PPACA 101: REGULATORY RISK REDUCTION FOR IMPLEMENTATION OF THE AFFORDABLE CARE ACT’S EMPLOYER MANDATE INSTRUCTOR: Jason N. Sheffield, Managing Attorney

PPACA 101:REGULATORY RISK REDUCTION FOR IMPLEMENTATION OF THE AFFORDABLE CARE ACT’S EMPLOYER MANDATE

INSTRUCTOR:

Jason N. Sheffield, Managing Attorney

WILLIS COMPLIANCE ACADEMY

A SERVICE OF THE NATIONAL LEGAL & RESEARCH GROUP



PROGRAM OVERVIEW

I. Introduction to the Employer Mandate· What constitutes a “Qualifying Offer of

Coverage?”

II. Defining the Employer· Who is an Applicable Large Employer?

III. Defining the Employee & Applicable Dependents

· To whom must the employer make the “Qualifying Offer?”

IV. Understanding the Cooperative Nature of ACA Compliance

· Contracting ACA compliance with Collective Bargaining Agents, Leasing Agencies & Independent Contractors

PPACA 101 (2015) | 2

INTRODUCTION TO THE EMPLOYER MANDATEWhat Constitutes a “Qualifying Offer of Coverage?”

Section One



FALLACY NO:

“We offer minimum essential coverage to all of our fulltime employees, so we’re not subject to any ACA penalties”

1

THE “PAY OR PLAY” CONTINUUM

1. Determine ALE Status (50+/FTE) NO No Pay or Play Obligation =

No Penalty

Note:

2015 Transition Relief Rules

YES

2. Offer of Minimum Essential Coverage (95% of FTE population/pre-waiver) NO

Penalty = $2,000/year/FTE (-30 FTEs)

YES

3. Is the Offer Affordable? (≤9.50% mainland FPL) NO

Penalty = $3,000/year/FTE deemed eligible for public

exchange subsidy FIX

Immediately adjust prospective individual wage to >89.50%

mainland FPL

YES

4. Is the Offer Valuable? (≥60% actuarial value) NO

Penalty = $3,000/year/FTE deemed eligible for public

exchange subsidy FIX

Adjust plan-wide value on a prospective basis (renewal)

YES

5. Natural Born/Adoptive Dependents Eligible for MEC to Age 26? NO

Penalty = $2,000/year/FTE (-30 FTEs) FIX

Adjust dependent eligibility prospective basis (immediate or

renewal)

YES

Qualifying Offer & Full “Play” Scenario = No Penalty

PPACA 101 (2015) | 5

FALLACY NO:

“We satisfy the qualifying offer methodology because employees and their spouses may enroll in minimum essential coverage following 90 days of service. ”

2

WHAT IS A QUALIFYING OFFER?

PPACA 101 (2015) | 7

1A Qualified Offer:

Minimum Essential Coverage

providing Minimum Value

offered to full-time employee with

employee contribution for self-only coverage equal to or less than 9.5% mainland single federal poverty line

and

Minimum Essential Coverage offered to spouse and dependent(s)

FORM: 1095-CPART II, LINE 14OFFER CODES

DEFINING THE EMPLOYERWho is an “Applicable Large Employer?”

Section Two



FALLACY NO:

“For 2015, we only have to offer coverage to 70% of our employees in order to satisfy the ACA’s employer mandate”

3

EMPLOYER MANDATE - 2015

PPACA 101 (2015) | 10

Two Types of Transition Relief for 2015

PHASE-INS BASED ON EMPLOYER SIZE & PERCENTAGE OF OFFER POPULATION

Employer Size 2015 Plan Year 2016 Plan Year +

1–49 full-time employees or full-time equivalents Does not apply Does not apply

50-99 full-time employees or full-time equivalents* Does not apply

Employer must offer coverage to 95% of full-time employees

and dependents to age 26

100 or more full-time employees or full-time

equivalents

Employer must offer coverage to 70% of full-time employees and dependents

to age 26

Employer must offer coverage to 95% of full-time employees

and dependents to age 26

FALLACY NO:

“Since most of our workforce is part-time, we do not have to comply with the ACA’s employer mandate”

4

EMPLOYER MANDATE

“FULLTIME” employee performs an average of 30+ hours of service per week or 130+ hours of service in any calendar month

“FULLTIME EQUIVALENTS” equals the sum of all hours of service performed by all employees:

Total Hours (max = 2,080 / worker)Divided by 2,080

Rounded to next lowest whole numberEquals the FTE Total Count

2,080

= 16.11

= 16 FTEs

33,500

Defining the Fulltime Employee

PPACA 101 (2015) | 12

FALLACY NO:

“We’re a subsidiary of a Canadian company and only have 15 fulltime employees, so we’re exempt from the ACA’s employer mandate”

5

WHO IS AN APPLICABLE LARGE EMPLOYER?

PPACA 101 (2015) | 14

TICTAC Global (Paris, France)

TICTAC North America

TICTAC-US (ALE)(202 FTEs)

TIC Parts GA (ALE Member)(21 FTEs)

TAC Parts CA (ALE Member)(36 FTEs)

TICTAC Canada

TICTAC Turkey TICTAC Ireland

X

X X

X

X

Once any member in the ALE group passes the “pay or play” threshold of 50 FTEs, each member accrues a compliance obligation

Foreign employers are not subject to the “pay or play” mandates

ORG CHART:TICTAC

GLOBAL

X

Understanding the Distinction Between an ALE & an ALE Member

FALLACY NO:

“Most of our workers are represented by unions or staffing agencies, so we don’t have to worry about ACA compliance for these individuals.”

6

WHO IS AN APPLICABLE LARGE EMPLOYER?

PPACA 101 (2015) | 16

Understanding ACA Compliance for Temporary Workers & Collectively-bargained Employees

Collectively-Bargained Employees• Employer mandate operates to employer• Memorialize ACA compliance agreement• “C” series collaborative reporting or “C” & “B”

separate reporting

Temporary & Staffed Workers• Application of “common law” worker analysis• Contract negotiation for ACA compliance obligations• Payment of premium to agency for ACA compliance

DEFINING THE EMPLOYEE & APPLICABLE DEPENDENTSTo Whom Must the Employer Make the “Qualifying Offer?”

Section Three



FALLACY NO:

“As mandated by the ACA, we measure hours of service for our non-exempt employees throughout each year of service to determine eligibility for the next subsequent plan year.”

7

EMPLOYER MANDATEEmployee Classifications Recognized by the Affordable Care Act

FULL-TIME

• Eligibility following satisfaction of waiting/orientation period

PART-TIME

• Eligibility following close of initial measurement period (if 30+)

VARIABLE HOUR

• Eligibility following close of initial measurement period (if 30+)

SEASONAL

• Eligibility following 180 days of service (if 30+ / first 180 days)

PPACA 101 (2015) | 19

FALLACY NO:

“Because of the nature of our business model, we hire seasonal workers throughout the year. Seasonal workers are exempt from the ACA’s coverage mandate.”

8

DEFINING THE SEASONAL WORKER

PPACA 101 (2015) | 21

Distinguishing a Seasonal Worker from a Variable Hour Worker

No more than 180 days of continuous service during any 12-month period

No cap on hours of service during the 180-day period

Seasonal period relates to a seasonal increase in business (note relationship to calendar

On 181st day of service, seasonal worker becomes a “hold over” and may be immediately eligible for enrollment

Occasional hold-over is permissible

1

2

3

4

5

FALLACY NO:

“Since the administrative period is the same thing as open enrollment, the measurement period is the prior plan year and the stability period is the subsequent plan year.”

9

EMPLOYER MANDATEPart-time, Variable Hour & Seasonal Employees

MEASUREMENT PERIOD

Period of time in which the employer measures an employee’s

actual hours of service

ADMINISTRATIVE PERIOD

Implementation of the look-back period observations (identification of fulltime workers and enrollment)

STABILITY PERIOD

Coverage period for the full-time employees & the ineligibility period

for part-time workers

PPACA 101 (2015) | 23

FALLACY NO:

“Upon completion of the initial measurement period, a variable hour worker is eligible to enroll in the plan during the next open enrollment period.”

1010

EMPLOYER MANDATEVariable Hour Process

2016

2017

Initial Stability Period 11/1/15 – 10/31/16

First Standard Stability Period 1/1/17-12/31/17

First Standard Administrative Period 11/1/16-12/31/16

2014

Initial Administrative Period 10/5/15 - 10/31/15

Initial Measurement Period 10/5/14 - 10/4/15

First Standard Measurement Period 11/1/15 – 10/31/16

2015

Hire Date: 10/5/14

PPACA 101 (2015) | 25

FALLACY NO:

“Our fulltime employees are eligible to enroll after 90 days of service for coverage effective the first day of the next subsequent month.”

11

EMPLOYER MANDATE

Health coverage eligibility conditions based solely on the lapse of a time period are permissible for no more than 90 days

• Does not exceed 12 months

• Begins on any date between start date and first day of first calendar month following start date and

• Coverage is effective no later than 13 months from start date, plus time remaining until first day of next calendar month

Period before late or special enrollment is not waiting period

If Plan conditions eligibility on FT/specific hours of service and employer believes the EE will not be FT, may use measurement period that:

Final Regulations on Mandatory Waiting Periods

PPACA 101 (2015) | 27

FALLACY NO:

“Since we use the federal orientation period, fulltime employees are not eligible to enroll until after 4 months of service.”

12

EMPLOYER MANDATE

New “reasonable and bona fide employment-based orientation period" in addition to 90-day waiting period

• First calendar month following hire, minus one calendar day• Orientation period must end on/before end of next calendar month

May delay waiting period until orientation period is complete

Proposed Rule on the Federal Orientation Period

PPACA 101 (2015) | 29

FALLACY NO:

“Academic interns are exempt from the employer mandate, so we don’t have to offer these individuals a coverage opportunity.”

13

ACADEMIC INTERNS

Distinguishing Student Workers From Academic Interns

ACADEMIC INTERN• Federal or state work-

study grant recipients• Workers receiving

academic credit in exchange for hours of service

• Exempt from the employer mandate

STUDENT WORKER *• Not receiving federal

or state work-study grant funds

• Not receiving academic credit in exchange for hours of service

• Not exempt from the employer mandate

*NOTE: When determining whether an employee is a student worker or an academic intern, the first step is evaluating whether the employer maintains a formalized referral and reporting relationship with the worker’s academic institution.

PPACA 101 (2015) | 31

FALLACY NO:

“Employers are required to offer affordable, valuable, minimum essential coverage for the benefit of the children of each fulltime employee.”

14

HSA

Coverage to Age 26

Minimum Essential Coverage

Not Necessarily Affordable

Not Necessarily ValuableNatural Born &

Adoptive Children*

All Plans by First Day of 2015 PY

THE ACA AND DEPENDENT CHILDREN

DEPENDENTS

* Excludes foster children & step children

PPACA 101 (2015) | 33

UNDERSTANDING THE COOPERATIVE NATURE OF ACA COMPLIANCEContracting ACA Compliance with Collective Bargaining Agents, Leasing Agencies & Independent Contractors

Section Four



FALLACY NO:

“Since most of our employees receive benefits from the union, we don’t need to worry about the employer mandate or the annual information reporting.”

15

NEGOTIATING ACA COMPLIANCE WITH UNIONS

Collaboration is the Key to Success with Collective Bargaining Units

The union trust should preform ACA reporting for the offer of coverage on the 1094/1095 “B” series forms

If the union fails to perform reporting, employees will look to the employer to perform reporting

If the employer reports, the employer should use the 1094/1095 “C” series forms

Remember the preparation and filing of ACA information reporting likely implicates HIPAA’s Privacy Rule (BAA may be necessary)

Note: Regulatory compliance is not subject to collective bargaining…but contact unions now and memorialize agreement in writing

1

2

3

4

5

PPACA 101 (2015) | 36

FALLACY NO:

“With respect to our temporary workers, the staffing agencies we contract with are the employers of record for purposes of the ACA.”

16

NEGOTIATING ACA COMPLIANCE FOR TEMPS

Collaboration is the Key to Success with Staffing Agencies

“Common Law Worker” analysis may prevail – who receives the “benefit of the service?”

Most staffing agencies voluntarily accept ESR obligations

If the contract is silent, the IRS will look to the employer of record

Remember the preparation and filing of ACA information reporting likely implicates HIPAA’s Privacy Rule (BAA may be necessary)

Consider paying a small “premium” to the agency to accomplish ACA obligations (creates a “new contract”)

1

2

3

4

5

PPACA 101 (2015) | 38

FALLACY NO:

“Our plan administrator is required to provide our employees and the IRS with the various Forms 1095 & 1094, where appropriate.”

16

· Vendors cannot “relief” the employer’s ESR obligations; if the vendor fails, the employer is on the hook

· Vendor agreements should contemplate liquidated damages if the vendor fails to perform

· Be wary of multi-year contracts at the outset

· HIPAA’s Privacy & Security Rules are often implicated by ACA functions – a BBA, MOU or confidentiality agreement should generally outline privacy obligations

VENDOR AGREEMENT DOES NOT ABSOLVE

Vendors aren’t

subject to the ACA!

The Employer of Record Must Achieve the ESR Obligations

PPACA 101 (2015) | 40

FALLACY NO:

“Since our benefit plan is fully-insured, the insurance company is responsible for preparing and filing the various Forms 1095 & 1094.”

17

OVERVIEW OF ENTITIES & FILINGS

Employer by Size Insured Health Plan Self-Insured Health Plan

Small Employer – Less than 50 full-time employees (FTEs)

Does not file

Insurer files Form 1095-B

File Form 1095-B

Applicable Large Employer(ALE) with 50-99 FTEs

ALE member files Form 1095-C and completes Parts I and II


File Form 1095-C and complete Parts I, II and III

ALE with 100 or more FTEs

ALE member files Form 1095-C and completes Parts I and II


ALE member files Form 1095-C and completes Parts I, II and III

All required filers will also complete the associated transmittal Forms, e.g., 1094-B and 1094-C

PPACA 101 (2015) | 42

DISCUSSION

PROVIDED FOR INFORMATIONAL PURPOSES ONLY & SHOULD NOT BE INTERPRETED AS A LEGAL OPINION OR AS LEGAL ADVICE



Questions ?

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PPACA 101: Regulatory Risk Reduction for

Implementation of the Affordable Care Act’s Employer Mandate

http://www.hrci.org/

Documents

PPACA 101: REGULATORY RISK REDUCTION FOR IMPLEMENTATION OF THE AFFORDABLE CARE ACT’S EMPLOYER MANDATE INSTRUCTOR: Jason N. Sheffield, Managing Attorney