affordable care act: recent changes & deadlines

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More things Non-Profits and Governmental Units need to know about The Affordable

Care Act

Presented by :

Don McAnelly, CPA, ABV, CGMAMichael P. James, JD, MBA,

CSSGB

Overview of Recent Changes to the

Requirements and Deadlines under the Affordable Care Act

Overview of Recent Changes

Employer Responsibility Requirements

Large Employer Mandate Delayed • Applies to large employers with 50-99 FTEs.• Will not be penalized for not providing insurance to full-time employees until 2016.• Previous requirement: Provide insurance to full-time employees in 2015 or face

penalties.

Large Employer Mandate Modified• Applies to large employers with 100+ FTEs.• Only required to provide adequate and affordable coverage to 70% of full-time

employees in 2015.• In 2016, these employers must provide appropriate coverage to 95% of full-time

employees.• Previously requirement: Large employers were required to provide appropriate

coverage to 95% of full-time employees starting in 2015.


Employer Responsibility Requirements

“Pay or Play” Penalties Modified for 2015• Applies to large employers with 100+ FTEs.• If employer fails to provide health insurance coverage to full-time

employees, a 100+ FTE Employer is subject to a penalty equal to:– $2,000 x (# of full-time employees – 80)

• Previous requirement: The penalty was calculated as:– $2,000 x (# of full-time employees – 30)

• 2015 modification applies to “Unaffordable / Minimum Value” Penalty as well (discussed later).

• In 2016, the “no coverage” penalty for all large employers is equal to:– $2,000 x (# of full-time employees – 30)


Seasonal Employees Redinfied

• A “Seasonal Employee” is an employee in a position for which the customary annual employment is 6 months or less. The seasonal period should begin around the same part of the year each year.

• Seasonal employment may be extended under certain circumstances.

Members of Religious Orders

• In determining whether its members are full-time employees, a religious order is permitted to not count the hours of service related to any work performed by an individual who is subject to a vow of poverty as a member of that order when the work is in the performance of tasks usually required for active members of the order.


Bona Fide Volunteers

• Government entities and 501(c) organizations with tax-exempt volunteers do not need to count the hours of service provided by bona fide volunteers when determining their status as a large or small employer under the ACA.

Work Study Program Student Employees

• Educational institutions do not need to count the hours worked by students that are employed in positions subsidized through the federal work study program or a substantially similar program at the State or local level in determining whether they are a large or small employer under the ACA.

• However, the hours worked by students employed outside of these programs must be counted by the educational institution to determine whether it is subject to the shared responsibility requirements of the ACA.


Approved Methodology for Determining Adjunct Faculty Hours

• Institutions that employ adjunct faculty are required to use a reasonable method to identify and track the hours of service for adjunct faculty.

• The IRS has identified one method that it deems reasonable: – The institution must credit the adjunct faculty member with:

• (a) 2 ¼ hours of services per week for each hour of teaching or classroom time (this would add an addition 1 ¼ hours for activities such as class preparation and grading); and, separately

• (b) 1 hour of service per week for each additional hour outside of the classroom that the faculty member spends performing duties required to perform (office hours and faculty meetings).


HealthCare.gov

• Open enrollment: October 2013 ???• Plans go into effect: January 1, 2014• Enrollment ends: March 31, 2014

• Glitches, delays and functionality problems:– Slow start to enrollment through HealthCare.gov.– 22,000 appeals need to be resolved.– State Medicaid programs not finalized.


Individual Mandate Delayed

• Deadline for individuals to sign up for health insurance before facing tax penalties extended to March 31, 2014.

• “Short Coverage Gaps” protect individual for not having coverage for up to 3 months.– Would have protected uninsured individuals from penalties until March 31,

2014.

• In practice, an individual must sign up by the 15th of a given month in order for health insurance to start the first day of the next month.

• Would have required insurance application by February 15, 2014 to qualify for Short Coverage Gap protection.


Cancelled Health Plans

• “If you like your health insurance plan, you can keep it.”• Plans cancelled because plan was not compliant with ACA requirements.

– Individuals impacted in 2013 for 2014 coverage.– Some small businesses impacted in 2013 for 2014 coverage, but many will see

affects in 2014 for 2015 coverage.

• 4% of U.S. population affected, 11 Million consumers.• Michigan Department of Insurance and Financial Services:

– Insurers allowed to reinstate cancelled policies.

• Some Michigan insurance carriers elect not to reinstate policies.• Job Killer – The CBO indicates ACA will kill 2.3M jobs by 2021.


Small Business Health Option Programs (SHOP)

• SHOP enrollment: October 1, 2013 November 1, 2013 November 30, 2013…

• SHOP system down. Can still enroll in SHOP insurance products through authorized agents.

• Must enroll in a SHOP insurance product to be eligible for Small Business Health Care Tax Credits.– 2010 - 2013:

• Non-profit employer may receive tax credit of up to 25% of employer’s contribution to employees’ health insurance premiums.

– 2014 - 2016: • Non-profit employer may receive tax credit of up to 35% of employer’s

contribution to employees’ health insurance premiums.

Timeline of Key Effective Dates

2013 2014 2015 2016 2017 2018

• Open enrollment in the Individual Exchange begins (10/1/2013) (SHOP Exchange moved to 11/15/14)

• Increase Medicare payroll tax by 0.9% on earned income

• Impose 3.8% tax on unearned income

• PCORI fee

• Employers generally must be in compliance with coverage requirements (1/1/2014) * Delayed to 1/1/15 and 1/1/16

• Individual mandate, premium and cost sharing credits go into effect

• Medicaid expansion

• Other insurance market reforms

• Temporary reinsurance fee begins

• SHOP Exchange online enrollment opens

• Temporary reinsurance fee ends

• Employer information reporting to the IRS on employee coverage (due by 1/31/2016), even if not subject to penalties.

• 50-99 FTE Employers generally must be in compliance with applicable large employer coverage requirements (1/1/2016)

• States may open Exchanges to large group market

• 40% excise tax on high-cost health plans “the Cadillac Tax”

Provisions not effective until regulations issuedEmployer coverage notices under Fair Labor Standards ActNon-discrimination rulesAutomatic enrollment of employees

• 100+ FTE Employers generally must be in compliance with applicable large employer coverage requirements (1/1/2015)

Understanding Employer Classifications

Employer Classifications

Are You a Large or Small Employer?

• Large Employer:– Over 50 FTEs.

• 50-99 FTEs: Do not have to provide coverage until 2016.• 100+ FTEs: Employer must offer minimally essential insurance.

– Insurance must cover at least 60% actuarial value.– Insurance must be offered to:

» 70% of full-time employees in 2015.» 95% of full-time employees in 2016.

• Small Employer:– Under 50 FTEs.– Employers do not have to offer insurance....at least not yet.– However, if health insurance is offered, it must meet the essential health

benefits, metal levels and be available to full-time employees.


Which Entities Are Subject to the ACA Requirements?

• Governmental Entities

• Institutions of Higher Education

• Parochial Schools

• Non-Profit Organizations

• Churches

• Public Schools

Play or Pay Penalty for Large Employers

No Coverage

• Effective 2015 for 100+ FTE Employers; 2016 for 50-99 FTE Employers.

• IRS Code 4980H(a).

• Is triggered if an eligible employer does not offer coverage:

– In 2015, 100+ FTE Employers subject to this penalty must pay a $2,000 annual excise tax for each full-time employee in excess of 80 (does not include FTE’s generated by variable employees).

– In 2016, all large employers subject to this penalty must pay a $2,000 annual excise tax for each full-time employee in excess of 30 (does not include FTE’s generated by variable employees).

• The tax will go up annually.


Play or Pay Penalty for Large Employers

Coverage Unaffordable or Lack of Required Value

• Effective 2015 for 100+ FTE Employers; 2016 for 50-99 FTE Employers.

• IRS Code 4980H(b).

• Is triggered if an eligible employer offers coverage that is either:– (1) Unaffordable, or (2) does not provide a minimal value of

coverage; and– A full-time employee goes to the Marketplace and receives a tax

credit or subsidy.

• The Excise Tax is the lesser of: – The “no coverage” penalty (different in 2015 and 2016); or– $3,000 for each full-time employee who enrolls in insurance through

the Marketplace and receives a tax credit or subsidy.

• The tax will go up annually.


Applicable Large Employer and Applicable Large Employer Member

• Employer Shared Responsibility Requirements apply to applicable large employers and to all of the applicable large employer members that comprise that applicable large employer.

• Final Regulations from Department of Treasury:

– Continue to reserve a section of §54.4980H-2(b) for special rules for government entities, churches, and conventions and associations of churches to determine whether they are applicable large employers.

• Expect further guidance from the IRS.


Understanding How to Classify and Count Your

Employees

Employee Classification

Which Employees Count Toward FTEs?

• Government Employees?

• Elected Officials?

• Election Workers?

• Adjunct Faculty?

• Coaches?

• Hourly Employees?

• Seasonal Employees?

• Independent Contractors?

All employees are subject to the Act’s requirements!


Full-Time Employees

• Evaluated based on monthly hours:– Average at least 30 hours per week; or– 130 hours of service in a calendar month.

• Must consider each hour an employee is paid or entitled to be paid.– Include: vacations, holidays, illnesses, incapacity (including disability), layoffs,

jury duty, military duty or leaves of absence (up to a maximum of 160 hours for any continuous period).

• Each full-time employee is one (1) FTE.• It is possible that an employee paid on an hourly basis could be

considered a full-time employee based on the weekly or monthly hours logged by the worker.


Part-Time Employees

• If an employee does not meet the definition of full-time, his or her individual hours are included in your monthly full-time equivalent (FTE) calculation.

• How do part-time employees affect your classification as a large or small employer:– 1) Monthly Calculation:

• Add up the hours for all part-time employees in a month and divide by 120.– This is your monthly FTE for part-time employees.

• Add the number of full-time employees.• Result is that month’s FTE number.

– 2) Annual Calculation:• Add up the calculations for each month and divide by 12, round down.

• This is your annual FTE number.– 3) Determine status based on annual FTE number.


Variable Hour Employees

• Employees that may work full-time hours at various intervals throughout the year and part-time hours the rest of the year cause difficulties for employers.– If you offer health insurance to full-time employees, variable hour employees

may migrate in and out of the employer’s insurance coverage throughout the year.

– Administrative difficulties for both employer and employee.

• Measurement and Stability Period Safe Harbor– Employer allowed to set a measurement period of 3 to 12 months to

determine whether an employee averaged at least 30 hours of service per week or 130 hours of service per calendar month during the defined period.

– Employer then has a stability period of at least 6 months (must be equal to measurement period) where employees who were full-time during the measurement period are treated as full-time an permitted to participate in employer health plan.

Employee ClassificationMeasurement and Stability Period Safe

Harbor


Seasonal Employees• Seasonal employees include:

– An employee in a position for which the customary annual employment is 6 months or less.

– What does “customary” mean? • By the nature of the position an employee in the position typically works

for a period of 6 months or less; and• That period should begin each calendar year in approximately the same

part of the year, such as summer or winter.– Seasonal employment may be extended under certain circumstances.

• Seasonal employees are included in initial FTE calculation for employer.– If an employer's workforce exceeds 50 FTEs for 120 days (four calendar

months) or fewer during a calendar year and the employees in excess of 50 FTEs who were employed during that period were seasonal employees, the employer would not be an applicable large employer.

– The 4 calendar months / 120 days are not required to be consecutive.


Employees of Controlled/Affiliated Groups

• Employees of a controlled or affiliated group may be treated as the employees of a single employer to determine whether an employer is a large or small employer under the ACA.

• IRS: final controlled group rules do not apply to certain church entities, a state or local government or a federal government entity.

• Until further guidance is issued, certain church entities and state or local government public schools that sponsor section 403(b) plans can continue to rely on a reasonable, good faith interpretation of the common control rules to determine whether they are large employers under the ACA.

THANK YOU!

Michael P. James, JD, MBA, CSSGB

Phone: (517) 377-0823 Lansing (313) 237-7300 Detroit

Email: [email protected]

www.linkedin.com/in/MichaelJamesLaw

Don McAnelly, CPA, ABV, CGMA

Phone: (989) 799-9580

Email: [email protected]

affordable care act: recent changes & deadlines

Health & Medicine

annual fte

irs code 4980h

customary

employer classifications

applicable

100 fte employers

receive tax

include ftes