Foundation’s Solution to theAffordable Care Act

Presented by John Hnat and Jason Stypick

Disclaimer: The information contained in this presentation is for informational purposes only and is not legal advice or a substitute for legal counsel.

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What is the Affordable Care Act?A quick guide to the Affordable Care Act (ACA) and how it affects employers

What is the ACA?

The Affordable Care Act is responsible for the most sweeping reform of the American healthcare

system since the introduction of Medicare and Medicaid in 1965. Provisions in the ACA are intended

to expand access to insurance, emphasize preventative care, improve quality of care, and curb rising

health care costs.

While certain provisions of the act may affect every individual or business, our focus here is on the

responsibilities placed on large employers. These responsibilities include offering health coverage or

facing a penalty, providing a statement of offered coverage to employees, and reporting to the IRS

what coverage, if any, was offered.

Play or PayThe Employer Shared Responsibility Provisions

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2 Failure to offer the required coverage may result in the employer owing one of the

two shared responsibility payment to the IRS.

Applicable Large Employers (ALEs) are required to offer affordable minimum value health

coverage to substantially all of their full-time employees (and their dependent children).

Section 4980H(a) - “Sledgehammer Penalty”

If an ALE fails to offer coverage to at least 95% of its full-time employees and their dependents, and at least one full-time employee receives a premium tax credit, then the ALE is assessed a penalty of $2,000* times the total number of full-time employees with the first 30 excluded.

Section 4980H(b) - “Tack-hammer Penalty”

If an ALE does offer coverage to at least 95% of its full-time employees and their dependents, but one or more full-time employees still receive a premium tax credit, then the ALE is assessed a penalty of $3,000* times each full-time employee that received the premium tax credit.

* Annual amounts. Penalties are assessed monthly at 1/12th of the annual amount. Penalties will also be adjusted for inflation.

Am I an Applicable Large Employer?Or, Should I Be Worried About Owing a Shared Responsibility Payment?

1 An employer is an Applicable Large Employer if it employed an average of at least 50

full-time employees (including full-time equivalent employees) per month during the

prior calendar year.

2 Employees with more than 30 hours of service per week (or 130 hours per month)

are considered full-time.

3 Full-time equivalent employees are calculated for each month by adding the hours of

service (up to 120 hours per employee) from all employees that were not considered

full-time, and dividing by 120.

ALE Determination ExampleEmployer is an Applicable Large Employer

Full-Time Employees(More than 130 Hours) 45 43 44 45 48 50 68 55 45 43 42 40

Total FT for Month(Full-Time Plus FTEs) 51.34 49.28 50.32 51.38 54.49 56.70 76.48 62.52 51.33 49.25 48.48 44.27

Full-Time Equivalent(Non Full-Time Hours / 120) 6.34 6.28 6.32 6.38 6.49 6.70 8.48 7.52 6.33 6.25 6.48 4.27

Non Full-Time Hours(Max. 120 per Employee) 761 754 758 765 779 804 1,018 902 759 750 778 512

2015 January February March April May June July August September October November December

53Monthly Average Full-Time Employee Count

645.84 total FTEs divided by 12 months

Who Are My Full-Time Employees?

1 Any employees that average at least 30 hours of service per week (or 130 hours per

month) are considered full-time.

2 The IRS allows for measuring employee hours of service by one of two methods:

Look-BackMeasurement Method

MonthlyMeasurement Method

Note: These methods are only available for the purpose of determining if an individual employee is full-time and required to be offered coverage. The ALE determination must be done as described earlier.

Identifying the employees that should be offered coverage

Monthly Measurement Method

1 Each employee’s full-time status for a month is determined by the hours they work

during that month.

2 This requires making assumptions about the hours that will be worked when trying to

decide whether to offer coverage to an employee for a given month. If an employee

unexpectedly works full-time hours during a month they were not offered coverage,

you face a potential penalty.

3 This method also opens the possibility of adding or dropping coverage for an

employee every single month.

Look-Back Measurement Method

1 An employer determines an employee’s status by measuring their hours worked over

a look-back period, and then applying that status to a subsequent period of time.

2 This method consists of three separate periods:

Measurement

During this period each employee’s status is determined by measuring their hours over a period of 3-12 months. This status then applies to each of the subsequent periods.

Administrative

This is an optional period of up to 90 days to allow the completion of all the administrative tasks required to make an offer of coverage (i.e. computing hours, completing forms, making the offer, etc.)

Stability

This is the period during which the status determined in the Measurement period is applied to the employee, regardless of how many hours are actually worked during the stability period. It must be the greater of 6 months or the length of the Measurement period.

Look-Back Measurement MethodExample of a basic setup

201301 02 03 04 05 06 07 08 09 10 11 12

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New Hire

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201701 02 03 04 05 06 07 08 09 10 11 12

12 Month Measurement 90 Day Administrative 12 Month Stability

6 Month Measurement 30 Day Administrative 6 Month Stability

Meeting the IRS Reporting RequirementsNew sections of the Internal Revenue Code

There are two new sections of the Internal Revenue Code that require information reporting

under the ACA: 6055 and 6056.

Section 6055 Section 6056

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Requires employers to report what offers of coverage were made and supply a statement to full-time employees.

This information is used by the IRS to administer the Employer Shared Responsibility provisions.

Applies to all ALEs, whether self-insured or fully-insured.

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Requires providers of health coverage to report coverage information and supply a statement to covered individuals.

This information is used by the IRS to administer the Individual Shared Responsibility provisions.

Only applies to employers that provide self-insured coverage to some, or all, of their employees.

Meeting the IRS Reporting RequirementsReporting related penalties

1 The IRS may assess a penalty in case of a late filing, a filing with incorrect or missing

information, or intentionally disregarding filing.

2 All penalties are per return and apply to the IRS filings and furnishing the statements

to your employees. Each penalty could be assessed twice.

3 The IRS may waive penalties on employers that can show a good faith effort to

comply. Late filings will not be considered a good faith effort. The deadline for filing

with the IRS is February 28th, or March 31st if filing electronically. Statements must be

provided to employees by January 31st.Late or Incorrect Filing Intentional Disregard of Filing

Penalty $250 Maximum $3,000,000

$500No Maximum

Penalty if Corrected Within 30 Days $50 Maximum $500,000

Penalty if Corrected By August 1 $100 Maximum $1,500,000

How Can FOUNDATION Help?Using FOUNDATION to help with the administration of the Employer Shared Responsibility provisions

How Can FOUNDATION Help?

1 Proper Tracking of Employee Hours of Service

Meeting the IRS Reporting Requirements

Determining Applicable Large Employer Status2

Monitoring and Measuring Employee Status Using the Look-Back Measurement Method3

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FOUNDATION will help meet the ACA requirements in several ways.

Proper Tracking of Employee HoursNo matter which measurement method you use, tracking hours correctly is now more important than ever

1 Salary Employees - Unless you will always be assuming full-time status, you may want

to track the hours of salary employees using the salary proration feature.

2 History Adjustments – Be careful when including hours on a history adjustment.

Posting hours for a long time frame to a specific date may lead to your employee’s

full-time status being reported incorrectly.

3 Hours Adjustment Worksheet – A new hours worksheet has been added to allow you

to enter adjustments for your employees hours on a monthly basis. These hours

adjustments are used only in ACA reporting.

The only way to get truly accurate reporting is to be sure you are entering accurate, hourly timecards for all of your employees.

!

Determining Your ALE Status

Determining your ALE status can be done using the Monthly Hours Report. For a given year, It

will provide you with your count of full-time employees, full-time equivalent employees, your

totals for each month, and your overall average.

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Things to Watch For:

Under the ACA, separate companies that are part of a “controlled group” are considered one employer for purposes of determining whether they are an ALE. That means that if you are using FOUNDATION for multiple companies, you will need to run this report for each company and combine the results.

If you have any salary employees that had no hours entered in a month they were paid, this report will give them estimated hours based on the Employment Status on their Employee Record. The net effect of this is that if you don’t enter hours for a salary employee, they will at least be considered a Full-Time Equivalent for any month they collect pay.

The report will alert you if the seasonal work exception may apply to you. This exception has a lot of potential variables to it, so you’ll want to look at it closer in these cases, and discuss with your legal counsel.

Monitoring & Measuring Employee StatusSetting Up Look-Back Measurement Method Tracking – Defining Measurement Groups

1 Measurement Groups are created in the Payroll Control File.

2 They are used to define the measurement, admin, and stability periods you want to

use for each group of employees. You will define ongoing and initial period rules.

3 Under the ACA, you’re allowed to set up different groups under the following

scenarios: union and non-union employees, employees in different unions, salaried

and hourly employees, and employees who primarily work in different states.

Monitoring & Measuring Employee StatusSetting Up Look-Back Measurement Method Tracking – Employee Maintenance

1 The “ACA” tab of the Employee Record is where you specify which Measurement

Group the employee belongs to.

2 You will also need to enter the start date for each employee on the “General” tab of

the Employee Record. For employees that existed prior to this feature, the hire date

was automatically inserted.

3 You can also enter an Employment Status on the “General” tab.

Monitoring & Measuring Employee StatusLook-Back Measurement Method Reporting

FOUNDATION provides three reports for monitoring and measuring employee status:

Employee Hours Tracking

The Employee Hours Tracking Report can be used to monitor each employee’s hours during their current measurement period.

It will show you how many hours they’ve worked so far, a basic projection of how many more hours they will work, and how many more hours they can work before being considered full-time.

Admin Period Summary

The Admin Period Summary Report will tell you which employees are currently in an admin period and whether their full-time status has changed from their prior measurement.

Depending on the length of your admin periods, you’ll want to run this report fairly regularly, as it will tell you who needs to receive an offer of coverage, and when the offer needs to be made.

Measured Employee Status

The Measured Employee Status Report shows you the measured status for each employee currently in a stability period.

It tells you whether an employee is part-time or full-time status and the date range during which that status applies.

Meeting the IRS Reporting RequirementsIRS forms 1094-C and 1095-C

1 FOUNDATION will allow Applicable Large Employers to meet the IRS reporting

requirements by generating forms 1094-C and 1095-C in printed and electronic

formats.

2 1095-C Parts I and II can be entered through the bulk entry interface or on each

individual Employee Record.

3 1095-C Part III can be entered only on each individual Employee Record. This part

should only be filled out for employees enrolled in a self-insured plan.

FOUNDATION will not allow for the generation of IRS forms 1094-B or 1095-B.!

4 1094-C will be entered as part of the generation process.

More InformationFurther resources on the Affordable Care Act

For questions on the setup or reporting available in Foundation, please contact our Support department at (800) 246-0800 or

review the materials available at www.foundationsoft.com.

For questions on the Affordable Care Act or its implications, please contact your legal counsel or financial/benefits advisor.

http://www.irs.gov/Affordable-Care-Act/EmployersIRS Affordable Care Act Employer Portal

http://www.irs.gov/Affordable-Care-Act/Employers/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-ActIRS Affordable Care Act Employer Shared Responsibility Provisions FAQs

https://www.federalregister.gov/articles/2014/02/12/2014-03082/shared-responsibility-for-employers-regarding-health-coverageShared Responsibility for Employers Regarding Health Coverage – Official Rule from Federal Register

http://www.irs.gov/pub/irs-dft/f1094c--dft.pdf1094-C (Draft)

http://www.irs.gov/pub/irs-dft/f1095c--dft.pdf1095-C (Draft)

http://www.irs.gov/pub/irs-dft/i109495c--dft.pdf1094/1095-C Instructions (Draft)