understanding the affordable care act: should you pay or play?
DESCRIPTION
The Affordable Care Act (ObamaCare) is upon us and there’s a lot to do in order to be ready for the employer mandate coming in Jan 2015. It starts with determining if you should pay or play. Jennifer Kraft, gives us an update of where healthcare reform stands now and how to calculate your real cost. She’ll also cover: what steps should you be taking right now to determine whether you should pay or play; how can you ensure that you’re minimizing the financial impact of the ACA on your business? Jennifer Kraft of Seyfarth Shaw LLP, will review this pay or play mandate and ways employers can mitigate the financial impact, including: ◾Are you even subject to the Affordable Care Act and if you are, what are your options? Which employees must you offer coverage to or pay a penalty? What are the state exchanges and how do they work with the employer mandate? ◾How is the employer penalty calculated? ◾How will the expansion of eligibility for Medicaid in your state affect the employer penalty? How do you discover whether your state’s ruling will impact your employees and who you will need to provide insurance to? ◾If your employee hours vary (i.e., part-time and fluctuating schedule workers in industries such as retail, hospitality, and health care), how do you calculate your ACA liabilities? ◾What steps should you be taking right now to determine whether you should pay or play? How can you ensure that you’re minimizing the financial impact of the ACA on your business? In addition, EPAY will briefly discuss how a time and labor management system can help you monitor and track the data required to make these decisions and manage the ACA on an ongoing basis. Automated tools from your time-tracking system, such as reports and alerts, will be critical to managing who is eligible and mitigating the risk of non-compliance. For more than 60 years, Seyfarth Shaw has been recognized as one of the “go-to” labor and employment firms for business by providing extraordinary, cost-effective results. EPAY Systems, Inc. has joined forces with Seyfarth Shaw to educate employers of distributed labor environments on how compliance risk can be minimized .TRANSCRIPT
Understanding the Affordable Care Act: Should You Pay or
Play?
Featuring Seyfarth Shaw LLP
©2012 Seyfarth Shaw LLP
EPAY Systems -- designed to meet the needs of your complex,
distributed workforce
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• Reduce your labor costs by 5% or more
• Keep you in control and in compliance
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Today’s Discussion
The Affordable Care Act is upon us and there’s a lot to do in order to be ready for January 1, 2014.
Does your company even need to be concerned?
If so, who is eligible for health insurance at your company?
How do you calculate whether it’s better to offer health insurance to your employees or just pay the penalty?
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Our Speaker
Jennifer A. KraftPartner, Seyfarth Shaw LLPEmployee [email protected](312) 460 -5000
©2012 Seyfarth Shaw LLP
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Ask Your Questions
To ask a question, simply type your question in the
“Question” box on the right side of your screen.
©2012 Seyfarth Shaw LLP
Legal Disclaimer
The contents of this presentation should not be construed as legal advice or a legal opinion on any
specific facts or circumstances.
These materials are intended for general information purposes only, and you are urged to consult a lawyer concerning your own situation and any specific legal
questions you may have.
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©2012 Seyfarth Shaw LLP
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Current Health Care Landscape
Employer-provided coverage
Individual PolicyMedicareMedicaidTRICARE
Uninsured50 million people16% of population
Population = 311 Million
©2012 Seyfarth Shaw LLP
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Exchanges
IndividualMandate
EmployerMandate
GuaranteedIssue/
Community Rating
Medicaid Expansion
Overview of 2014 Health Care System
©2012 Seyfarth Shaw LLP
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Projected Health Care Landscape
Employer-provided coverage
Individual PolicyMedicareMedicaidTRICARE
Uninsured18 million people5% of population
Population = 311 Million
©2012 Seyfarth Shaw LLP
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Medicaid Expansion• Following the Supreme Court decision on the ACA, states may choose whether to expand Medicaid coverage
► Some Republican-led states have expanded
► Arkansas model of using funds to insure Medicaid-type offerings
• Employees with income below the thresholds shown below may not be eligible for Medicaid if their state of residence does not expand coverage
Family Size Federal Poverty Level 133% of FPL
1 $11,490 $15,281
2 15,510 20,628
3 19,530 25,975
4 23,550 31,321
5 27,570 36,668
6 31,630 42,068
• These employees will be more likely to seek coverage:
► Through the exchanges, or
► From their employers
©2012 Seyfarth Shaw LLP
Participating in Medicaid Expansion?
Yes Leaning Yes Leaning No No Undecided
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How Will Individuals Get Health Coverage? – Medicaid Expansion
©2012 Seyfarth Shaw LLP
Health Benefit Exchanges
or“Marketplaces”
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• State-based collection of health insurance offerings (“Qualified health plans”)o Private and non-profit insurerso Essential health benefitso If state did not establish, Federal government stepped in
Illinois has a State-Federal partnership exchange
• 2014o Individuals (with tax credits and cost-sharing subsidies)o Small businesses (100 or less employees)
• 2017o Large employers (more than 100 employees)
Exchanges (Now Called Marketplaces)
©2012 Seyfarth Shaw LLP
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State Decisions on Exchanges
Establishing State Exchanges?
State Exchange State/Federal Partnership Federal Exchange
©2012 Seyfarth Shaw LLP
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Exchanges/Marketplaces
• Each state will have one or two exchanges:o Individual Exchange + Small Business Health Operations
Program Exchange (SHOP Exchange)OR
o Combined exchange for individuals and small businesses
• All individuals can purchase coverage through the exchange, regardless of:
Income level Employment status
©2012 Seyfarth Shaw LLP
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Exchanges / Marketplaces
Family Size2013 FederalPoverty Level 133% of FPL 250% of FPL 400% of FPL
1$11,490 $15,281 $28,725 $45,960
215,510 20,123 $38,775 $62,040
319,530 25,975 $48,825 $78,120
423,550 31,321 $58,875 $94,200
527,570 36,668 $68,925 $110,280
631,590 42,068 $78,975 $126,360
©2012 Seyfarth Shaw LLP
Employer Mandate
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Employer Mandate – Large Employers Only
o Threshold for “Large Employer” = 50 Full-time Equivalent Employees in prior year
o Full-time employees = 30 hours per week, on average
#FULL-TIME EMPLOYEES
Aggregate # hours worked/ month by part-time employees
________ Divided by 120
#Full-time equivalent employees
You must count all employees working for any company within the corporate family (as determined by IRS rules)
©2012 Seyfarth Shaw LLP
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Employer Mandate
• Employer “Shared Responsibility” starting in 2014o If:
Employer has 50 or more full-time equivalent employees Add each month’s calculation up in the prior year and divide
by 12 to get average monthly count, but note 2014 transition relief
o Then: The employer is required to provide affordable “minimum
essential coverage” to all full-time employees and their dependents Dependents does not include spouses
o Or else: The employer will be assessed a penalty if an employee
receives a tax credit or subsidy through an Exchange
©2012 Seyfarth Shaw LLP
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Employer Mandate
• Employer “Shared Responsibility” — Penalties
► Failure to Provide Minimum Essential Coverage (“No Coverage Penalty”)
OR
► Failure to Provide Affordable Coverage (“Inadequate Coverage Penalty”)
©2012 Seyfarth Shaw LLP
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No Coverage Penalty
• Employer Fails to Provide Minimum Essential Coverage o At least one employee receives a tax credit or subsidy
through a state-based exchange All full-time employees = 95% of full-time employees
o Penalty = $2,000 X # of Full-time Employees Subtract first 30 full-time employees when calculating the
penalty
o Assessed employer-by-employer within the controlled group 30 person deduction must be spread ratably among all
employers
©2012 Seyfarth Shaw LLP
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No Coverage Penalty
• Minimum Essential Coverage o Group health plan o That is not excepted benefits
Dental only, vision only
o Could be preventive care only
©2012 Seyfarth Shaw LLP
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No Coverage Penalty
• Exampleo Employer employs 55 full-time equivalent employees, 45 of
which are full-time employees o The employer offers coverage to 35 of its full-time
employees, 77%, but chooses not to offer health insurance coverage to 10 full-time employees
o One of those employees who was not offered coverage purchases individual coverage through Exchange with a tax credit
o The employer will be assessed a penalty of $30,000 (45-30) X $2,000
©2012 Seyfarth Shaw LLP
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Inadequate Coverage Penalty
• Employer offers health insurance coverage, but not affordable coverage that provides minimum value
► Affordable – Cost of coverage no more than 9.5% of household income
► Minimum value – Covers at least 60% of actuarial value of health costs
► Note: No coverage to an employee (where part of the 5% leeway) would equate to coverage not offering minimum value
• Any employee receives a tax credit or subsidy through a state-based exchange
©2012 Seyfarth Shaw LLP
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Inadequate Coverage Penalty
ADEQUATE HEALTH COVERAGE
AFFORDABLE MINIMUM VALUE
• Employee-only premium cost (regardless of what coverage employee elects) cannot exceed 9.5% of household income. May use:
• W-2 wages
• Rate of Pay (hourly rate for each hourly employee multiplied by 130 hours per month)
• Federal Poverty Line* New guidance suggests may only use reduced premium under Wellness for tobacco cessation programs
• Plan must cover at least 60% of the actuarial value of health costs (medical, hospital, prescription drug, lab, etc.)
• Calculated in one of three ways
• HHS Calculator
• Safe Harbor Checklist
• Actuarial Certification
©2012 Seyfarth Shaw LLP
PENALTY
THE LESSER OF:
$2,000 x (Total No. of Full-Time Employees – 30)
$3,000 x No. of Full-Time Employees who receive a tax credit or subsidy and purchase coverage through an Exchange
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Inadequate Coverage Penalty
©2012 Seyfarth Shaw LLP
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Inadequate Coverage Penalty
• Exampleo Employer employs 55 full-time equivalent employees, 45 of
which are full-time employees. o Employer offers health insurance to all 45 full-time
employees, but the insurance only covers 50% of costs. o Five employees receive a credit through the exchange. The
employer will be assessed a penalty of $15,000 (5 X $3,000). Note this is less than $2000 x (45 – 30) full-time employees
©2012 Seyfarth Shaw LLP
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Inadequate Coverage Penalty
• Strategies for Achieving Affordabilityo Set employee-only coverage premium at 9.5% but increase
dependent level costs: Assume an employee has $30,000 a year in household income
Premium is $2,400 for employee-only coverage (8% of household income) and $6,000 for family coverage (20% of household income)
The employer will be deemed to have offered the employee affordable coverage, even if the employee elects family coverage
©2012 Seyfarth Shaw LLP
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Inadequate Coverage Penalty
• Strategies for Achieving Minimum Valueo Reduce participant cost-sharing
Co-insurance, co-pays, deductibles
Wellness programs that reduce cost-sharing cannot be considered, except for tobacco-cessation programs
o Add benefits Cover additional services
o Add HRA/HSA component With employer contributions
©2012 Seyfarth Shaw LLP
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Full-Time Employee
• What is a Full-Time Employee?o Those who work, on average,
30 hours per week or
130 hours per month
o Full-time status determined on a monthly basis
o Measurement & Stability periods Measurement period (look-back) could range between 3-12 months
Stability period must be at least as long as the look-back period and can be no shorter than 6 months
Administrative Period up to 90 days between the two To determine who will be eligible, notify them and enroll them
©2012 Seyfarth Shaw LLP
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
2014 2015
Measurement Period Stability Period Admin
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Measurement and Stability Periods
©2012 Seyfarth Shaw LLP
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• May use different Measurement and Stability Periods for:
Salaried and hourly employees
Employees of different entities
Employees located in different states
Collectively bargained with different collective bargaining agreements
Safe Harbor for Current Employees
©2012 Seyfarth Shaw LLP
Optional administrative period. Overlaps with stability period
New measurement period begins (for 2016 stability period)
Stability period (following 2013 measurement period)
2014 2015 2016
Stability Period #1 Measurement Period #3
Measurement Period #2 Stability Period #2Admin
Admin
Starting with 2014, every year will feature a simultaneous measurement and stability period
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Overlapping Periods
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
©2012 Seyfarth Shaw LLP
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When Must Coverage Be Offered?
• Full-time position
► If know that the position is more than 30 hours/week, must offer coverage within 3 months of hire
► May be allowed to take 6 months, depending on facts and circumstances at time of hire
► Monitor hours going forward under Measurement Period approach
©2012 Seyfarth Shaw LLP
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• Based on facts and circumstances at date of hire,
• Cannot determine that employee is reasonably expected to work, on average, at least 30 hours per week (or 130 hours per month)
• The IRS may disagree with determination and impose penalty if every crew member is labeled as “variable hour” but many end up working full-time
What is a “Variable Hour” Employee?
©2012 Seyfarth Shaw LLP
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• Examples*
► Part-time employees
► Hourly employees with fluctuating schedules
► Seasonal employees
*These are merely examples of individuals that might be considered variable hour new hires. Facts and circumstances may limit an employer’s ability to treat these employees as variable hour new hires.
• NOTE: Expected (short) length of employment can be taken into consideration, but only for 2014
What is a “Variable Hour” Employee?
©2012 Seyfarth Shaw LLP
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What is a “Seasonal Employee”?
• Seasonal Employee
► No definition for purposes of theEmployer Mandate
► Through 2014, employers may makea good-faith interpretation of the term
► Example
• Employees hired for summer season
• Employees hired over holiday break
©2012 Seyfarth Shaw LLP
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When Must Coverage Be Offered?
• “Variable hour” o New hires must be offered coverage within 13
months of hire date (or start of next calendar month thereafter),
o if they work at least 130 hours per month on average during that time
©2012 Seyfarth Shaw LLP
Stability Period coverage begins April 1, 2015 (and continues through March 31, 2016)
Variable Hour New Hire – Hire Date February 15, 2014
Measurement Period ends February 14, 2015Administrative Period From February 15 – March 31
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
2014 2015 2016
Measurement Period #1 Stability Period #1
Measurement Period #2
Employee switches to ongoing employee measurement period effective October 1, 2014
Stability Period #2
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When Must Variable Hour New Hires be Offered Coverage?
©2012 Seyfarth Shaw LLP
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Transition Relief for 2014
• Shorter 6-Month Determination Period for 2013 (for purposes of determining “large employer” status)
o Any 6 consecutive months
o Normally would look back to prior 12 month year
• Shorter Measurement Period for 2013 (even if using a 12-Month Measurement Period going forward)
• Off-Calendar Year Plans can wait until first day of Plan Year after Jan. 1, 2014
• Dependent Coverage Not Required in 2014
o Never required for spouses
©2012 Seyfarth Shaw LLP
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Special Rule: Breaks in Service
Length of Break Length of Employment
Result Upon Rehire
More than 26 weeks
N/A Treat employee as new hire (i.e., start new measurement period and disregard prior service)
Less than 26 weeks but more than 4 weeks
Shorter than break
Treat employee as new hire (i.e., start new measurement period and disregard prior service)
Less than 26 weeks but more than 4 weeks
Longer than break
Continue existing measurement period (0 hours counted during break*)ORContinue coverage for remainder of stability period
Less than 4 weeks
N/A Same as above
©2012 Seyfarth Shaw LLP
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Special Rule: Breaks in Service
• For “special leaves” employees must not be penalized for breaks in serviceo Two methods:
Apply average hours worked before and after leave to determine “hours” equivalent during leave,
Exclude leave period when calculating average hours
o Special leaves include: FMLA
USERRA
Jury Duty
©2012 Seyfarth Shaw LLP
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Special Rule: Breaks in Service
• Employees on paid leave must be credited with hours of service during leave, regardless of length!!!!!
©2013 Seyfarth Shaw LLP
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Special Rule: Other Terminations of Coverage
• No penalty if:o Employee is offered but fails to elect coverage during open
enrollmento Employee fails to pay premiums so coverage terminates
• Grace period runs through conclusion of plan year to which employee’s failure relates
©2012 Seyfarth Shaw LLP
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Nondiscrimination Requirements
• Nondiscrimination Rules Extended to Insured Plans► Insured plans may not discriminate in favor of highly-
compensated employees ► Prior to PPACA, Code Section 105(h) applied to self-funded plans
• No discrimination in (1) eligibility or (2) benefits
► Post-PPACA, similar rules apply to fully insured plans, BUT► Penalty is different
• $100 per day per non-highly compensated employee
• Civil action to enjoin noncompliance (or to seek appropriate equitable relief)
• No imputed income penalty for highly compensated employee
Doesn’t apply to grandfathered plans
©2013 Seyfarth Shaw LLP
©2012 Seyfarth Shaw LLP
Key Considerations
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Key Considerations
• Employers are not required to pay 100% of the cost of coverageo Employees can be required to contribute to the cost of
coverage, in increasing amounts based on increasing incomeo Employees can be required to pay the full cost of dependent
coverage
• Large employers are only required to offer coverageo There is no penalty if an employee declines coverageo Not all employees will elect the coverage that is offered
©2012 Seyfarth Shaw LLP
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Next Steps
• Start to project cost of optionso Determine maximum number of employees who could elect
coverageo Determine number of employees likely to elect coverage
• Select Measurement Period and Stability Periodo Document
• Consider design options for 2014o Wellness rewards
©2012 Seyfarth Shaw LLP
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Homepage
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Quick Access to Resources
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Shaw LLP
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Sortable FAQ
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ACA Resource Center
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EPAY Systems
Michelle Lanter Smith
Chief Marketing OfficerEPAY Systems, Inc.
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Real Time Data Collection
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Secure web management
Data Collection
Data Export Payroll
Payroll Process
or
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EPAY’s Mobile Expertise
John Gaudiuso
Sales EngineerEPAY Systems, Inc.
Contact John at:[email protected]
Today’s Expert
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Determining FTE’s in Blueforce
• Compare all employees average hours to AHA guidelines to determine total FTE’s
• Will give total Full Time Employees (> 30 hours)
• Will give total Part Time Employees (< 30 hours)
• Total the two to determine total FTE’s
• Could also use alerting to ensure employees not going over 30 hours per week
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Determining Average Hours in Blueforce
• Calculate employees’ average hours per week from hire date
• Report to show the employee, the hire date and the average hours worked per week
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Track Covered Employees in Blueforce
• Report to give information on average hours worked per week
• Includes whether employee has insurance
• Easily identify employees that do not have coverage
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Upcoming Education
• New Time & Attendance Technologies for Tracking the Mobile Workforce Webinars. May 30: 10:00 cst
• California Wage & Hour Labor Law--Avoiding Common Pitfalls with a Distributed Workforce. June 26: 12:00 cst
• How to Avoid Costly Wage & Hour Pitfalls for Healthcare Employers with a Distributed Workforce. Sept 25: 12:00 cst
• How to Avoid Costly Wage & Hour Pitfalls for Employers in the Hospitality Industry. Nov 6: 12:00 cst
Register at www.EPAYsystems.com
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Connect With Us
Connect with EPAY:o LinkedIn – follow our company page
at EPAY Systemso Twitter -- @EPAYsystemso Sign up for our e- newsletter at
www.EPAYsystems.com
Connect with Seyfarth Shaw LLP:o Wage & Hour Litigation Blog
http://www.wagehourlitigation.com/o Twitter - @SeyfarthShawLLPo Twitter - @SeyfarthEBLaw
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Thank You!