PENALTIES Employer Shared Responsibility under the Affordable Care Act (ACA)

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1 PENALTIES Employer Shared Responsibility under the Affordable Care Act (ACA) What employers need to know to make informed decisions about ACA compliance. Employer Shared Responsibility Under the employer shared responsibility provisions of the Affordable Care Act (ACA), employers with 50 (100, in 2015) or more full-time and full-time equivalent employees may pay penalties if any full-time employee receives a premium tax credit or cost-sharing reduction when purchasing health coverage on the Marketplace. To avoid potential penalties, employers will need to: Offer health coverage to full-time employees and their dependents (children up to age 26). Offer health coverage that meets the minimum value requirement of 60 percent. Wellmark is your expert resource for health care reform Wellmark appreciates that as an employer, not only do you want to understand each of the provisions of the ACA, but you are also asking yourself: What does this mean to my business and what do I do next about employees health benefits? That s why we are here to provide: Information about each of the ACA requirements Tools that will assist with your decision making Health plans that meet the ACA mandates Guidance to develop the health plan(s) best suited for your organization Offer health coverage that is affordable relative to an employee s household income. You may be unsure if employer shared responsibility applies to your company, and if it does, what steps to take to comply and the penalties involved. The first thing to determine is if you are considered an applicable large employer. (For more details, see Wellmark s information brief Determining Applicable Large Employer Status.) If you are not an applicable large employer, you are not subject to the employer shared responsibility requirements. If you are an applicable large employer, you will want to offer coverage that meets minimum value and affordability requirements to avoid penalty. To assist you in understanding the employer shared responsibility requirements and penalties, follow the decision tree depicted on the next page.

2 EMPLOYER SHARED RESPONSIBILITY DECISION TREE Am I an applicable large employer? You are if you have 50 (100, in 2015) or more full-time and full-time-equivalent employees. YES NO Not subject to employer shared responsibility requirements Do I offer health coverage to at least 95% (70%, in 2015) of full-time employees (and their dependents)? 1 YES NO Does at least one full-time employee receive a premium tax credit/cost-sharing reduction? YES No Coverage Penalty: $2,000 x (Total number of full-time employees -30 (80, in 2015)). 2 NO No penalty Does plan provide minimum value AND affordable coverage to full-time employees? YES NO Does at least one full-time employee receive a premium tax credit/costsharing reduction? YES Inadequate Coverage Penalty: $3,000 x total full-time employees receiving a premium tax credit/cost sharing reduction. 2 No penalty NO Penalty cannot exceed $2,000 x the total number of full-time employees -30 (80, in 2015). 2 1 While applicable large employers that offer coverage to at least 95% (70%, in 2015) of their full-time employees (and their dependents) avoid the No Coverage Penalty, such employers are still subject to the Inadequate Coverage Penalty for full-time employees who receive federally subsidized Marketplace coverage, including those not offered coverage (e.g., the other 5% (30%, in 2015)). 2 These are annual potential penalties that accrue monthly, and are subject to inflation adjustments. 2

3 KEY CONCEPTS Employees who are effectively offered minimum essential coverage through an eligible employer-sponsored plan that meets minimum value and affordability requirements will generally not be eligible for premium tax credits or cost-sharing reductions for coverage obtained through the Marketplace and employers will then avoid penalty. OFFER OF COVERAGE An employer must provide full-time employees and their dependents an offer of coverage and an effective opportunity to elect or decline the coverage at least once each plan year. To avoid the No Coverage penalty, employers must offer coverage to all but five percent (30 percent, in 2015) or, if greater, five of its full-time employees (and their dependents). Whether an employee has an effective opportunity is determined based on all the relevant facts and circumstances, including adequacy of notice, the period of time during which acceptance of the offer of coverage may be made, and any other conditions on the offer. If an employee has not been offered an effective opportunity to accept or decline coverage, the employee will not be treated as having been offered coverage. If an applicable large employer member fails to offer coverage to a full-time employee for any day of a calendar month, that employee is treated as not offered coverage during that entire month. An effective opportunity to decline is not required (nor its proof) for an offer of coverage that provides minimum value and is either: a. Offered at no cost to the employee, or b. At a cost, for any calendar month, of no more than the Federal Poverty Level (FPL) safe harbor calculation An employee s election of coverage from a prior year that continues for every succeeding plan year unless the employee affirmatively elects to opt out, constitutes an offer of coverage. For an employee who is employed by more than one applicable large employer (ALE) member, an offer of coverage by one ALE member for a calendar month is treated as an offer of coverage by all ALE members for that calendar month for purposes of penalty liability. An offer of coverage includes an offer made on behalf of an employer, including those made by a multi-employer plan, single employer Taft-Hartley plan, or a MEWA to an employee on behalf of a contributing employer of that employee. Similarly, an offer of coverage to an employee made by a PEO or other staffing firm on behalf of the employer is treated as an offer of coverage for purposes of employer shared responsibility, but only if the fee the employer would pay to the staffing firm for an employee enrolled in the health plan is higher than the fee the employer would pay if the same employee did not enroll in the health plan. Also, employers must offer coverage to full-time employees who may have coverage from other sources, such as Medicare, Medicaid or a spouse s employer. A penalty will not apply to an employer if it offers affordable, minimum value coverage to an employee who declines the offer. Generally accepted substantiation and recordkeeping requirements apply for demonstrating an offer of coverage was made, including a safe harbor method for electronic media. MINIMUM ESSENTIAL COVERAGE Minimum essential coverage is defined as coverage under certain government-sponsored plans; employer-sponsored plans, with respect to any employee; plans in the individual market; grandfathered health plans; and any other health benefits coverage, such as a state health benefits risk pool, as recognized by the HHS Secretary. Minimum essential coverage does not include coverage consisting of excepted benefits, such as dental-only coverage. DEPENDENTS For the purpose of employer shared responsibility, dependents include biological and adopted children up to age 26 (for the entire calendar month attaining age 26). Dependents do not include spouses, foster and step-children, and children who are not U.S. citizens or nationals (unless residents of a country contiguous to the U.S. or adopted). The coverage offered to dependents need not be considered affordable, and an employee s receipt of a subsidy with respect to coverage for a dependent only will not result in a penalty for the employer. When an employer offers affordable, minimum value coverage to the employee, the family members of the employee generally cannot qualify for any federal tax credits or other assistance. These family members can still use the Marketplace to purchase coverage, but must pay the full amount of the premium for that coverage. MINIMUM VALUE Under the ACA, a health plan meets minimum value requirements if 60 percent of the total allowable cost of benefits provided to the employee is paid by the plan. The IRS and HHS have established four methods employers can use to determine if a plan meets minimum value requirements: Minimum value calculator, safe harbor plan designs, actuarial certification and metal level coverage. (For more details, see Wellmark information brief Minimum Value.) AFFORDABILITY The ACA considers coverage affordable if an employee s required contribution does not exceed 9.5 percent of his/her annual household income for the lowest cost self-only plan offered by the employer that also meets minimum value. In most cases, an employer may not know an employee s annual household income, prompting the IRS to develop three proposed safe harbors to determine affordability. These include the W-2 safe harbor, the rate of pay safe harbor and the federal poverty line safe harbor. (For more details, see Wellmark information brief Affordability.) 3

4 PENALTIES NO COVERAGE PENALTY If an applicable large employer does not offer coverage to at least 95 percent (70, in 2015) of its full-time employees (and their dependents) and one or more full-time employees receives a premium tax credit or cost-sharing reduction for coverage purchased through the Marketplace, a penalty may be assessed. The penalty for not offering coverage is $2,000 per full-time employee within your organization (minus the first 30 (80, in 2015)), even if just one employee receives a premium tax credit or cost-sharing reduction. The penalty is the same whether just one full-time employee or all of your full-time employees receive a Marketplace subsidy, when the employer does not offer coverage. Although the penalties are paid annually, they accrue monthly for any applicable month that coverage is not offered and a full-time employee receives a premium tax credit or cost-sharing reduction for coverage purchased through the Marketplace. After 2015, the penalty payment amount will be adjusted for inflation by a premium adjustment percentage for each subsequent calendar year. For purposes of determining the penalty, full-time employees are only those individuals with an average of 30 hours of service or more per week or 130 hours of service per month. An employer will not pay a penalty for any non-full-time employee receiving a premium tax credit or cost-sharing reduction on the Marketplace. Additionally, an employee s receipt of a subsidy with respect to coverage for a dependent only will not result in a penalty for the employer. ANNUAL PENALTY = $2,000 x (Total full-time employees 30 (80, in 2015)) MONTHLY PENALTY = ($2,000/12) x (Total full-time employees 30 (80, in 2015)) INADEQUATE COVERAGE PENALTY If an applicable large employer offers coverage, but it does not meet the minimum value or affordability requirements, the potential penalty will be assessed on the number of full-time employees receiving a premium tax credit or cost-sharing reduction when purchasing coverage through the Marketplace. Like the penalty for not offering coverage, this penalty is paid annually but accrues monthly for any applicable month a full-time employee receives a premium tax credit or cost-sharing subsidy. ANNUAL PENALTY = $3,000 x total full-time employees receiving a premium tax credit or cost-sharing subsidy. MONTHLY PENALTY = ($3,000/12) x total full-time employees receiving a premium tax credit or cost-sharing subsidy NOTE: An applicable large employer is subject to the lesser of the Inadequate Coverage Penalty or the No Coverage Penalty. THE EFFECTIVE DATE FOR EMPLOYER SHARED RESPONSIBILITY On Feb. 10, 2014, the Internal Revenue Service (IRS) released final regulations governing the employer shared responsibility provisions of the Affordable Care Act (ACA). These final rules address application after Dec. 31, 2014 of the employer shared responsibility requirement that was added by the ACA. Under this requirement, employers with 50 or more full-time and full-time equivalent employees must offer health coverage to full-time employees and their dependents or pay a penalty. Even employers that offer coverage may incur a penalty if that coverage does not provide minimum value or if it is not affordable. Originally slated to become effective in 2014, the IRS had previously delayed the effective date of the employer responsibility provision until The long-awaited final rule further delays the effective date for employers with between 50 and 99 full-time employers until 2016, assuming certain conditions are met. The final rule also provides that employers with 100 or more full-time employees must offer health coverage to only 70 percent of full-time employees in 2015, instead of 95 percent, to avoid the No Coverage penalty, when mandatory reporting begins. 4

5 EMPLOYERS Effective dates for penalties may be delayed until Jan. 1, 2016 PENALTIES BEGIN IN 2015, UNLESS QUALIFYING FOR DELAY UNTIL 2016 A significant new transition rule delays employer shared responsibility another year (until 2016) for employers with at least 50 but fewer than 100 full-time and full-time equivalent employees. Conditions to qualify for relief if you are of this size To qualify for this relief, an employer must satisfy all four of these conditions: 1. Average full-time and full-time equivalent employees in Keep in mind aggregation rules, the seasonal worker exception, and the transition relief that allows use of a shorter period in 2014 to determine applicable large employer status for 2015 (as noted on page 6). 2. Not reduce its workforce size or the overall hours of service of its employees during the period of Feb. 9, 2014 through Dec. 31, 2014, unless for bona fide business reasons. Such examples include the sale of a division, changes in the economic marketplace in which the employer operates, and the termination of employees for poor performance. 3. Not eliminate or materially reduce the health coverage it offers as of Feb. 9, 2014 (the day before the final rules were issued) throughout the remainder of the coverage maintenance period. (The coverage maintenance period is Feb. 9, 2014 through Dec. 31, 2015 for calendar year plans, and Feb. 9, 2014 through the last day of the plan year that begins in 2015 for non-calendar plans.) The employer will not be treated as eliminating or materially reducing health coverage if, during the coverage maintenance period, it meets all three of these following criteria: a. For employee-only coverage as compared to Feb. 9, 2014, the employer either does not: i. Lower the employer contribution dollar amount by more than 5%, or ii. Lower the employer contribution rate at all. b. Provides minimum value coverage after any possible change in coverage, and c. Does not narrow or reduce the classes of employees (or their dependents) to whom coverage was offered on Feb. 9, Certify to the IRS that it meets the three eligibility requirements above to qualify for this relief, which will be part of the transmittal form filed with the IRS in 2016 for the 2015 tax year under the employer reporting requirements. If an employer qualifies for this relief, employer shared responsibility penalties will not be a factor for employers with full-time and full-time equivalent employees until Jan. 1, Note: Employers taking advantage of this one-year delay will NOT be eligible in 2016 for the same transition relief afforded in 2015 related to non-calendar year plans, the use of a shorter measurement period for a future stability period, the January payroll period relief, adding coverage for previously ineligible dependents, or the lower threshold (70%) of full-time employees for which an employer must offer coverage to avoid the No Coverage penalty. Administrative period when an employer is determined to be an applicable large employer for the first time So that employers whose status may be affected by data from the final months of the calendar year have time to respond to becoming an applicable large employer, for the first year of applicable large employer status, an employer is not penalized January through March if providing an offer of affordable, minimum value coverage to employees who were not offered coverage at any point in the prior calendar year by April 1. If coverage is not offered by April 1, penalties may apply for all applicable months (including January through March). This rule only applies the first year an employer meets the applicable large employer status, including in 2015, and not if falling below one year and then reaching the applicable large employer threshold the subsequent year. Note: An employer that uses the transition relief which allows a shorter period in 2014 to determine applicable large employer status for 2015 (as noted on the next page) is not prevented from also using this administrative period when becoming an applicable large employer for the first time. 5

6 EMPLOYERS 100 OR MORE Effective dates for penalties begin Jan. 1, 2015 CALENDAR YEAR PLANS: For employers with 100 or more employees, penalties take effect on Jan. 1, Note: The final regulations provide, in general, that if an applicable large employer member fails to offer coverage to a full-time employee for any day of a calendar month, that employee is treated as not offered coverage during that entire month. Solely for Jan. 2015, if an employer offers coverage to a full-time employee no later than the first day of the first payroll period that begins in Jan. 2015, transition relief provides that the employee will be treated as having been offered coverage for Jan NON-CALENDAR YEAR PLANS: Employers with plan years that do not start on Jan. 1 will be able to begin compliance with shared responsibility at the start of their plan years in 2015, rather than on Jan. 1, if certain conditions are met. Conditions to qualify for relief if you have a non-calendar year plan For the plan year relief, as of Dec. 27, 2012 you would have had to have maintained a noncalendar year plan and not moved your plan year to a later date and meet one of three tests: 1. Provide an offer coverage by the first day of the 2015 plan year under eligibility terms in effect on Feb. 9, This might seem easy to meet, but how many employers, for example, already define full-time for purposes of coverage as 30 or more hours of service? Probably few, so this test is impractical for most employers. (It was likely intended to reward employers that complied early with the shared responsibility rules.) 2. At any point the prior year before Feb. 9, 2014, you covered a fourth of all employees; or a third of full-time employees. 3. During the last open enrollment before Feb. 9, 2014, offered coverage to a third of all employees; or half of full-time employees. Tests 2 and 3 are referred to as the significant percentage tests, and were previously in the proposed rules but only to the extent the calculation was based on the total number of employees. Because this could disqualify employers with large numbers of part-time and seasonal employees, regulators expanded these tests in the final rules to also give an option to take into account only full-time employees. This relief applies to all employees (unless part of the 30%) who, under the eligibility terms in effect on Feb. 9, are eligible as of the first day of the 2015 plan year. Employer reporting is required for the entire 2015 calendar year, even if taking advantage of the transition guidance for non-calendar year plans, because it is needed by the employee and the IRS for the administration of the subsidy. Note: An employer with a non-calendar plan that qualifies for the relief to begin shared responsibility penalties as of their first plan year in 2015 rather than Jan. 1, 2015 would need to decide if taking advantage of the administrative period relief (noted on the previous page) or the non-calendar year plan relief is more advantageous. Shorter period to determine applicable large employer status for 2015 For 2015, an employer may determine its applicable large employer status using at least six consecutive months during the 2014 calendar year (rather than the entire 2014 calendar year). Related to this transition relief, schools are also permitted to select any six consecutive month period in 2014 to determine their applicable large employer status for 2015 (even though they may record no hours of service during the summer months). Note: The seasonal worker exception is based on the entire calendar year, whether this shorter period or the seasonal worker exception is more advantageous in determining its applicable large employer status. (For more details on the seasonal worker exception, see the Wellmark Information Brief Determining Applicable Large Employer Status.) Even though employers with employees may be exempt from shared responsibility in 2015 (as discussed on the previous page), these employers still need to calculate their applicable large employer status in 2014 to verify they are actually of a size for which the exemption applies. These employers are also permitted to use this shorter period transition relief in 2014 to determine their status for 2015 (but not in any subsequent year). 6

7 EXAMPLES OF ANNUAL PENALTIES FT + FTE FT only Scenario Does employer offer coverage? Does coverage meet minimum value? Calculating the Annual Penalties Is coverage affordable? FT employees with Marketplace coverage FT employees with subsidized Marketplace coverage No N/A N/A No coverage: $0 Type of Potential Penalty No Coverage 1 Inadequate Coverage 2 Potential Annual Penalty (Accrued Monthly) 2 No N/A N/A No Coverage: $2,000 X (500 30) = $940,000 3 Yes Yes No Inadequate Coverage: $3,000 X 20 = $60,000 4 Yes No Yes Inadequate Coverage: $3,000 X 20 = $60,000 5 Yes Yes Yes 20 0 N/A: $0 6 Yes Yes No Inadequate Coverage: $3,000 X 400 = $1.2M Penalty capped: $2,000 X (500 30) = $940,000 7 Yes Yes Yes Inadequate Coverage: $3,000 X 25 = $75,000 1 Penalty amounts are subject to inflation adjustments, and the No Coverage penalty calculation is absent 2015 transition relief (i.e., $2,000 x the number of full-time employees, minus the first 30 rather than 80). 2 If at least one full-time employee obtains subsidized Marketplace coverage, the employer must pay an annual tax of the lesser of $3,000 per subsidized full-time employee; or $2,000 for each full-time employee (minus the first 30), with possible inflation adjustments on the penalty amounts. 3 These full-time employees represent the 5% that were not offered coverage by the employer. When calculating the penalties, there are many factors to weigh. Here we have one employer and seven different scenarios. The employer has a combined total of 750 full-time and full-time equivalent employees with 500 of them strictly being full-time. Remember full-time equivalents only matter in determining employer size, but will have no bearing on employer penalties. So, we will focus only on the number of full-time employees in these scenarios. Scenario 1: The employer does not offer coverage, and all 500 of the FT employees go to the Marketplace for coverage to avoid their own tax penalty. None receive subsidized coverage, so the employer pays no penalty. Scenario 2: The employer does not offer coverage, and all 500 of the FT employees go to the Marketplace for coverage. This time, one FT employee receives a subsidy. Since the employer does not offer coverage, the employer must pay a penalty for the total number of FT employees minus 30, or $940,000. In scenarios 3-7, the employer offers coverage to at least 95 percent of FT employees (and their dependents) and therefore will not be subject to the No Coverage penalty: Scenarios 3 and 4: In scenario three, employer s coverage is not affordable; and in scenario four, the coverage does not meet MV. 120 of the FT employees go to the Marketplace for coverage, but only twenty receive a subsidy. In this case, the employer s penalty is $60,000 ($3,000 for each FT employee that received subsidized Marketplace coverage). Scenario 5: The employer s coverage is both affordable and meets MV. But instead, twenty FT employees go to the 7 Marketplace for coverage. Because the employer offered them affordable, MV coverage, the employer s penalty is zero (even if the employees are otherwise eligible for subsidized Marketplace coverage based on their household income). Remember, the affordability safe harbor and Marketplace s review of household income could produce two different results, whereby making the employee eligible for subsidy even though the employer provided affordable coverage per the safe harbor. Scenario 6: The employer s coverage meets MV, but is not affordable. 400 FT employees go to the Marketplace for coverage and all 400 qualify for a subsidy. The Inadequate Coverage Penalty is capped not to exceed the No Coverage Penalty. So, in this case, because $1.2 million exceeds that amount, the employer will pay a lower penalty amount of $940,000. Scenario 7: The employer s coverage is both affordable and meets MV. However, all 25 of the FT employees that were not offered coverage (the remaining 5%) go to the Marketplace for coverage and all qualify for a subsidy. The acceptable margin of error for employers to not offer coverage and still avoid the No Coverage Penalty is the greater of 5% of full-time employees; or 5 full-time employees. Because 5% of 500 is 25, the employer is able to not offer coverage to these 25 FT employees and still not be penalized under the No Coverage Penalty. However, while the employer avoids the No Coverage Penalty, this employer remains subject to the Inadequate Coverage Penalty for full-time employees who receive subsidized Marketplace coverage. Therefore in this scenario, the employer must pay a penalty of $75,000 ($3,000 for each of the 25 FT employees who were not offered employer coverage and who received subsidized Marketplace coverage).

8 EMPLOYER SHARED RESPONSIBILITY AND THE 90-DAY WAITING PERIOD RULES For plan years beginning on or after Jan. 1, 2014, waiting periods may not exceed 90 days. A waiting period is defined as the period that must pass before an individual is eligible for coverage under the terms of the plan. The waiting period rules do not require the employer to offer coverage to any particular employee or class of employees, but prevents an otherwise eligible employee (or dependent) from waiting more than 90 days before coverage becomes effective (except for the added provision in the waiting period final rules that allows an employer to require an employee to satisfy a reasonable and bona fide employment-based orientation period prior to the start of the 90 calendar day waiting period). Under the final rules for employer shared responsibility, there are times when an employer will not be subject to penalty with respect to an employee although the employer does not offer coverage to that employee during that time. However, the fact that an employer will not be penalized under employer shared responsibility for failure to offer coverage during certain periods of time does not, by itself, constitute compliance with the waiting period rules during that same period. As you can see, there are relational aspects to the waiting period and shared responsibility rules. Exercise caution, however, as they are two different sets of rules and they do not fully integrate with one another. For example, except for eligibility conditions based solely on a lapse of time (e.g., completion of 60 days of employment) or that are designed to avoid compliance with the 90-day waiting period limit, plan sponsors have great latitude in imposing eligibility conditions. They can be based on such factors as meeting sales goals, earning a certain level of commissions, or working a certain number of hours during a specified period. For instance, a cumulative hours eligibility requirement is permissible up to 1,200 hours, and once satisfied the plan may impose a waiting period that does not exceed 90 days. While a substantive eligibility condition that denies coverage to employees may be permissible under the waiting period rules, a failure by an applicable large employer to offer coverage to a full-time employee beyond the first three calendar months of employment might nonetheless give rise to an employer shared responsibility tax penalty. Consequently, due to employer shared responsibility penalty implications, employers may want to limit cumulative hours-of-service requirements to employees who are expected to work fewer than 30 hours per week. LIMITED NON-ASSESSMENT PERIODS The final regulations add the term limited non-assessment period for certain employees, in which penalties do not apply if the employee is offered minimum value coverage by the first day of the month following the end of the applicable period; and during the calendar month during the relevant period the employee is otherwise eligible for an offer of coverage (except in the case an employer is an applicable large employer for the first time). If so, a penalty does not apply: To an employee in the initial measurement period (or associated administrative period) For a period after an employee changes to full-time during the initial measurement period To a new employee reasonably expected to be full-time and to whom coverage is offered on the first of the month following the employee s initial three months of employment Under the monthly measurement method, to an employee for the first full calendar month in which otherwise first eligible for an offer of coverage and the immediately subsequent two calendar months For first year of applicable large employer status, the employer is not penalized January through March if providing offer of coverage to an employee who was not offered coverage at any point in the prior calendar year by April 1 The first month of employment if it is a day other than the first day of the calendar month This employer relief does not affect an employee s eligibility for subsidy. 8

9 HOW WILL AN EMPLOYER KNOW THAT IT OWES A PENALTY? The IRS will contact employers to inform them of their potential liability and provide them an opportunity to respond before any liability is assessed or notice and demand for payment is made. The contact for a given calendar year will not occur until after employees individual tax returns are due for that year claiming premium tax credits and after the due date for employers that meet the 50 (100, in 2015) full-time employee and full-time equivalents threshold to file the information returns identifying their full-time employees and describing the coverage, if any, that was offered. With respect to aggregated groups, an employee working for two or more applicable large employer members during the same calendar month is treated as full-time for the member they had the most hours with for the month for purposes of penalty liability. If the employee has the same number of hours, the employers can decide which member is penalized (and the member who does must include that employee in their information return). If the employee doesn t show up on either member s return, the IRS will decide which member is penalized. MAKING A SHARED RESPONSIBILITY PAYMENT If it is determined that an employer is liable for a shared responsibility payment after the employer has responded to the initial IRS contact, the IRS will send a notice and request for payment. That notice will instruct the employer on how to make the payment. Employers will not be required to include the shared responsibility payment on any tax return that they file. NEXT STEPS: Determine if you are an applicable large employer. Determine which measurement method is best for your company to determine full-time employee status. At least once per plan year, if applicable, offer coverage to your full-time employees (and their dependents). Ensure at least one plan offered meets the minimum value and affordability requirements. Consult your legal and/or tax professional with questions on compliance and tax consequences related to employer shared responsibility. The ACA: An online Employer Guide Wellmark is here to assist and support you through all the ACA changes. For more detailed information on this topic, please go to WeKnowReform.com or contact your Wellmark representative. Wellmark Blue Cross and Blue Shield is an Independent Licensee of the Blue Cross and Blue Shield Association Wellmark,Inc. Wellmark is not providing any legal advice with regard to compliance with the requirements of the Affordable Care Act (ACA), including 26 U.S. Code 4980H, or the Mental Health Parity Addiction Equity Act (MHPAEA). Regulations and guidance on specific provisions of the ACA and MHPAEA have been and will continue to be provided by the U.S. Department of Health and Human Services (HHS) and/or other agencies. The information provided reflects Wellmark s understanding of the most current information and is subject to change without further notice. Please note that plan benefits, rates, renewal rate adjustments, and rating impact calculations are subject to change and may be revised during a plan s rating period based on guidance and regulations issued by HHS or other agencies. Wellmark makes no representation as to the impact of plan changes on a plan s grandfathered status or interpretation or implementation of any other provisions of ACA. Wellmark will not be held liable for any penalties or other losses resulting from application of ACA section Any questions about Wellmark s approach to the ACA or MHPAEA may be referred to your Wellmark account representative. Wellmark will not determine whether coverage is discriminatory or otherwise in violation of Internal Revenue Code Section 105(h). Wellmark also will not provide any testing for compliance with Internal Revenue Code Section 105(h). Wellmark will not be held liable for any penalties or other losses resulting from any employer offering coverage in violation of section 105(h). Wellmark will not determine whether any change in an Employer Administered Funding Arrangement affects a health plan s grandfathered health plan status under ACA or otherwise complies with ACA. Wellmark will not be held liable for any penalties or other losses resulting from any Employer Administered Funding Arrangement. For purposes of this paragraph, an Employer Administered Funding Arrangement is an arrangement administered by an employer in which the employer contributes toward the member s share of benefit costs (such as the member s deductible, coinsurance, or copayments) in the absence of which the member would be financially responsible. An Employer Administered Funding Arrangement does not include the employer s contribution to health insurance premiums or rates. M /14

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