ascentis © 2015 | proprietary and confidential | all rights reserved the affordable care act

Ascentis © 2015 | Proprietary and Confidential | All Rights Reserved

THE AFFORDABLE CARE ACT

Affordable Care Act JEOPARDY!ACA: Why We

Hate it So Much!Ends in aPenalty!

Admin BestPractices

Year-EndReporting

Eligibility &Affordability

500

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200 200

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200

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500

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300

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500

200

300

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500

It’s the Number of Hours Per Month that Part-Time or Variable Hour Employees Must

Average Over a Measuring Period to

Qualify for An Offer of Health Insurance…

What is 130?

Eligibility Tracking: Simplification

• Weekly accounting vs. Monthly accounting: regulations specify that 130 hours per calendar month are equivalent to 30 hours per week, and can avoid having to account for different pay frequency records (and that’s precisely what our report does).

• Rule of Constructive Receipt applies: just as with cash taxpayer accountability in payroll, hours can be credited to the month in which they are paid (based on pay period end date), regardless of when worked (and that’s precisely what our report does).

• New Hires: when counting hours, the period between the employee’s actual hire date and the first of the following month can be ignored, provided that the number of days being ignored must be deducted from the administrative period.

Coverage Requirements: What Simplification Options are Available?

ACA Regulations Require that Hours Related to

Unpaid Jury Duty, FMLA, and This Kind of Leave

Must Be Counted as Paid Hours for Eligibility

Purposes.“Present Arms!”…

What is Military Leave?

PPACA: The Employer Mandate

The hours that must be included within the chosen measurement period include:• All paid hours

• The following unpaid hours categories MUST ALSO BE INCLUDED:• Unpaid Jury Duty• Unpaid FMLA• Unpaid USERRA-protected military leave

(Generally, up to five years of leave for military purposes, including National Guard Duty, emergency call-ups, and active duty deployments. There are many exceptions to the five year limit; see 20 CFR Part 1002 §§99 et. seq. for full regulations. The law itself can be found at 38 U.S.C. 4301-4335.)

Coverage Requirements: What Hours Must Be Counted?

The Three Periods Which

Are Time-Delimited in Determining a Part-Time

or Variable Hour Employee’s Health Plan

Eligibility Are:the Measurement

Period, the Administrative Period,

and…

What is the Stability Period?

ACA: The Employer Mandate

Some new terminology under the ACA:

• The measurement period:

• A 3-, 6- or 12-month period (employer’s choice) used to measure each employee’s hours for determining full-time status under the law.

• The stability period:

• A period following, and equal in length, to the measurement period, during which the employee is eligible for employer-provided health insurance.

• The stability period may not be less than 6 months.

• The administrative period:

• An optional interim period of up to 90 days, between the measurement and stability periods, designed to offer the employer additional time for determining eligibility. The administrative period may be “split” to facilitate counting for mid-month hires.

“Large” Employers: Determining Employee Coverage Obligations


“Large” Employers: Measurement periods

2013 2014 2015

Octobe

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Novem

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Decem

ber

January

February

March

April

May

June

July

August

September

October

November

December

January

February

March

April

May

June

July

August

September

October

November

December

Measurement period Admin Stability period

Example of a 12-month measurement period:

Measurement period3 Admin Stability period

Stability period extendsthrough December 31, 2016

3 Key Takeaway: Since coverage cannot be canceled mid-stability period, if the employeefails to qualify in this measurement period, their coverage cannot be canceled untilthe end of the prior stability period , in this case December 31, 2015.

TRUE, FALSE, or MAYBE? :

The Percentage of Household Income to

Use to Test Affordability is 9.5%.

What is “maybe”?

What’s with all the controversy around 9.5% vs. 9.56%?

• The original law defines affordability by reference to “household income…”

• …and applies an indexed factor of 9.5% to that value.• The indexing is calculated by dividing the rise in average insurance

premiums by the rise in average household income, using 2013 as the base year for both measurements.

• For 2015, that ratio adjusts 9.5% to 9.56% “of household income”

• But the three safe harbors written into the implementing regulations never included a reference to indexing the affordability percentage, and the IRS has not yet issued specific guidance on this issue.

• Based on the trend of both insurance premiums and household income, the gap between the 9.5%, and the indexed value, will only grow. Conservative employers should continue to use the 9.5% value.

So…Is It 9.5%? Or Is It 9.56%? The Perils of Careless Drafting…

ACA: Affordability Monitoring

This Form is NOT the Responsibility of Fully

Insured Plan Employers to Provide to Eligible

Employees; It is Provided to the

Employee Directly By the Insurance Carrier…What is the 1095-b?

ACA: Annual IRS Reporting

Annual Reporting: Four FormsForm Title Form Originator/

Form DestinationDue Date/Method of Filing

1094-BTransmittal of Health Coverage Information Returns

Insurer files withInternal Revenue Service

Paper or Electronic, Same deadline as IRS copy of 1095-B

1094-CTransmittal of Employer-Provided Health Insurance Offer and Coverage Returns

Employer files with Internal Revenue Service

Paper or Electronic, Same deadline as IRS copy of 1095-C

1095-B Health Coverage ReturnInsurer (or Employer if self-insured); copy to employee, copy to IRS

For employee: Paper (Required),ESS (Optional), by Jan. 31For IRS: <250 forms, paper, by Feb. 28;>250 forms, electronic only, by Mar. 31

1095-CEmployer-Provided Health Insurance Offer and Coverage Return

Employer files with Employee; copy to IRS

For employee: Paper (Required),ESS (Optional), by Jan. 31For IRS: <250 forms, paper, by Feb. 28;>250 forms, electronic only, by Mar. 31

TRUE, FALSE, or MAYBE? :The Transitional Relief Rules

for Employers of 50 - 99 FTEs Announced Feb. 10,

2014 Exempt Those Employers from both Pay or Play Penalties AND Year-EndReporting Requirements in

2015.What is “false”?


Your “Cheat Sheet” to the Requirements for §6056 Reporting

Employer Size2014 tracking for

Reporting in Jan-Mar, 2015

2015 tracking for Reporting in Jan-

Mar, 2016

2016 tracking for Reporting in 2017

and later years

Less than 50 FTEs (not offering coverage or offering commercial coverage)

VOLUNTARY ONLY EXEMPT EXEMPT

Less than 50 FTEs (offering a self-insured plan)

VOLUNTARY ONLYREQUIRED

(mandate penalties do not apply)

REQUIRED (mandate penalties

do not apply)

50-99 FTEs VOLUNTARY ONLYREQUIRED (but

mandate penalties are waived)

REQUIRED

100 or more FTEs VOLUNTARY ONLY REQUIRED REQUIRED

TRUE, FALSE, or MAYBE? :Regardless of any Other

Authorizations on File, the ACA Requires Separate

Employee Authorization to Deliver Annual Reporting

Documents On-Line Rather than Printed/Mailed.

What is “true”?


Form 1095-c (Participant Copy): Electronic Delivery? Or Paper?

TRUE, FALSE, or MAYBE? :The IRS is Expanding Their

Existing W-2 Reporting System to Accommodate

Next Year’s Deluge of New 1095-c and

1094-c Reports From Employers.

What is “false”?

ACA: The New AIRS Reporting System

It’s Not “Your Grandfather’s” IRS Anymore (or so they’d like you to believe…)The IRS joins employers in the IT community of the 21st century:• The IRS is NOT expanding their W-2 reporting system to include forms 1095-c.• The new system for 1094-c and 1095-c forms is called “AIRS” (ACA Information

Returns Reporting System)• It is designed to accept XML transmissions (web-based), rather than the older,

batch transmission technology.• Employers submitting fewer than 250 forms may submit to the IRS either on

paper or via AIRS.• Employers submitting 250 forms or more MUST submit to the IRS only via AIRS.• Ascentis will submit on behalf of all employers via AIRS, regardless of the

number of forms created for a given client.• XML “instant” turnaround messaging will inform each employer whether

their submission was accepted, accepted with exceptions, or rejected.• Ascentis will follow-up on all exceptions and rejections and keep clients

informed of resolutions.

TRUE, FALSE, or MAYBE? :For Employers Changing

HRIS During the Calendar Year, It’s Permissible to

Send the Employee and IRS Two Separate Forms 1095-c

for That Year.

What is “false”?


Single 1095-c Form vs. Multiple 1095-c Forms

If Employees Can’t or Won’t Give You Their Dependent’s Social

Security Number, then on the 1095-c Form, It’s Permissible to Report

that Dependent’s “this” Instead…

What is their date of birth?


Key Details About §6056 Reporting

Here are some important details to know about the Forms 1094/5-c:• Special SSN Collection Procedures

REMEMBER! For self-insured plans this includes SSNs of covered dependents!• Employers must make reasonable attempts to collect SSNs for all covered

individuals.• Three attempts to collect the SSN are required:

• …at establishment of the employment relationship• …if not received then, by December 31 of that year (or January 31 of

following year if relationship began in December)• …if not received then, by December 31 of the following year.

• Date of Birth SubstitutionIf the employer has made and documented the attempts described above and the employee STILL has not submitted a dependent SSN, then the employer may use the dependent’s data of birth in lieu.

Participants Under this “Venomous” Program Present

Special Challenges for ACA Year-End Reporting…

What is COBRA?

ACA: Reporting COBRA Continuees

COBRA Participants and 1095-c Reporting

Here are some important details to know about your COBRA Continuees and Form 1095-c:• COBRA participants MUST be reported by the ALE

providing the insurance, NOT by any TPA who may be managing COBRA for the employer.

• The cost of coverage reported changes from the lowest cost employee-only premium to the COBRA single premium the month the individual enrolls in COBRA.

• If you’ve outsourced ALL management of COBRA records to a TPA, consider the kinds of events you may have to re-update in your Ascentis HRIS, back to January 1, 2015:

• Address changes (particularly important since these participants’ 1095-c forms will be mailed!)

• COBRA cancellations due to non-payment of premiums

Employee Members of This Type of Group, who Receive their MEC Health

Benefits from a Multiemployer Trust,

Present Special Problems for Employers Regarding

Year-End (1095-c) Reporting…What are unions?

CBAs and Multiemployer Plans

Implications of This Guidance:• Employee members of a collective bargaining unit who receive their

health plan benefits from a multiemployer plan are nevertheless required to receive their 1095-c from the employer, not the MEP trustee.

• Since there is no such thing as a “reverse Carrier Connection” to import all benefit plan changes into Ascentis on a periodic basis, the easiest way to accommodate this requirement is to build “shadow” plan tables in Ascentis and use it as the driver system of record to feed enrollment and demographic changes to the MEP third party administrator.

Collective Bargaining Health Plans (aka Taft-Hartley Plans)

TRUE, FALSE or MAYBE? :The Penalty for Failing to

Report Total Health Insurance Costs in Box 12 (Code DD) of the Form W-2 is the Same as for Filing a W-2 that is Incorrect for

Any Other Reason…What is “true”?

ACA: Healthcare W-2 Reporting

• Since 2013, reporting of aggregate health insurance costs has been REQUIRED for employers who file 250 or more W-2s each year. (Lower volume W-2 issuers are still on “indefinite reprieve” until further notice from the IRS.)

• The calculation is the same as the calculation for COBRA premiums (less any 2% administrative markup the employer might add), so employee plus employer share.

• It is reported in Box 12 of the Form W-2, with a code of “DD.”• Violations of this ACA requirement are treated just like other failures to produce a

timely and accurate form W-2, and depend on the number of failures and the timing of any corrections to those failures:

• $30 per Form W-2 if the employer correctly files within 30 days (by March 30 if the due date is Feb. 28), up to a maximum of $250,000 per year;

• $60 per Form W-2 if the employer correctly files more than 30 days after the due date but by Aug. 1, up to a maximum of $500,000 per year; or

• $100 per Form W-2 if the employer files after Aug. 1, does not file required Forms W-2 or does not file corrections and does not meet any exceptions to the penalty, up to a maximum of $1.5 million per year.

• If any violation is due to intentional disregard of the filing or correct information requirements, the penalty is at least $250 per Form W-2 with no maximum penalty.

What’s in Your W-2s (Box 12)?

It’s the Amount an Employer will Pay if it

Fails to Furnish Eligible Individuals

with a Form 1095-c by February 1, 2016 for the 2015 Tax Year…

What is $250?

ACA: 1095-c Penalties (Part I)

In Case You Hadn’t Heard!:1095-c Reporting Penalties Were Drastically Increased in June, 2015!*

“Infraction” NEW Amount(Post-TPEA 2015)

OLD Amount(Pre-TPEA 2015)

Failure to furnish Form 1094-c or 1095-c (per unfiled form) $250 $100

Annual cap on above penalty $3,000,000 $1,500,000

Lower annual cap for entities with gross receipts of less than $5,000,000 $1,000,000 $500,000

Per-filing penalty in the case of “intentional disregard” (no cap!) $500 $250

* As part of the Trade Preferences Extension Act of 2015, H.R. 1295, signed into lawon June 29, 2015.

…and exceptions for good faith attemptsto comply (timeliness) were eliminated!

It’s the Monthly Penalty Amount that Could Apply

if Your MEC Plan Fails the Affordability Test for

Any Participating Employee…

What is $250 per month?


Effective for plan years beginning January 1, 2014, the Affordable Care Act specifies one penalty if an applicable large employer (ALE) chooses not to offer health insurance to at least 95% of full-time employees (“pay”) and a different penalty if that ALE offers insurance but it fails to meet specified coverage levels (“play”) for at least 95% of full-time employees:

PPACA §4980H(a)Coverage Not Offered

PPACA §4980H(b)Coverage Offered Doesn’t Meet

Specified Levels

• Triggered if at least one employee receives tax credits or cost-sharing reductions through an Exchange

• $166.67/month times the total number of full-time employees (30 or more hours in a week) less first 30

• $250.00/month times the total number of full-time employees who receive tax credits or cost-sharing reductions through an Exchange

• Safe harbor: Cannot exceed penalty as calculated under §4980H(a)


Effective for the single plan year beginning January 1, 2015, the Affordable Care Act specifies one penalty if an applicable large employer (ALE) chooses not to offer

health insurance to at least 70% of full-time employees (“pay”) and a different penalty if that ALE offers insurance but it fails to meet specified coverage levels

(“play”) for at least 70% of full-time employees:

PPACA §4980H(a)Coverage Not Offered

PPACA §4980H(b)Coverage Offered Doesn’t Meet

Specified Levels

• Triggered if at least one employee receives tax credits or cost-sharing reductions through an Exchange

• $166.67/month times the total number of full-time employees (30 or more hours in a week)

less first 80

• $250.00/month times the total number of full-time employees who receive tax credits or cost-sharing reductions through an Exchange

• Safe harbor: Cannot exceed penalty as calculated under §4980H(a)

“REPRIEVE”: JULY 2, 2013

TRUE, FALSE, or MAYBE? :

The Penalty for Furnishing an

Erroneous Form 1095-cis the Same as for Failure to Furnish:

$250 per Form?What is “maybe”?

ACA: 1095-c Penalties (Part Deux)

In Case You Hadn’t Heard!:1095-c Reporting Penalties Were Drastically Increased in June, 2015!*

“Infraction” NEW Amount(Post-TPEA 2015)

OLD Amount(Pre-TPEA 2015)

Failure to file or erroneous return filed, when corrected within 30 days of original due date $50 $30

Annual cap on above penalty $500,000 $250,000

Lower annual cap for entities with gross receipts of less than $5,000,000 $175,000 $75,000

Failure to file or erroneous return filed, when corrected by August 1 of the year in which original filing was due

$100 $60

Annual cap on above penalty $1,500,000 $500,000

Lower annual cap for entities with gross receipts of less than $5,000,000 $500,000 $200,000

* As part of the Trade Preferences Extension Act of 2015, H.R. 1295, signed into lawon June 29, 2015.

TRUE, FALSE, or MAYBE? :Part-time Employees

Working Under 20 Hours Per Week Need Not Be

Counted When Determining “ALE” (Applicable Large Employer) Status?What is “false”?


Shared Responsibility: Am I an “Applicable Large Employer (ALE)” ?

Counting Employees:…each month is counted separately, and then averaged (and fractions are retained until the END of the computation.)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Full-Time Employees 37 36 36 37 31 35 39 38 39 35 36 38

Subject Hours non FT 1740 1670 2250 1900 1773 1640 1922 1950 2077 1850 1373 1530 (Note 1)

FTE Conversion 14.50 13.92 18.75 15.83 14.78 13.67 16.02 16.25 17.31 15.42 11.44 12.75 (Note 2)

Total Employees 51.50 49.92 54.75 52.83 45.78 48.67 55.02 54.25 56.31 50.42 47.44 50.75 617.62

617.62/12 months = 51.47 employees

1. Count only paid hours. Only the first 120 hours per month for each employee must be counted. 2. Always divide the previous line item by 120 to obtain this result, regardless of the actual number

of days or working days there were in the month.Retain fractions or decimals at this point in the calculation.


Employees and/or Hours You Can Exclude from this Calculation:

• The common law “employee” definition applies. Therefore, you can exclude:• Leased employees• Sole proprietors• Partners in a partnership• Owners of an LLC (if taxed as a partnership)• 2% or greater S-Corporation shareholders

• All hours worked outside the United States may be excluded from this calculation.

• For “affiliated employers” (as defined under IRC §414 controlled ownership group standards), FTEs of all related entities must be aggregated for the large employer test.

• Seasonal employees safe harbor: If an employer exceeds the 50 FTE count for 4 or fewer months in a year (and these need NOT be consecutive months), and the only reason they exceeded that total was due to seasonal staff, then the employer is NOT a large employer. Note that this is NOT limited to agricultural or retail employers.

Shared Responsibility: Am I an “Applicable Large Employer (ALE)” ?

While Everyone Wants to Keep their MEC

Plans in “this” Status, it Gets Increasingly

Difficult asthe Years Go By…

What is Grandfathered?

ACA: Grandfathered Plan Status

Is Your Plan Still “Grandfathered?”

A plan is grandfathered if it was in existence on the date ofenactment of the ACA (March 23, 2010), UNLESS itexperienced a change since that time that could cause it tolose grandfathered status:

1. Entering into a new policy, certificate or contract of insurance after 3/23/10. (Example: changing insurance carriers after 3/23/10, even if benefits are substantially the same.)

2. Eliminating all or substantially all benefits to diagnose or treat a particular condition. (Example: eliminating all benefits relating to Multiple Sclerosis, even though it is a rare condition.)

3. Increasing a percentage-based cost-sharing requirement (e.g., coinsurance) above the 3/23/10 level. (Example: increasing a level of coinsurance from 20% to 25% for a type of service.)

4. Increasing a fixed-amount cost-sharing requirement, other than copayments (e.g., deductible or out-of-pocket limit) by a total percentage (measured from 3/23/10) that is more than the sum of the rate of medical inflation plus 15%. This is a cumulative limit, not per year!

ACA: Grandfathered Plan Status

Is Your Plan Still “Grandfathered?”

More ways to lose grandfathered status:

5. Increasing copayments (e.g., for a doctor’s office visit) by an amount that exceeds the greater of: (i.) a total percentage measured from 3/23/10 that is more than the sum of medical inflation plus 15% OR (ii.) $5.00 increased by medical inflation measured from 3/23/10.

6. Decreasing the employer’s contribution rate toward any coverage tier for any class of individuals by more than 5% below the contribution rate on 3/23/10. This applies for ANY class of individuals, regardless of what other actions are taken. (For example, INCREASING the employer contribution rate toward employee-only coverage by 20% while simultaneously DECREASING the employer contribution rate toward family coverage by 6% will cause the plan to lose grandfathered status, despite the fact that it is a net plan improvement.)

7. With respect to annual and lifetime limits, a plan or policy that, on 3/23/10:• Did not impose an annual or lifetime limit, and later imposes one• Did not impose an annual limit but did impose a lifetime limit, and later

imposes an annual limit lower than the previous lifetime limit• Imposed an annual limit, and later reduces that limit.

The New Tax Employers

Can Look Forward to in

2018 – and You Don’t Have

to Drive a GM Vehicleto Hate it!

What is The Cadillac Tax?

The “Cadillac” Tax

• Permanent, non-deductible annual tax, beginning in 2018.

• Tax on high-cost employer sponsored health coverage.

• Purposes?– Reduce tax preferred treatment of employer-provided healthcare– Reduce health care spending by employers and employees– Help finance the expansion of health coverage under the ACA

• Who’s Impacted?– Insured plans: Employers calculate; insurers pay– Self-funded plans: Employers calculate; employers pay

“Just the Facts”

The “Cadillac” Tax

• Amount– 40% of the cost of healthcare coverage that exceeds predetermined threshold

amounts.– “Cost” of coverage is measured by including both employer and employee share,

but excludes cost-sharing amounts such as deductibles, co-pays and coinsurance– The threshold amounts have been set at $10,200 for individual coverage and

$27,500 for family coverage. These amounts should be regarded as “for planning purposes only,” because…

– …thresholds will be updated for 2018 when final regs are issued (likely will be higher, since the numbers above were set in 2010 when the law was passed).

– Threshold amounts will be indexed for inflation after 2018.

• Tax Implications?– The Cadillac Tax is an EXCISE tax, and like all excise taxes, is not deductible for

federal (corporate) tax purposes. – Since for any corporation with net income exceeding $335,000, the corporate tax

rate is 34% or 35%, the net impact of the Cadillac tax is a cost of about 54% of the amount of premiums in excess of the threshold limit.

“Just the Facts”

Of Approx. $6,650, $66,500 or $665,000: the Total Amount of ACA-Related Penalties that an

Employer with a Level Full-Time Headcount of 300

Throughout 2015 Will Probably Owe the Federal Government for the Entire Year (Assuming

Total Ignorance of all Coverage and Reporting Requirements)?What is $665,000?

*Failure to Include Health Care Costs onBox 12, Code DD, Form W-2:(Penalties Increased for Intentional Disregard)$250 per form x 300 forms…………………………………$75,000

Pay or Play Penalty, Decision to “Pay:”$166.67 x 12 mos x (300 – 80) employees..………$440,000

*Failure to Furnish Forms 1095-c(Penalties Doubled for Intentional Disregard)$500 per form x 300 forms……………………………...$150,000

TOTAL (Please Make Check Payable to “IRS”)……$665,000*Does not include turnover or miscellaneous penalties such as those for failure to provide new employees with SBC, NOC (Exchange Availability…)

ACA: Your Check, Sir or Madam?

What will it cost you to completely disregard the ACA in 2015?