Health Care Reform Ross Manson, Principal Tonya M. Rule, Tax - PDF document

9/3/2013 Health Care Reform Ross Manson, Principal Tonya M. Rule, Tax Manager www.eidebailly.com www.eidebailly.com 1 Health Care Reform Update • ACA employer penalties delayed until 2015 • 1/1/2014 • Establishment of Public Exchanges • Payment of Individual Subsidies • Individual Mandate www.eidebailly.com www.eidebailly.com 2 1

9/3/2013 Health Care Reform EMPLOYER BASICS www.eidebailly.com www.eidebailly.com 3 Employers key number is > = 50 = Large Employer 50 and subject to pay or play penalties < 50 Small Employer and NOT subject to pay or play penalties Full time equivalent employees www.eidebailly.com www.eidebailly.com 4 2

9/3/2013 Health Care Reform – Large Employer? • Large employer = 50 or more Full-Time Equivalent Employees Steps: Calculate your Full-Time Employees (average 30 1. hours/week or 130 hours per month ) Calculate your (part-time and seasonal) FTEs (add up 2. total hours and divide by 120 ) Add the two numbers in steps 1 and 2 3. Add up the 12 monthly numbers in 3 and divide by 12 4. If less than 50, not applicable large employer 5. If greater than or equal to 50, greater than 120 days? 6. www.eidebailly.com www.eidebailly.com 5 Part-Time and Seasonal Employees • Part-Time and Seasonal Employees • Part-time employees: those working fewer than 30 hours a week for the year • Included in calculating whether an employer has over 50 full- time equivalents • Not included in penalties • Seasonal employees: as designated by the Department of Labor • Included in calculating penalties in the months applicable • Excluded if: seasonal employees caused employer to have > = 50 full-time equivalents for equal or less than 120 days www.eidebailly.com www.eidebailly.com 6 3

9/3/2013 Large Employer – NO insurance • Employers NOT offering health insurance • A penalty of $2,000 per year/per full-time employee • Exempts the first 30 full-time employees from computation • Example: 100 full-time employees and one goes to an Exchange and utilizes credit • Penalty = (100-30) x $166.67 = $11,667/month • $140,000 annually • Triggered on all full-time employees if one full-time employee goes to the exchange and receives a subsidy • Penalty is NOT tax deductible www.eidebailly.com www.eidebailly.com 7 Large Employer – Offer Insurance • Potential penalty if employer OFFERS health insurance • A penalty of $3,000 per year/per FT employee who goes to the exchange and receives an exchange subsidy • Subsidy eligibility based on unaffordable or inadequate insurance • Unaffordable = Employee insurance premiums exceeding 9.5% of HHI • Inadequate = Insurance policy less than 60% of actuarial value • Capped by the amount of penalty for not offering insurance coverage (in aggregate, not per employee) www.eidebailly.com www.eidebailly.com 8 4

9/3/2013 Inadequate Insurance • Actuarial Value: • Generally is calculated by computing the ratio of the total expected plan payments for essential health benefits, computed according to the plan’s cost - sharing features (deductibles, coinsurance, copayments, and out-of-pocket limits) over the total costs for the essential health benefits a standard population is expected to incur. • Intended to allow consumers to compare and understand a plan’s value. • HHS has developed a Actuarial Value calculator at: http://cciio.cms.gov/resources/regulations/index.html#pm www.eidebailly.com www.eidebailly.com 9 Large Employer – Safe Harbor • Affordability safe harbor and proposed regulations issued 12/28/12 • Employer must offer minimal essential coverage • Employee portion of self-only premium for the lowest cost coverage that provides minimum value must not exceed 9.5% of the employee’s wages • Wages equal Box 1 on Form W-2 • “Rate of Pay” – rate of pay at beginning of year multiplied by 130 hours. This becomes base amount for 9.5% affordability calculation. • Federal poverty line (FPL) – self only coverage < 9.5% of FPL for a single individual. www.eidebailly.com www.eidebailly.com 10 5

9/3/2013 Large Group Coverage • Employer must offer coverage to at least 95% of all full-time employees and their dependents • Help protect against errors that could occur in identifying full-time employees; • Coverage must be offered to dependents – only required to pay premium towards single plan (can’t exceed 9.5% test); • Dependents; • Children up to age of 26 • Spouse not defined as a dependent www.eidebailly.com www.eidebailly.com 11 Health Care Reform BUSINESS EMPLOYER SPECIFICS www.eidebailly.com www.eidebailly.com 12 6

9/3/2013 Automatic Enrollment According to the health reform legislation, an employer must automatically enroll new employees and those who are currently enrolled in their health insurance plan However – The department of labor has concluded additional guidance has not been issued in time for automatic enrollment to take effect by 2014 Source: Department of Labor Technical Release 2012-01: IRS Notice 2012-17 www.eidebailly.com www.eidebailly.com 13 Hours of Service Rules • Hours of service include not only hours worked but also hours for which an employee is paid or entitled to payment even when no work is performed. Including: • Vacation, holiday, illness, incapacity, layoff, jury duty, military duty or leave of absence • Service outside of the U.S. is generally not counted www.eidebailly.com www.eidebailly.com 14 7

9/3/2013 Key Definitions: Determining Full-Time Employees • Hourly • Non Hourly • Actual hours • Days worked equivalency • Weeks worked equivalency • You cannot intentionally use a method to lower their actual hours (3 ten hour days using days worked would be an example) www.eidebailly.com www.eidebailly.com 15 Controlled Groups • Employer • Controlled group • Parent-subsidiary chains • Brother-sister controlled group • Combined group of the above • Affiliated service group • Has direct or indirect ownership interest and • Performs services for service organization or • Works with other organization in rendering services to third parties www.eidebailly.com www.eidebailly.com 16 8

9/3/2013 Health Care Reform Terms • Waiting period • Measurement period • Initial measurement period • Standard measurement period • Stability period • Administrative period www.eidebailly.com www.eidebailly.com 17 Waiting Period • Waiting Period – period of time that must pass before an employee or dependent, who is otherwise eligible to enroll under terms of a group health plan, can receive coverage. This period cannot exceed 90 calendar days www.eidebailly.com www.eidebailly.com 18 9

9/3/2013 Measurement and Stability Period • Measurement Period – period of not fewer than three or more than 12 months, chosen by the employer, as the measurement period that can be looked back to in order to determine the full- or part-time status of an employee • Stability Period – next period where an employee is locked in according to the results of the measurement period • Measurement and Stability periods apply to: • Ongoing employees • New variable hour employees • New seasonal employee www.eidebailly.com www.eidebailly.com 19 Measurement Period • Standard Measurement Period (SMP) applies to ongoing employees • Employees employed at least one full SMP • Initial Measurement Period (IMP) applies to new variable hour and seasonal employees • Is usually going to be different than the SMP • Begins between the employee’s start date and first day of next calendar month • IMP and SMP will likely overlap for new employees www.eidebailly.com www.eidebailly.com 20 10

9/3/2013 Stability Period • The Stability Period is the period in which an employee’s status is determined for offering insurance or paying penalties • Status will be either a full time or part time employee (as determined from the measurement period) • Full time employee: stability period has to be at least six months or the length of the measurement period • Part time employee: • Ongoing employee – not longer than SMP • New variable hour seasonal employee – not longer than IMP plus one month and status must be tested again during first SMP www.eidebailly.com www.eidebailly.com 21 Administrative Period • Administrative Period – this is the time allowed between the measurement period and stability period used to determine the status of the employee which cannot exceed 90 days and cannot delay the effective date of coverage to an eligible full-time employee • Initial measurement period and administrative period cannot exceed past the last day of 1 st calendar month beginning on or after 1-year anniversary of new variable hour employee (approximately 13 months) www.eidebailly.com www.eidebailly.com 22 11