topics • Step 1: Are you an Applicable Large Employer? • Step 2: I’m an Applicable Large Employer. Which Employees are eligible for coverage? • Step 3: Pay or Play? • Private and Public Exchanges • Strategic Considerations • Latest Updates • Action Steps • Summary Comments & Questions • Resources
Topics What are your next steps on how to prepare?
Are you an Applicable Large Employer? Source - IRS Proposed Regulation 54.4980H-2
Case Study #1 During each calendar month of 2013, Employer X has 20 Full-Time Employees averaging 35 hours of service per week, and 40 Employees averaging 90 hours of service per month. Are you an Applicable Large Employer? Source - IRS Proposed Regulation 54.4980H-2(d)(2)
Case Study #1: Conclusion Each of the 20 Employees who average 35 hours of service per week count as one Full-Time Employee for each month. To determine the number of FTEs for each month, the total hours of service of the Employees who are not Full-Time Employees (but not more than 120 hours of service per Employee) are aggregated and divided by 120. The result is that the Employer has 30 FTEs for each month (40 x 90 = 3,600, and 3,600 ÷ 120 = 30). Because Employer X has 50 Full-Time Employees (the sum of 20 Full-Time Employees and 30 FTEs) during each month in 2013, Employer X is an Applicable Large Employer for 2014. Are you an Applicable Large Employer? Source - IRS Proposed Regulation 54.4980H-2(d)(2)
Case Study #2 During each calendar month of 2013, Employer X has 100 Employees averaging 90 hours of service per monthand no Full-Time Employees. Are you an Applicable Large Employer?
Case Study #2: Conclusion Employer X has no Full-Time Employees but is still considered an Applicable Large Employer because it has 75 FTE’s (100 x 90 = 9,000, and 9,000 ÷ 120 = 75). Even though Employer X is considered an Applicable Large Employer, it will not be required to offer coverage to any of its current Employees, because they are not Full-Time. The current Employees’ hours are only taken into consideration for determining whether Employer X is an Applicable Large Employer and for no other purpose. However, as an Applicable Large Employer, Employer X may have to offer coverage to certain New Employees (This process is discussed later). Are you an Applicable Large Employer?
Should I count my Seasonal Workers? Are you an Applicable Large Employer?
Seasonal Worker Exception • Employers should use a “good-faith” interpretation of the Department of Labor’s Definition of a “Seasonal Worker”. • Most staffing firms should already be aware of who their Seasonal Workers based upon previous classifications. • If the sum of an Employer’s Full-Time Employees and FTEs exceeds 50 for 120 days or less, and the Employees in excess of 50 during that period were Seasonal Workers, then the Employer is not considered an Applicable Large Employer. Are you an Applicable Large Employer? Source - IRS Proposed Regulation 54.4980H-2(b)(2)
Can’t I just split into separate companies to avoid the PPACA? Are you an Applicable Large Employer?
YOU MAY STILL BE SUBJECT TO THE LAW! • All Employees of a Controlled Group as defined by IRS Code § 414(b) and (c) or an Affiliated Service Group under IRS Code § 414(m) are taken into account in determining whether the members of the group together constitute an Applicable Large Employer. • Each member of the group would then be considered an Applicable Large Employer Member. • While there may be benefits to disaggregation under the proposed regulations, this is a strategic consideration that you should discuss with your legal counsel or CPA. Are you an Applicable Large Employer? Source - IRS Proposed Regulation Preamble I.A.2 & III.A
Can I avoid the law by using a PEO? Are you an Applicable Large Employer?
Staffing Agency/PEO Relationship • The PPACA uses the Common Law Standard to determine who is an Employer. • In short, an Employer must be able to direct the Employee as to the work to be performed. • Under a co-employment relationship, the Staffing Agency is the Common Law Employer while the PEO provides administrative services to the Staffing Agency only. A PEO cannot direct an Employee to do anything and thus cannot be considered the Common Law Employer. Are you an Applicable Large Employer?
Step 2: I’m an Applicable Large Employer. Which Employees are eligible for coverage?
Employers can use a 3-12 month “look-back” period, called the Standard Measurement Period, to determine if Ongoing Employees were employed Full-Time during that period. • Employees must average 130 hours of service per month during the Standard Measurement Period to be considered Full-Time and eligible for coverage. • Example: 390 hours/3 months; 780 hours/6 months; 1,560 hours/12 months • ESC Recommends a Standard Measurement Period of 12 months to reduce qualifying Full-Time Employees but each Employer will have to determine what is best for their particular business. Ongoing Employees Source - IRS Proposed Regulation 54.4980H-3(c)
Employers may use up to a 90 day Administrative Period, after the Standard Measurement Period, to determine which Employees were Full-Time and should be offered coverage. • After the Standard Measurement Period and Administrative Period, there follows a Stability Period of at least 6 months but not shorter than the Standard Measurement Period. • Full-Time Employees must be offered coverage during the Stability Period. Part-Time Employees do not have to be offered coverage during the Stability Period. Ongoing Employees Source - IRS Proposed Regulation 54.4980H-3(c)
Case Study #3 Employer X is an Applicable Large Employer and chooses to use a 12-month Stability Period from January 1 – December 31 and a 12-month Standard Measurement Period from October 15 – October 14 (Since Employer X uses a 12-month Standard Measurement Period, it’s Stability Period must also be 12 Months). Employer X chooses to use an Administrative Period between the end of the Standard Measurement Period (October 14) and the beginning of the Stability Period (January 1) to determine which Employees were employed on average 30 hours of service per week during the Standard Measurement Period, notify them of their eligibility and coverage options for the plan, and enroll those Employees who elect coverage. Employee A was employed on average 30 hours of service per week from October 15, 2014 – October 14, 2015 and Employee B is employed on average less than 30 hours of service per week during that same Standard Measurement Period. Ongoing Employees Source - IRS Proposed Regulation 54.4980H-3(c)(1)(viii)
Case Study #3: Conclusion Because Employee A was a Full-Time Employee for the Standard Measurement Period, Employee A is offered coverage for the Stability Period of January 1, 2016 – December 31, 2016. Because Employee B was not a Full-Time Employee during the Standard Measurement Period, Employee B is not required to be offered coverage for the Stability Period in 2016. Ongoing Employees Source - IRS Proposed Regulation 54.4980H-3(c)(1)(viii)
Employer must look at the facts and circumstances at the Employee’s Start Date, and determine if the Employee is reasonably expected to work an average of 30 hours per week. • If YESNon-Variable Hour EmployeeMust offer coverage within 3 Calendar Months of Employee’s Start Date. • If NO Variable Hour Employee Must follow rules similar to the “look-back” for Ongoing Employees using an “Initial Measurement Period” between 3-12 months that must begin between the Employee’s Start Date and the first day of the first month following the Employee’s Start Date. New Employees Source - IRS Proposed Regulation 54.4980H-3(c)(2)-(3)
Can It Be Reasonably Determined That New Employee Will Average 30 Hours/Week? Variable Hour Employee Initial Measurement Period 3-12 Months Did Employee Average 30 Hours/Week During Initial Measurement Period? YES Up to 90 Day Administrative Period Employer Does Not Have To Offer Coverage NO YES NO Non-Variable Hour Employee Offer Coverage Within 3 Calendar Months of Employee’s Start Date Stability Period the greater of: 6 months OR Initial Measurement Period See IRS Proposed Regulation 54.4980H-3(c)(3) for additional guidance regarding Variable Hour Employees. New Employees
Break-In-Service Rules • Apply to situations where Employees are rehired after being terminated; or after a “continuous period during which the Employee is not credited with an hour of service.” • An Employee is considered to have voluntarily terminated employment and therefore can be treated as a New Employee in the following two situations: • After a break of at least 26 consecutive weeks with no compensable hours of service. • After a break of less than 26 weeks if the break is at least four weeks and is longer than the Employee’s period of employment immediately preceding the break (For example, a three-week assignment followed by a 6 week break) New Employees Source - IRS Proposed Regulation 54.4980H-3(e)
Break-In-Service Rules • Exceptions for Employees of Educational Organizations and for “Special Unpaid Leave” i.e. FMLA, Uniformed Service, and Jury Duty. New Employees Source - IRS Proposed Regulation 54.4980H-3(e)
Case Study #4: As of April 1, 2014, Employee A has been an Employee of Employer X for 10 years. On April 1, 2014, Employee A terminates employment and is not credited with an hour of service until December 1, 2014 when Employer X rehires Employee A and Employee A continues as an Employee through December 31, 2014, which is the close of the measurement period as applied by Employer X. New Employees Source - IRS Proposed Regulation 54.4980H-3(e)(7)(1)
Case Study #4: Conclusion Because the period during which Employee A is not credited with an hour of service for Employer X exceeds 26 weeks, Employee A may be treated as having terminated employment on April 1, 2014 and having been rehired as a New Employee on December 1, 2014, for purposes of determining Employee A’s Full-Time status. Because Employee A is treated as a New Employee, Employee A’s hours of service prior to termination are not required to be taken into account for purposes of the Standard Measurement Period, and the period between termination and rehire with no hours of service is not taken into account in the new measurement period that begins after the Employee is rehired. New Employees Source - IRS Proposed Regulation 54.4980H-3(e)(7)
Using Look-Back Rule • Use the Look-Back Rule for previous years to estimate Full-Time Employees to get an idea of what your potential tax penalty exposure is. OR… • The Look Back Rule will need to be applied in 2013 in identifying who those particular Employees are if you intend on obtaining a quote for MEC coverage. Census information and a 3 year claims experience is typically required for quotes from carriers.
Topics Step 3: Pay or Play?
Pay or Play? • Applicable Large Employers are required by law to either offer Minimum Essential Coverage (MEC) qualified health plans to their Full-Time Employees (Play); OR • Pay a penalty on each Full-Time Employee. • There are many considerations Employers must take into account besides the financial one. Pay or Play?
Cost of Paying • The tax penalty for not offering MEC qualified health plans is $2,000 per year ($166.67 dollars per month) on each Full-Time Employee, less the first 30. • Employees will have coverage available from subsidized State Exchanges, or face individual mandate penalties if no coverage options are affordable or available. • Penalty is triggered when at least one Full-Time Employee receives a Premium Tax Credit or Cost Sharing Subsidy when seeking coverage from an Exchange. Pay or Play? Source - IRS Proposed Regulation 54.4980H-4
Cost of Paying • Could weaken Employer/Employee bond if coverage previously offered. • Nondiscrimination rules could affect decision. • Market considerations? • Higher paid, longer term workforce? • Lower wage, higher turnover workforce? • Client needs? Pay or Play?
Cost of Playing: Advantages • Maintain or increase Employer recruiting and retention abilities. • Maintain any and all historical benefits of offering Employer Sponsored health coverage. • Gets you out of the penalties on all Full-Time Employees. Pay or Play?
Cost of Playing: Disadvantages • What will the cost be if you are able to offer a plan? • Will that cost increase or decrease in the future? • Meeting Carrier requirements to offer coverage? • Cost of many new administrative, regulatory, reporting, and fiduciary responsibilities? • Will your competition have less expensive rates if only paying the tax? Pay or Play?
Cost of Playing: Disadvantages • There may still be a penalty of $3,000 per year ($250 per month) per Employee to whom coverage is offered, if that coverage: • Fails to provide Minimum Value; OR • Requires an Employee contribution that exceeds 9.5% of their Household’s Adjusted Gross Income. • Penalty only applicable to the number of Employees who seek alternate coverage from an Exchange and receive a Premium Tax Credit. • Total penalty cannot exceed the penalty amount had the Employer offered no coverage at all ($2,000 per Full-Time Employee, less the first 30). Pay or Play? Source - IRS Proposed Regulation 54.4980H-5
Wellness/Preventative Plans • May qualify as Minimum Essential Coverage. • Essential StaffCare creating such plans in the event that this proves true. • $3,000 penalty on some Employees may cost less than $2,000 penalty for all Full-Time Employees. • Unknown how many Employees will purchase a plan at the Exchange and get a subsidy, triggering the $3,000 tax. • No Penalty if: • Employee doesn’t go to Exchange and apply for subsidy. • Employee is eligible for Medicaid. • Employee already covered under another qualified program (Spouse, Dependent, Military, etc.) Pay or Play?
Non Discrimination Rule • Part of ACA but enforcement is postponed while further guidance is being developed. • If enforced, then it will require an “all or nothing” offer to Employees. Employers will have to either: • Offer the same group health plan(s) to ALL of your Full-Time Employees; OR • Drop your plan for all Employees and send to the Exchanges for coverage. Pay or Play?
Costs at a Glance Did Employer Offer MEC? Does MEC Provide Minimum Value? Does MEC Exceed 9.5% of Employee’s Family Income? No Penalty Employer Contribution to MEC Plan Only YES YES NO NO YES NO Employer Penalty of $3,000 Per Subsidized Employee ($250/Month) AND Employer Contribution to Plan for Non-Subsidized Employees Who Elect Coverage Employer Penalty of $2,000 Per Full-Time Employee ($166.67/Month) Pay or Play?
“Pay or Play” Options Note that all options involve “paying” • Offer MEC Plan ONLY to internal Employees.* • Offer MEC to ALL Full-Time Employees. • Offer Wellness/Preventative Plan if it qualifies as MEC. • Drop health plan completely and send Employees to the Exchange for coverage. Pay or Play? *Depends on Non-Discrimination Rule