The Employer’s Guide to Understanding

the

Affordable Care Act

ContentsIntroduction ................................................................................................. 3

Key ACA Terms for Employers ................................................................... 6

ACA REPORTING

Requirements for Every Business ......................................................... 7

Navigating the Compliance Roadmap ................................................. 8

The Essentials of the form 1095-C ......................................................... 10

Measurement Periods: Who, What, When ............................................ 13

Manage ACA Compliance with One Complete Solution ............................................................................. 16

On March 23, 2010, President Barack Obama signed the Patient Protection and Affordable Care Act (PPACA), P.L. 111-148, best known as the Affordable Care Act, into law.

OVERVIEW OF THE HEALTH CARE LAW2010: A new Patient’s Bill of Rights goes into effect, protecting consumers from the worst abuses of the insurance industry. Cost-free preventive services begin for many Americans.1

2011: People with Medicare can get key preventive services for free, and also receive a 50% discount on brand-name drugs in the Medicare “donut hole.”1

2012: Accountable Care Organizations and other programs help doctors and health care providers work together to deliver better care.1

2013: Open enrollment in the Health Insurance Marketplace begins on October 1st.1

2014: All Americans will have access to affordable health insurance options. The Marketplace allows individuals and small businesses to compare health plans on a level playing field. Middle and low-income families will get tax credits that cover a significant portion of the cost of coverage. And the Medicaid program will be expanded to cover more low-income Americans. All together, these reforms mean that millions of people who were previously uninsured will gain coverage, thanks to the Affordable Care Act.1

2015: Certain employers (called applicable large employers or ALEs) must either offer minimum essential coverage that is “affordable” and that provides “minimum value” to their full-time employees (and their dependents), or potentially make an employer shared responsibility payment to the IRS. The employer shared responsibility provisions are sometimes referred to as “the employer mandate” or “the pay or play provisions.”2

2016: Starting January 1, 2016, the definition of an ALE will include employers that on average employ at least 50 full-time employees (including full-time equivalent employees). This is a change from the 2015 status which only applied to employees with 100+ full-time employees.

INTRODUCTION

1 Source: U.S. Department of Health & Human Services. Key Features of the Affordable Care Act By Year. www.hhs.gov

2 Source: Internal Revenue Service. Employer Shared Responsibility Provisions. www.irs.gov

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INTRODUCTIONOn June 25, 2015, the U.S. Supreme Court (the Court) ruled in favor of the federal government in King v. Burwell, regarding whether the Affordable Care Act (ACA) permits the Internal Revenue Service (IRS) to provide tax credits for individuals in states that have not established a state run health insurance exchange. The Court ruled that “Federal tax credits” through a federal exchange (also referred to as the Health Insurance Marketplace…Healthcare.gov) will continue to be available for health insurance in states that do not have a State Run Marketplace. As a result of this ruling, individuals who are receiving subsidies will continue to qualify regardless of whether they obtain coverage on a state or federal Exchange. Currently only sixteen states and the District of Columbia have established state run exchanges.

How does this affect employers?In general, subsidies are not available for employees who are eligible for employer sponsored coverage, if the coverage offered meets minimum value and affordability standards. However, the individual mandate portion of the law, that requires most all employees to maintain credible coverage or face a fine, remains intact. Employer fines related to the Employer Shared Responsibility portion of the law still apply, and will presumably be enforced this year and beyond. Employers that offer qualified credible coverage to all of their eligible employees will be unaffected by the ruling. Employers who do not, will want to focus on becoming ACA compliant to avoid penalties.

All of the ACA provisions and extensive reporting requirements remain in place for employers. This guide is designed for all employers and aims to provide a better understanding of the core requirements of the Affordable Care Act.

For more information on how Netchex can help your business manage the requirements, click here.

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Credit: Getty Images

“The [ACA], created the most significant government health care program since the Medicare and Medicaid legislation in the 1960s. The law’s complexity is compounded by the intricacies and interdependencies of health insurance and the health care delivery system that the legislation and related regulations have struggled to address.- MARK O. DIETRICH, CPA/ABV AND BRIAN K. MARKS, “Ten things CPAs Should Know About the Affordable Care Act.” Journal of Accountancy. July 2014

KEY ACA TERMS FOR EMPLOYERSAdministrative Period: A period up to 90 days, following the standard measurement period, to determine eligibility for ongoing employees.

Affordable Coverage: Employer coverage is considered affordable - as it relates to the premium tax credit - if the employee’s share of the annual premium for the lowest priced self-only plan is no greater than 9.56% of annual household income. People offered employer-sponsored coverage that’s affordable and provides minimum value are not eligible for a premium tax credit.

Affordable Insurance Exchange: Also known as the health insurance “Marketplace,” the Affordable Insurance Exchange is a new transparent, competitive insurance marketplace where individuals and small businesses can purchase affordable and qualified health benefit plans.

Applicable Large Employer: An applicable large employer is an employer that employed on average employs at least 50 full-time employees (including full-time equivalent employees) on business days during the preceding calendar year.

Broker: An agent or broker is a person or business who can help you apply for assistance paying for coverage and enroll in a Qualified Health Plan (QHP) through the Marketplace. They can make specific recommendations about which plan you should choose. They are also licensed and regulated by states and typically get payments or commissions from health insurers for enrolling a consumer into an issuer’s plans. Some brokers may only be able to sell plans from specific health insurers.

Employer Shared Responsibility: Under this provision, beginning in 2014, business owners with at least 50 full-time or full-time equivalent (FTE) employees that do not offer health coverage to their full-time employees may be subject to a shared responsibility payment under the health care law. Click here to see more information on the Employer Shared Responsibility Provision

Form 1094-C: Form 1094-C must be used to report to the IRS summary information for each employer and to transmit Forms 1095-C to the IRS. Click here to see more information on Form 1094-C

Form 1095-C: Form 1095-C is filed and furnished to any employee of an ALE member who is a full-time employee for one or more months of the calendar. ALE Members must report that information for all twelve months of the calendar year for each employee.Click here to see more information on Form 1095-C

Full-time Equivalent Employee (FTE): A part-time or variable hour employee who has averaged 30 or more hours over a predetermined “look-back” period. Once an employee reaches FTE status, they become benefits-eligible and the employer must offer them affordable coverage.

Offer of Coverage Codes: These codes tell the IRS not only whether coverage was offered, but also if dependents were eligible, whether it met minimum coverage requirements, etc. Click here for more information on offer of coverage codes

Regular Full-time Employee (RFT): An employee, that when hired, is reasonably expected to work 30 hours or more per week. RFTs will be eligible for benefits after a traditional waiting time.

Safe Harbor Premium: The safe harbor premium is the monthly employee amount for single coverage in the lowest cost plan that meets the minimum essential coverage rules. This safe harbor premium amount will be used in reports, charts, and graphs to show how affordable your plan is when applying one of more of the safe harbor rules.

Safe Harbor Rules: The three affordability safe harbors are (1) the Form W-2 wages safe harbor, (2) the rate of pay safe harbor, and (3) the federal poverty line safe harbor. These safe harbors are all optional. An employer may use one or more of the safe harbors only if the employer offers its full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan that provides minimum value for the self-only coverage offered to the employee. An employer may choose to use one or more of the safe harbors for all of its employees or for any reasonable category of employees, provided it does so on a uniform and consistent basis for all employees in a category.

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Click here for additional glossary terms from Healthcare.gov6

Under the Affordable Care Act, every business is responsible for collecting, documenting, and proving information to the IRS. A common misconception is that an organization is in the clear if they have very few people who elect insurance or have only part-time employees. Current guidelines require employers to document and prove things like employer status, employee status, and benefits offered, whether or not they were elected.

The chart below details the reporting requirements for all business based on employee size:

ACA REPORTING REQUIREMENTS FOR EVERY BUSINESS

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ACA REPORTING NAVIGATING THE COMPLIANCE ROADMAP

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“It continues to surprise me how few business owners have had someone take the time to simply explain to them what “1095 Reporting” is and what they need to be doing about it.- Aaron Travis, Sales Engineer, Netchex

ACA REPORTING - THE ESSENTIALS OF THE FORM 1095-C

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We’ve broken the 1095 form in to 4 main components you need to understand. Once we look through the form together, we see pretty quickly why we NEED a system that can manage this for us!

If you’re interested in the full instructions – check those out here.

1. Think of a 1095 as a W2 for the affordable care act…The 1095 is how the IRS wants employers to report on benefits that employees were eligible for in a calendar year. So, in January of each year, we’ll be providing a 1095 form to each one of our employees that average more than 30 hours for any single month this year. We’ll also file a single 1094 form that will provide our company totals to the IRS. That’s why we don’t want to wait to get started on this!

2. The Easy PartPart 1 of the 1095 is a piece of cake - name, address, company name, FEIN, etc. Piece of cake, right? We’ve got this under control.

3. Now I need some help...Part 2 of the 1095 is where it gets scary. Take a look at the form below and what I’ve got to report on for every one of my full-time employees:

ACA REPORTING - THE ESSENTIALS OF THE FORM 1095-C

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We have to designate by month whether coverage was OFFERED.  Notice, not whether it was elected, but simply if they were eligible.  Now, you’d think a simple checkbox would do the trick right?  Wrong.  The IRS has provided a list of 9 possible codes to enter for each month.  These codes tell the IRS not only whether coverage was offered, but also if dependents were eligible, whether it met minimum coverage requirements, etc.  Check out this link if you’re interested in what the different codes are and what they mean.

Remember that with the Affordable Care Act, the definition of “Full Time Employee” has changed. So, even my people that are Part Time Employees still have to be measured for their look-back period to ensure they don’t meet the federal definition of a Full Time Employee. Someone has to keep a running calculation of that! Next, I’ve got to designate what the lowest cost employee-only coverage available was and then choose from another list of 9 possible codes to designate whether the coverage was “affordable” or not. There’s a little more to it than that, but that gives you a decent overview.

4. Dependent InformationThe last section is only for companies that are self-insured.  If you are self-insured, you’ll also need to report on dependents that were actually covered by the plan.

ACA REPORTING - THE ESSENTIALS OF THE FORM 1095-C

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What Should I Do About It?

ACT NOW:  If you’re just now starting to tackle ACA, you’re already behind the 8-ball and you’re not alone.  Lots of companies haven’t been tracking these numbers because no one has sat down and explained any of this to them.  Your best course of action is to decided to do something NOW! Every month you delay puts you further behind on the tracking you’ll need to do the 1095 reporting.

SINGLE SOLUTION: Next, find a system that does Benefits Administration AND Payroll in a single system – NOT two systems that are “integrated” together.  We all know how well so-called “integrated solutions” works right?  As you can see, we need to tack hours worked right next to benefit plans offered. The ONLY way to administer this without manual intervention is to find a system that handles both sides of the equation.  Stand Alone benefits and payroll products won’t get you where you need to be.  Here’s another great article on why you need a single system to tackle this.

ASK QUESTIONS: As helpful as I hope this article is, if this is the first time you’re hearing about this form and your responsibility, someone has not been doing their job to serve as your advocate and advisor. ACA is complex and there is no such thing as a stupid question. Visit netchexonline.com/aca-library for more helpful resources.

ACA REPORTING - MEASUREMENT PERIODS: WHO, WHAT, HOW?WHO TO MEASUREThe ACA has changed the definition of “full-time employees” as anyone that averages more than 30 hours. Salaried, non-exempt managers expected who work more than 30 hours can simply be classified as “full-time” and are eligible for benefits. However, part-time or variable hour employees is where it gets a little tricky...

The final regulations provide two measurement methods for determining whether an employee has sufficient hours of service to be a full-time employee. One method is the monthly measurement method under which an employer determines each employee’s status as a full-time employee by counting the employee’s hours of service for each month. The other method is the look-back measurement method under which an employer may determine the status of an employee as a full-time employee during a future period (referred to as the stability period), based upon the hours of service of the employee in a prior period (referred to as the measurement period).3

NOTE: ACA measurement periods apply only to part-time and/or variable hour employees.

WHAT TO MEASURE Initial Measurement Period: 3 to 12 month period (selected by the employer) that “looks back” to an employee’s date of hire to determine if a new hire worked ≥ 30 hours per week on average. If yes, that employee is now a Full-time Equivalent (FTE) and is now eligible for benefits.

Stability Period: a period of at least six (6) consecutive calendar months, no shorter than the initial measurement period, that determines how long that FTE can remain on an elected plan.

Standard Measurement Period: 3 to 12 month (as selected by employer) look back period to measure and determine FTE status for ongoing part-time employee, measured one-time annually at the same time every year.

Administrative Period: a period up to 90 days, following the standard measurement period, to determine eligibility for ongoing employees.

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Each newly hired part-time employee will have their own Initial Measurement Period based on their hire date. If a new employee is determined to be a full-time employee during the initial measurement period, you must offer coverage within 13 months of their start date. A new employee becomes an ongoing employee once they have completed at least 1 Standard Measurement Period.

HOW TO MEASURE ACA LOOK-BACK PERIODS

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ACA REPORTING - MEASUREMENT PERIODS: WHO, WHAT, HOW?

“Employers expect 2016 & 2018 will be the costliest years for ACA compliance, according to results from the International Foundation’s latest survey. - Read more here

MANAGE ACA COMPLIANCE WITH ONE COMPLETE SOLUTION

Applicable Large Employer & Full-Time Equivalent Employee ReportsThe step-by-step ACA Setup provides educational references and access to reports like the Applicable Large Employer report along the way.

Simplified Affordability & Measurement ReportingACA Central also makes reporting simple by tracking and measuring employee eligibility for you. Information from your benefits offered plans is captured to streamline everything from affordability calculations to minimum essential coverage.

The Netchex ACA Central dashboard is your complete ACA management tool. Measure, analyze, and track employee information in one location to automatically generate forms 1094c and 1095c.

Guided Reporting SetupThe ACA Central reporting setup tool walks you through a simple setup process to configure company specific parameters such as look back periods and administrative windows.

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Our team is here to bring you the best in employer services and ACA compliance. We continually monitor the ongoing changes of the ACA to ensure our clients are compliant at every turn. The Netchex difference means one complete system of record to manage

your employee base from recruitment to retirement.

Netchex is a trusted provider of payroll, human resources, time management, and benefits outsourcing services.

Netchex was founded in 2003 by two executives working in the payroll industry at a publicly traded firm who were convinced that there was an easier and better way to

manage payroll. Embracing three tenets - web integration for technology, accountability for service, and value for price delivery, Netchex has quickly grown into an industry leader

in web-based payroll, human resource and benefits management services.

Netchex has offices in five states and more than 3,000 businesses that trust us with their payroll needs. Netchex has been listed on the Inc. 5000 list of fastest-growing, privately

owned businesses in the country for the past three years.

Let’s talk. Call (877) 729-2661 or visit us online at www.netchexonline.com/aca

ABOUT NETCHEX

GIVE YOU BUSINESS TOTAL ACA COMPLIANCE