OBAMACARE: What You Don’t Know CAN Hurt You

Harding & Shultz(402) 434-3000

H & S School Lawkhaase@hslegalfirm.com@KarenHaase

btruhe@hslegalfirm.com@btruhe

Policy Behind the ACA

It is important to keep in mind that the ACA’s policy purpose is to insure more peopleWhen you think about insuring as

many people as possible, the shared responsibility tax payments and requirements make more sense

General Structure of ACA

Large Employers must either• Make affordable, qualifying coverage

available to all full time employees• Pay a “shared responsibility tax” to

supplement the cost of those employees obtaining insurance on the exchange

Small employers affected too

Are You a Large

Employer?

“Large Employer” Large Employer = 50 FT + FTE / yr.

• FT: EEs > 30 hours per week avg. / mo.• FTE: EEs < 30 hours per week avg. / mo.

Computing FTE• Add all monthly FTE “hours of service”

and divide by 120• “Hour of service” means paid or entitled

to payment (vacation, holiday)

Dealing with Part-Time Staff Three Options for Salaried Staff

• Track hours• Daily equivalent if one hour worked• Weekly equivalent if one hour worked

Also the rule for calculating eligibility for employer or exchange insurance

FTE Computation Ex.Moles School District

• 4 paras work 25 hours (25)• 3 cooks work 27 hours (81)• 6 bus drivers work 15 hours (90)

100 + 81 + 90 = 271 weekly FTE hrs. 271 x 4 = 1096 monthly FTE hrs. 1096 / 120 = 9.13 FTE for month

• Keep decimal point

FT Computation Ex.Moles School District (Para Sara)

• Week 1: 33 hours• Week 2: 28 hours• Week 3: 31 hours• Week 4: 29 hours

33 + 28 + 31 + 29 = 121 121 / 4 = 30.25 NOTE: different for individuals

Are you covered?An employer’s status as an applicable large employer for a calendar year is determined by taking the sum of the total number of full-time employees…for each calendar month in the preceding calendar year and the total number of FTEs…for each calendar month in the preceding calendar year, and dividing by 12.

- 26 CFR §54.4980H-2 (proposed reg)

Counting to 50

MONTHLY computation Each month will

have “x” FT and “y” FTE Add up the 12 x’s

and 12 y’s then divide by 12

Large Employer Ex.Moles School Dist.Sep: 42, 9.3Oct: 42, 8.7Nov: 42, 7.8Dec: 42, 7.5Jan: 42, 9.2Feb: 42, 9.9

Mar: 42, 8.6Apr: 42, 8.7May: 42, 8.7Jun: 42, 8.7Jul: 42, 8.7Aug: 42, 8.7

Large Employer Ex. 42+42+42+42+42+42+42+42+42+42

+42+42 = 504 FT 9.3+8.7+7.8+7.5+9.2+9.9+8.6+8.7

+8.7+8.7+8.7+8.7 = 104.5 FTE 504 + 104.5 = 608.5 608.5 / 12 = 50.71 Round down: 50 EEs

Let’s Practice!

Shared Responsibility Tax Shared Responsibility “TAX,”

• Board stigmas if called “penalty” 2 Types of Tax

• Offering NO insurance• Offering UNAFFORDABLE or no

MINIMUM ESSENTIAL COVERAGE (MEC) insurance

Assume EHA plans meet MEC

Premium Credit In play for BOTH Tax

AssessmentsQualifications:

• AGI less than 400% of poverty

• No Medicaid or CHIP• Non-complying

employer plan

Persons in family/HH

Poverty guideline

For families/households with more than 8 persons, add $4,020 for each additional

person.

FOR 2013

1 $11,490

2 15,510

3 19,530

4 23,550

5 27,570

6 31,590

7 35,610

8 39,630

Premium Credit

Offering NO InsuranceWhat we don’t know: subgroups?What we know:

• Takes one FT EE to obtain premium credit AND insurance on exchange

• 95% safe haven: if you offer insurance to all but lesser of 5 or 5% of FT EEs

• Tax is (FT – 30) x $2,000• Ex.: 75 FT – 30 = 45 x $2,000 = $90,000

Unaffordable InsuranceWhat we know:

• Must “offer” insurance to at least 95% of FT EEs

• EE can’t pay more than 9.5% of AGI• W2 safe harbor• Tax is $3,000 x each EE who gets

insurance on exchange plus a premium credit, unless that is more than the “NO insurance” tax

If District Pays Tax No shaming

If District Pays Tax No shaming

To Avoid TaxMust “offer” insurance to at least 95%

of FT EEs EE can’t pay more than 9.5% of AGIW2 safe harbor

If District Pays Tax Tax is $3,000 x each EE who gets

insurance on exchange plus a premium credit, unless that is more than the “NO insurance” tax Employee doesn’t get this money

Unaffordable Ins. Ex.Moles School District

• 40 Certificated• 35 Classified • We “offer” insurance to all FT EEs

20 classified staff go to exchange and obtain the credit• 20 x $3000 = $60,000 (assessed monthly)

Effects of EHAWhat we know:

• EHA Board looking at cheaper options• Will be bronze level (60% of medical

costs covered, minimum)• Can create 2+ subgroups• 5% premium savings assessed in each

subgroup—saves for teachers• Can offer different plans to different

subgroups

13-14 EHA Rates

Counting to 30The term full-time employee means, with respect to a calendar month, an employee who is employed at least 30 hours of service per week, or 130 hours of service in a calendar month.

Counting to 30 Three Options for Salaried Staff

• Track hours• Daily equivalent if one hour worked• Weekly equivalent if one hour worked

Counting to 30 Standard Measurement Period

• 3-12 month lookback• Gather data for “hours of service” in

each of the weeks of the measurement period

• Divide by the number of weeks in the measurement period (can use pay per.)

• Be wary of equivalencies for monthly and yearly calculations

What does this mean? Option #1: pay for insurance

• EHA may have low-premium plan• Don’t have to use current EHA plan• If 95% of FT employees are provided

insurance, no tax assessment• Affordability calculation and 50%

EHA underwriting rule only apply to a single plan

What does this mean? Option #2: “offer” unaffordable ins.

• Subject to tax assessment of $3,000 per employee who obtains insurance and a credit on the exchange

• Have to be willing to pay ½ of the single premium if anyone takes ins.

• 5% surcharge determined separately for each EHA subgroup

• Offer date for 9/1/14 enrollment

What does this mean? Option #3: don’t offer insurance to

classified staff at all for 14-15• $2,000 x (all FT EEs – 30)• Only pay this tax if one FT person

obtains insurance and credit on the exchange

• Possible staff survey: (1) Do you have insurance? (2) How do you get it?

What does this mean? Option #4: cut hours / cut staff

• Look back window can be as short as 4th quarter for 13-14

• Employment at will• Contracts for 13-14• No RIF process for classified staff• Shared and part-time teachers:

consider carefully…

What does this mean? SIT. TIGHT. DO NOT offer current EHA plan

(unless you want to) Take a deep breath, the ACA is a

monthly process, and you can always make adjustments around yearly EHA enrollment periods

OBAMACARE: What You Don’t Know CAN Hurt You

Harding & Shultz(402) 434-3000

H & S School Lawkhaase@hslegalfirm.com@KarenHaase

btruhe@hslegalfirm.com@btruhe