2013 Employee Benefits Compliance Update

Transcription

1 2013 Employee Benefits Compliance Update March 27, 2013 Terra Hudlow Compliance Consultant AGENDA Health care reform update Insurance exchanges Medicaid expansion 2013 issues and recent developments Individual mandate and subsidies for individual health insurance 2014 issues Employer shared responsibility rules Defining full-time employee New wellness plan regulations 1

2 INSURANCE EXCHANGES Health Insurance Exchanges A marketplace where carriers will sell individual and small group health insurance plans Individual health insurance - Public insurance exchanges will certify and administer subsidies for low- and middle-income individuals purchasing individual health insurance though exchange - Guarantee issue, no medical underwriting Small group insurance - Small group program is called Small Business Health Options Program ( SHOP exchange ) Enrollment to begin October 1, 2013 for 1/1/2014 effective date 2

3 Health Insurance Exchanges SHOP and small group rules Group plans available to small employers - <50 or <100 employees depending on state (100 in all states 2016 on) - <50 in MN, < 100 In WI Small group insurance reforms - ACA small group reform rules apply to all small group plans both inside and outside the exchange - No rating based on claims experience - No medical underwriting or pre-ex limitations - Age rate spread of no more than 3:1 - Smoker rate spread of no more than 1.5:1 4 Health Insurance Exchanges American Health Benefit Exchange Federal exchange - If state does not set up an exchange, the federal government will operate an exchange in that state Some states opting for a state/federal partnership exchange - State will retain some decision-making control but use the federal exchange infrastructure and technology Subsidies will be provided through the federal exchange - IRS has taken position that subsidies are available through state- or federally-operated exchange - Federal government prepared to offer at least 2 health plans nationwide 3

4 (25) (19 inc. D.C. ) (7) Source: Kaiser Family Foundation statehealthfacts.org 4

5 MEDICAID EXPANSION Medicaid Expansion ACA expands Medicaid eligibility to 138% FPL Household Size % FPL 1 $15,415 2 $20,879 3 $26,344 4 $31,809 5 $37,274 Supreme Court decision permits states to opt-out of expansion Current Medicaid eligibility varies significantly by state Examples (% FPL) Adults with Children Childless Adults Jan Eligibility Medicaid 1115 waiver or State Medicaid 1115 waiver or State Connecticut % % 56-72% % Minnesota % 275% 75% 250% New York 68-74% 150% n/a 100% Georgia 27-49% n/a n/a n/a Texas 12-26% n/a n/a n/a 5

6 Medicaid Expansion Expanded Medicaid Eligibility Federal government pays 100% of costs for expanded Medicaid eligibility for , reduces to 90% for 2020 and beyond Expected changes due to ACA Medicaid expansion compared to no ACA expansion Enrollment Increase Increase in State Medicaid Spending Increase in Federal Medicaid Spending United States 27.4% 1.4% 22.1% Wisconsin 20.8% 0.9% 12.7% Minnesota 32.9% 1.2% 22.0% 6

7 2013 ISSUES AND RECENT DEVELOPMENTS 2013 Employer Issues Increase in Medicare payroll tax for high income individuals Effective 1/1/ % on income over $200,000 ($250,000 filing jointly) - Employer withholding only if compensation to employee exceeds $200,000 Health FSA payroll deductions limited to $2,500 Plan years beginning 01/01/2013 W-2 health plan reporting for the 2012 tax year IRS transitional relief for small business until further guidance - Employers who filed fewer than 250 W-2s in 2011 are not required to report health costs on W-2s until further guidance issued by IRS 7

8 Patient Outcomes Research Fees Background Fee on all group health plans to help fund research for the treatment of chronic health conditions Effective for plan years beginning 11/1/ $1 per member per year for plan years ending prior to 10/31/ $2 pppy for plan years ending after 10/31/2013 through 2019 Applies to all fully-insured and self-funded health plans - Health reimbursement arrangements (HRA) are subject to the fee Patient Outcomes Research Fees Special Rules for HRAs For HRAs integrated with self-funded health plan - Only one fee required for combined HRA/self-funded plan HRA integrated with fully-insured health plan - Carrier will pay fee related to fully-insured plan - Plan sponsor must also pay fee for HRA - HRA fee in this case is based only on number of employees eligible for benefits under the HRA - Counting of spouses and dependents is not required even though they are covered by the plan 8

9 Patient Outcomes Research Fees Paying the fee Fully-insured plans carrier will pay Self-funded plans plan sponsor must pay by July 31 the year after the end of the plan year -Example: - Plan year 1/1/ /31/2012, fee due July Plan 4/1/2012 3/31/2013, fee due July First payments due by 7/31/2013 for annual plan years beginning Nov. 1, Dec. 1, and Jan. 1 Paid once annually using IRS Form 720 quarterly excise tax form Patient Outcomes Research Fees Calculating the fee Sponsors of multiple self-funded plans with same plan year pay only one fee to cover all plans Three allowed methods to calculate fee for self-funded plans - Actual Count Method - Average number of individuals covered for the entire plan year (i.e. number covered each day number of days in year) - Includes employees, spouses, dependents & other participants Snapshot Method - Add total of lives covered on a particular day (or equal number of days) in each quarter by number of dates used 9

10 Patient Outcomes Research Fees Calculating the fee Form 5500 Method - Use the number of participants actually reported on the Form 5500 for the plan year - Add the total participants at the beginning plus the end of the year - Results in an estimate of the average contract size being 2.0 individuals per subscriber - Note the term participant in reference to 5500s refers only to the principal subscriber (e.g. the employee or COBRA participant) and does not include spouses or dependents HRAs & Individual Health Insurance Background The ACA prohibits health plans from imposing lifetime or annual limits on the dollar value of benefits (PHSA 2711) - Regulations issued in 2010 make clear that 2711 applies to health reimbursement arrangements (HRAs) - Stand-alone HRAs violate 2711 but were able to receive temporary waivers until HRAs which are integrated with a comprehensive group health plan (which meets requirements of 2711) are allowed Defined contribution using an HRA Some have been advocating for employers to set up an HRA funded by the employer for employees to use HRA funds to purchase individual coverage 10

11 HRAs & Individual Health Insurance Paying for individual health insurance through HRA prohibited January 2013 DOL FAQ 2 important clarifications regarding HRAs - An employer-sponsored HRA integrated with individual health insurance or with an employer plan that provides coverage through individual policies would violate PHSA To be considered integrated with the employer s group plan, the employee must be enrolled in the comprehensive group coverage at the same time, not just eligible to enroll Effectively this eliminates the possibility of coverage through a standalone HRA and prohibits the use of an HRA as a tax-advantaged vehicle to fund the purchase of individual health insurance ACA Notice of Exchange Background ACA amends the Fair Labor Standards Act (FLSA) to require employers to provide a notice to employees to inform them of the establishment of public exchanges and the availability of subsidies to certain qualifying individuals. Who must comply It appears that virtually all employers may be subject to the notice requirement - an employer to which this Act [FLSA] applies - Forthcoming regulations could define (clarify) which employers are subject to the rule in more detail 11

12 ACA Notice of Exchange Effective date Per statute, notice must be sent by March 1, 2013 Notice must also be provided to all new employees Notice requirement delayed by DOL On January 24, the DOL delayed the notice requirement - until such regulations are issued and become applicable, employers are not required to comply with FLSA section 18B - Expected to be late summer or early fall - DOL expected to release model notice and additional guidance on distribution 22 QUESTIONS EMPLOYERS WILL HAVE 12

13 Individual Mandate Health insurance requirement Beginning in 2014, most Americans must have a certain level of health insurance or pay an annual tax No tax if covered by: - An employer plan - Individual health insurance - Medicare, Medicaid, Children s Health Insurance Program (CHIP), TRICARE, Veteran s Health Program - And more Individual Mandate Exemptions from tax Qualified religious sect approved - Exemption approved by HHS Member of a health care sharing ministry Unlawfully present in the U.S. Incarcerated No access to affordable coverage - If cost of coverage available exceeds 8% of individual s household income - For family members of employees eligible for employer-sponsored coverage, affordability is based on the contribution required for the family member to participate 13

14 Individual Mandate Amount of tax $95 per adult and $47.50 per child (up to $285 for a family) or 1% of family income, whichever is greater $325 per adult and $ per child (up to $975 for a family) or 2% of family income, whichever is greater 2016 and Beyond - $695 per adult and $ per child (up to $2,085 for a family) or 2.5% of family income, whichever is greater 26 Low- and Middle-Income Subsidies Subsidies to help low- and middle-income individuals afford health insurance when purchasing individual heath insurance though a public exchange Advanceable premium tax credit based on household income - Qualified individuals will pay no more than a fixed maximum contribution depending on household income Cost-sharing reductions (i.e. lower deductibles and out-of-pocket costs) 14

15 Low- and Middle-Income Subsidies Subsidies available only to individuals with household income up to 400% of Federal Poverty Level (FPL) Subsidies are not available to individuals eligible for affordable employer sponsored minimum value coverage FPL 400% FPL 1 $11,170 $44,680 2 $15,130 $60,520 3 $19,090 $76,360 4 $23,050 $92,200 5 $27,010 $108,040 6 $30,970 $123,880 Low- and Middle-Income Subsidies Affordable employer-sponsored coverage Affordable for employee - Employee contribution for single (employee only) coverage in an employer plan is no more than 9.5% of household income NEW DEVELOPMENT - Affordable for family members eligible for employer sponsored coverage based on cost of single coverage - An employee s family member is not eligible for subsidy if family member is eligible for employer plan and if the contribution for single (employee only) coverage is no more than 9.5% of household income - This IRS interpretation significantly limits the number of lower income family members who will be eligible for subsidized coverage 15

16 Low- and Middle-Income Subsidies Affordable employer-sponsored coverage example Requires contribution for single coverage =$100 per month Employer requires employees to contribute an additional $750 per month to enroll family members in employer plan - Total family contribution = $850 Employee household income = $20,000 per year - Contribution for single ($100/ mo.) = 6% of employee s household income - Contribution required for family $750/mo.) = 45% of household income Family members not eligible for exchange subsidies because contribution for single coverage is less than 9.5% of household income Low- and Middle-Income Subsidies Bottom line Very few employees or their families who are eligible for an affordable, minimum value employer plan will qualify for subsidized individual coverage $24,000 Household Income $2,000 mo. X 9.5% Employee cost for single coverage must exceed $ mo. 16

17 Low- and Middle-Income Subsidies Impact of rule on employer-sponsored plans Penalties - Employer penalties applicable to large employers are based solely on whether an employee qualifies for subsidies family member qualification for subsidies has no impact on employer plan Enrollment rates - Employers with a significant number of lower income workers had been expecting that if subsides were widely available to lower income families, there would be a drop in family enrollment rates in the employer plan - With no subsidies available to most family members, the employer s plan is most likely enrollment option to avoid the individual mandate tax and potentially driving increased family enrollment in employer plans Low- and Middle-Income Subsidies Subsidy process Individuals must apply for health insurance coverage through a public (state or federal) exchange Exchange will collect income and employer coverage data and certify if individual is eligible for subsidy Exchange must notify an employer if an employee is certified Subsidy calculator available on Minnesota Exchange website

18 Subsidized Coverage Examples Assumes a Silver Base Plan with $6400/$12,800 OOP Example of Monthly Retail Cost 300% FPL Income Maximum Premium Federal Premium Assistance Max OOP Age 30 family(4) $861 $70,300 $554 $308 $12,800 Age 30 single $318 $34,500 $273 $45 $6,400 Age 50 family(4) $1,436 $70,300 $554 $882 $12,800 Age 50 single $530 $34,500 $273 $256 $6,400 Subsidized Coverage Examples Assumes a silver base plan with $6500/$12,500 OOP Example of Monthly Retail Cost 150% FPL Income Maximum Premium Federal Premium Assistance Max OOP Age 30 family(4) $861 $35,250 $117 $745 $2,250 Age 30 single $318 $17,250 $58 $260 $4,500 Age 50 family(4) $1,436 $35,250 $117 $1,319 $2,250 Age 50 single $530 $17,250 $58 $472 $4,500 18

19 Cost-sharing limitations Maximum deductible of $ Applies to small group fully-insured plans only - Regulations allow carriers to issue higher deductibles to offer a bronze level plan Total out-of-pocket (OOP) cannot exceed HSA HDHP limits limits - $6,250 for self-only coverage, $12,500 for family expected to be $6,400/$12,800 - This limit applies to all plans including large group and self-funded 19

20 2014 Waiting period Limited to no more than 90 days - Effective for first plan years beginning on or after 1/1/ First of the month following 90 days not allowed - Special rule for variable hour and seasonal employees covered later Automatic enrollment delayed Employers with 200 employees required to auto-enroll new employees in health plans DOL has delayed requirement until formal guidance issued 2014 Temporary reinsurance fee Effective for Expected to be approximately $63 per year per participant this first year Applies to all fully-insured and self-funded plans - Carriers and TPAs will pay on behalf of employer plans Funds a reinsurance account used to protect individual health insurance carriers from losses due to catastrophic claims 20

21 2014? Fully-insured nondiscrimination rules IRS has delayed enforcement until sometime after guidance is issued - Not likely to be effective prior to 1/1/2014 Rules will be similar to current 105(h) rules which already apply to self-funded plans Health plans may not discriminate in favor of highly compensated - Under 105(h) benefits don t always have to be identical among subgroups of employee - Safe harbor tests allow for some discrimination Outstanding questions - Will the fullyiinsured rules work the same way as 105(h)?? EMPLOYER SHARED RESPONSIBILITY RULES 21

22 Employer Shared Responsibility Rules Background Beginning in 2014, applicable large employers must offer minimum essential health coverage to all full-time employees or face possibility of shared responsibility payments (penalties) Full time is generally any employee averaging 30 hours per week - More later! Applicable large employer - Employed an average of at least 50 full-time equivalent (FTE) employees in the prior calendar year - All employers within the same controlled group are treated as a single employer for purposes of determining large employer status Employer Shared Responsibility Rules Applies only to applicable large employer 50 or more full time employee + full-time equivalents (FTE) in prior calendar year For each month: Add total number of full time employees working 30 hrs/wk + total hours worked by all other employees 120 Example JAN FEB MAR APR MAY Number employees 30 hrs/wk Total hours worked by all other employees (PT) EEs Part time FTE (hours 120) Monthly Total Average the monthly totals for the 12 months of the calendar year 22

23 Employer Shared Responsibility Rules Groups under common control To determine applicable large employer status, separate organizations under common control according to Code 414 must be treated as a single employer - Example 3 separate companies A, B, and C each with common ownership and each with 30 full-time EEs ACA penalties apply only the member company of a common control group which violates an ACA requirement - In the example above if Cos A and B provide qualifying benefits to FT employees but C does not, ACA penalties would apply only to Co. C 44 Employer Shared Responsibility Rules Two different types of employer penalties H(a) Penalty - Employer does not offer minimum essential coverage to all full-time employees (30 hours per week) and their dependents - $2000/yr times number of all full-time employees not counting first H(b) Penalty - Employer offers coverage to all full-time employees; however: - Coverage is unaffordable for some full-time employees; or - Some full-time employees are not eligible for minimum value coverage - $3000/yr times number of employees who qualify for and purchase subsidized individual coverage through a public exchange 23

24 Plan Value Requirements Three terms that sound the same but are different Essential health benefits - Applies to individual or small group fully-insured plans only - Large group and self-funded plans not required to offer essential health benefit set but cannot apply limits to these benefits - Must include coverage in a variety of categories Minimum essential coverage (MEC) - Any employer-sponsored health plan - Guidance expected from IRS on other requirements possible to meet MEC Minimum value (MV) - Employer plan must have an actuarial value of at least 60% Minimum Value Minimum value Kaiser study: Model 60% plan: Total out-of-pocket for single = $6,350 Minimum value calculator - IRS/HHS have issues employer minimum value calculator - The Center for Consumer Information & Insurance Oversight (CCIIO) regulations page: Employer determination of plan s value - Use MV calculator - Hire an actuary for plans with designs that do not fit in MV calculator - Use MV checklist developed by HHS calculator (not yet released) 24

25 Employer Shared Responsibility Rules Bottom line Very few employees or their families who are eligible for a minimum value employer plan will qualify for subsidized individual coverage $24,000 Household Income $2,000 mo. X 9.5% Employee cost for single coverage must exceed $ mo. As a result very few employers will face a 4980H(b) penalty unless: - Relatively high single contribution requirement and low income employees - Not offering minimum value coverage to all fulltime employees Employer Shared Responsibility Rules Effective date of shared responsibility rules transition rule NEW DEVELOPMENT - Employer shared responsibility rules and penalties apply for first plan year beginning on or after 1/1/2014 Specific conditions must be met to apply transition rule - Non- calendar year plan must have been in effect on 12/27/ Plan must meet one of the following criteria: - (1) Employer offered coverage to at least 1/3rd of all employees (both FT and PT) at last open enrollment prior to Dec. 27, (2) Employer had at least 25% of all employees (both FT and PT) enrolled as of the end of the most recent enrollment period or any date between 10/31/2012 and 12/27/ Additional issues if employer also maintains a separate calendar year plan 25

26 Employer Shared Responsibility Rules Applicable large employer transition rule Generally the determination of status as an applicable large employer is based on the average employment for the 12 months in the prior calendar year - i.e. an employer s 2014 status is based on average employment over 12 months of 2013 NEW DEVELOPMENT one time use of a 6 month average in Employers can choose any consecutive 6 month period in 2013 to calculate average employees for purpose of 2014 shared responsibility requirements Employer Shared Responsibility Rules 4980(H)(b) employer penalty safe harbors - Background - Employers face potential liability under 4980(H)(b) if the employer coverage is not affordable to an employee - Coverage is affordable if the employee s required contribution for self-only coverage does not exceed 9.5% of employee s household income - NEW DEVELOPMENT 3 Employer Safe Harbors - Recognizing that employers will generally not know an employee s household income, the IRS has provided three employer safe harbors - As long as the employee contribution for single coverage meets one of these safe harbors, employers will not be liable for 4980(H)(b) penalty even if an employee qualifies for subsidized coverage 26

27 Employer Shared Responsibility Rules 4980(H)(b) employer penalty safe harbors (cont.) W-2 safe harbor - Employer will not be subject to penalty: - If the employee contribution for self-only coverage does not exceed 9.5 % of the employee s W 2 wages in Box 1 Rate of pay safe harbor - Employer will not be subject to penalty: - If employee s contribution for self-only coverage does not exceed 9.5% of the computed monthly rate of pay - Hourly rate of pay multiplied by 130 hours per month to determine a monthly rate of pay - $10/hr rate of pay returns safe harbor contribution rate of $ ($1300 x 9.5%) Employer Shared Responsibility Rules 4980(H)(b) employer penalty safe harbors (cont.) Federal Poverty Level Safe Harbor - If the employee s cost for self-only coverage does not exceed 9.5% of the FPL for a single individual monthly safe harbor contribution for self-only coverage would be anything less than $90.96 in the lower 48 states 27

28 Employer Shared Responsibility Rules 95% Rule - margin of error rule Employer faces potential penalties under 4980H(a) if it fails to offer minimum essential coverage to all full-time employees and dependents NEW DEVELOPMENT - Introduction of the 95% Rule - Employer will not be liable for 4980H(a) penalties as long as employer offers coverage to all but 5% of its full-time employees - Rule also applies if coverage is offered to all but 5 full-time employees if that is greater than 5% Rule alleviates employer fears that a small administrative mistake could trigger significant employer penalties FULL-TIME EMPLOYEES 28

29 Full-Time Employee Definition ACA defines full-time as 30 hours per week Optional definition for health insurance purposes hours per month equivalent to 30 hours per week - Employers have option to use a look back measurement period of 3-12 months to determine full-time status This definition is for ACA health insurance requirements only and does not change an employers definition of full-time for other purposes - Does not impact retirement plans, wage and hour rules, etc. Full-Time Employee Definition Measurement, stability and administrative periods - Measurement period - Measurement period of between 3-12 months - Employee must work average of 30 hours per week during measurement period (1560 hours using a 12 month period) to be considered FT - Stability (coverage eligibility) period - Employee must be treated as full-time for stability period - Must be same length as measurement period but no less than 6 months - Administrative Period - Up to a 90 day administrative period between end of measurement period and beginning of stability period 57 29

30 Full-Time Employee Definition Measurement, stability and administrative periods New employees - Maximum waiting period of 90 days for regular full-time employees - Initial measurement period of up to12 mos. for new variable and seasonal employees - Initial measurement period runs from date of hire or first of month following - Coverage must be offered no later than 13 months plus a partial month after the date of hire for an employee who earns full-time status during initial measurement period Ongoing employees - Standard measurement period can be used to define full time for all ongoing employees Full-Time Employee Definition New variable hour and seasonal employees Variable hour employees - Based on the facts and circumstances at the start date, it cannot be determined that the employee is reasonably expected to work at least 30 hours per week for entire measurement period - Example of variable hour employees - Retail worker hired full-time during holiday season, but may go to part-time later - Medical facility staff used to supplement full-time staff whose hours vary significantly from month to month Not a variable hour employee - Full-time employee hired into a high turnover job 30

31 Ongoing Employee Standard Measurement Period Method Determine which EEs have worked an average of 30 hrs/wk during measurement period. Employees who earned full-time status would be eligible for coverage for the entire stability period Measurement Period Yr 1 11/1/12 10/31/13 Admin Period Stability Period (Plan Year) Yr 1 01/01/14-12/31/14 Nov 2012 Dec 2012 Jan Jan 2013 Feb 2013 Mar 2013 Apr 2013 May 2013 Jun 2013 Jul 2013 Aug 2013 Sep 2013 Oct 2013 Assumptions: Employer chooses 12 month periods Measurement Period = 11/1 10/31 Stability Period = 01/01 12/31 (same as employer s plan year) 2 month Admin Period = 11/1 12/31 Nov 2013 Dec 2013 Jan Jan Feb 2014 Mar 2014 Apr 2014 May 2014 Jun 2014 Jul 2014 Aug 2014 Sep 2014 Oct 2014 Nov 2014 Dec 2014 Jan 2015 Feb 2015 Mar 2015 Apr 2015 May 2015 Jun 2015 Measurement Period Yr 2 11/1 /13 10/31/14 Admin Period Determine which EEs have worked an average of 30 hrs/wk during measurement period. Stability Period Yr 2 01/01/15 12/31/15 New Variable and Seasonal Employee Timeline New variable hour or seasonal employee hired 2/15/2013 Employee s Initial Measurement Period 2/15/13 2/14/14 2/14/2014 determine if new employee averaged 30 hours/week during initial measurement period. Admin Period EE who earned full-time status eligible for entire initial stability period beginning no later than 13 (plus a partial) months after hire date regardless of hours worked during stability period. Employee s Initial Stability Period 04/01/14-03/31/15 EE ave. 10 hr/wk - 5/1-9/31 In this example EEs coverage would end 4/01/15. EE offered COBRA for reduction in hours event. Nov 2012 Dec 2012 Jan 2013 Feb 2013 Mar 2013 Apr 2013 May 2013 Jun 2013 Jul 2013 Aug 2013 Sep 2013 Oct 2013 Nov 2013 Dec 2013 Jan 2014 Feb 2014 Mar 2014 Apr 2014 May 2014 Jun 2014 Jul 2014 Aug 2014 Sep 2014 Oct 2014 Nov 2014 Dec 2014 Jan Jan 2015 Feb 2015 Mar 2015 Apr 2015 May 2015 Jun 2015 Assumptions: Employee hired 2/15/2013 Std. Measurement Period = 11/1 10/31 Std. Stability Period = 01/01 12/31 (same as employer s plan year) 2 month Std. Admin Period = 11/1 12/31 Standard Measurement Period 11/01/13 10/31/14 Admin Period Since EE did not average 30 hrs/wk during the standard measurement period they would not be eligible for the next full stability period Stability Period 01/01/15 12/31/15 31

32 Full-Time Employees NEW DEVELOPMENT counting hours of service IRS has defined an hour of service - Each hour an employee is paid, or entitled to payment, for the performance of duties for the employer - Each hour for which an employee is paid, or entitled to payment, for vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence. For hourly employees - Employer must calculate actual hours of service from records of hours worked and for non-worked hours for which payment is made or due (vacation, holiday, illness, incapacity, etc.) Full Time Employees NEW DEVELOPMENT Counting Hours of Service (cont.) For employees not paid on an hourly basis - Employer must calculate hours of service using one of three methods: - Counting actual hours worked and non-worked hours for which payment is due - Using a days-worked equivalency method counting eight hours of service for each day for which the employee is entitled to pay - Using a weeks-worked equivalency using 40 hours of service per week for each week for which the employee is entitled to pay - An employer is not permitted to use the days-worked or weeks-worked equivalency if the result is to substantially understate an employee s hours of service 32

33 Full Time Employees 2013 measurement periods Background - Employers choosing to use a measurement period to determine 2014 eligibility must use 2013 employment data - Employers wishing to use a 12 month measurement period would already be well into the period for a plan year that begins 1/1/2014 NEW DEVELOPMENT month measurement period allowed - Employer may use a 6 month measurement period during 2013 to determine eligibility for a longer stability period in Transition rule measurement period may be no shorter than 6 months and must begin prior to July 1, 2013 NEW WELLNESS PLAN RULES 33

34 New Wellness Plan Regulations Wellness plan regulations Effective plan years starting on or after 1/1/2014 Participatory wellness program - Reward not based on a specific health outcome Health-contingent wellness program - Require an individual to satisfy a standard related to a health factor to obtain a reward - Require an individual with an identified health factor to take action to obtain a reward - Example: Provide a reward to employees identified through a health assessment as having high cholesterol to take additional steps such as meeting with a health coach to qualify for a reward New Wellness Plan Regulations Health-contingent program requirements Must have an opportunity to qualify at least once per year Reward limits - 30% of plan cost for health-contingent programs - 50% of plan cost for tobacco-related wellness programs - Combined plans - Total cannot exceed 50% and the health-contingent program reward cannot exceed 30% Reasonable design - Cannot base reward simply on meeting a factor (i.e BMI < X) - For example: Must give individual who has higher BMI opportunity to get reward if they complete an exercise program 34

35 Legal/regional regulatory statement to be added here if required. 35