Health Care Reform Where Are We Now? Preparing for 2015

Transcription

1 Tuesday, July 1, p.m. Central time Health Care Reform Where Are We Now? Preparing for 2015 David Hunt, CHBC Senior Managing Consultant BKD, LLP dhunt@bkd.com Philip Floyd, CFP, CFS Senior Managing Consultant BKD, LLP pfloyd@bkd.com Dan Timmermann, Senior Director, Practice Leader NFP daniel.timmermann@nfp.com To Receive CPE Credit Participate in entire webinar Answer polls when they are provided If you are viewing this webinar in a group o Complete group attendance form with Title & date of live webinar Your company name Your printed name, signature & address o All group attendance sheets must be submitted to training@bkd.com within 24 hours of live webinar o Answer polls when they are provided If all eligibility requirements are met, each participant will be ed their CPE certificates within 15 business days of live webinar 1

2 Health Care Reform Where Are We Now? Preparing for 2015 Daniel R. Timmermann Senior Director Health Care Reform Mandate The Affordable Care Act (ACA), which was signed into law on March 2010, put in place comprehensive health coverage reforms. Over the past four years, the ACA requirements have been slowly implemented with many of the key reforms becoming effective in 2014 and On February 10, 2014, the federal Department of Treasury released the final rules on compliance with the Employer Shared Responsibility requirements under health care reform law, which is often referred to as the law s Employer Mandate. Our presentation is designed to help Employers, who sponsor group health plans, to review their compliance with key provisions of the ACA. Please always work with a knowledgeable employment attorney, benefits advisor and CPA. 4 2

3 Employer Responsibilities Employers are responsible for maintaining an ACA compliant plan, which includes adherence to market reform requirements, notice requirements, etc. Compliance burdens apply to all size Employers Department of Labor and IRS have the primary enforcement authority including compliance audits of Employer sponsored plans Audit triggers Employee complaints, plan documents, reporting requirements and 5500 filings Fines can be heavy Up to $100 per day per violation for each impacted beneficiary 5 Areas of Review Employer Mandate Determine Employer Size for Employer Mandate Common Control Ownership Identifying your Eligible Full-time Employees New Full-time Employee Eligibility Test Calculating the Number of Employees When does my plan comply in 2015? Employer Mandate Penalties Employer Strategies Other Compliance and Reporting Requirements 6 3

4 Employer Mandate Determining Employer Size Small Group 2 to 49 Full-time Employees Not subject to the Employer Mandate, but must comply with many other ACA compliance provisions, if sponsoring a plan Transitional Group 50 to 99 Full-time Employees Subject to the Employer Mandate in 2016, but must comply with many other ACA compliance provisions, if sponsoring a plan Large Group 100 or more Full-time Employees Subject to the Employer Mandate in 2015 and ACA compliance requirements 8 4

5 Caution for Transitional Employers (50-99) Must not reduce its workforce or overall hours of service for employees during 2014 Exception for bona fide business reasons Sale of a division or terminations of employment for poor performance Must continue to sponsor a group plan with the same Employer contribution through the end of the 2015 plan year (as compared to Feb. 9, 2014) At least 95% of the employer s dollar contribution The same or higher percentage of total cost Must file a certification with the IRS 6056 information reporting Employer Mandate will apply in Common Control Ownership Common Control Ownership Issues The IRS controlled group rules apply to determine Employer size All employees of the controlled group are counted to determine the Employer Mandate applicability Determining controlled group status is very complicated and your CPA/tax counsel should be consulted A rule of reference is that two or more corporations generally connected through common control / stock ownership in any of the following ways: Parent-Subsidiary Group Brother-Sister Group Combined Group Need to calculate the total employees of all controlled groups 10 5

6 Identifying your Eligible Full-time Employees Definition of Full-time Employee Employees working an average of at least 30 hours per week Under IRS 4980 H, an employee would mean a worker who is an employee under the common-law test Common-law rules look at the degree of control and independence of an employee (behavioral, financial, relationship type) Does the Employer have the right to control the worker? Is the worker s job controlled by the Payer? Common-law rules need to be tested by a professional Traditional Eligible Full-time Employee Definition Employees working an average of 30 hours or more per week Compensated either W-2 or K-1 11 Identifying your Eligible Full-time Employees Non-Traditional Full-time Employees to Test In the categories below, employees determined to be eligible under the new rules should be included in the Employer s FT count and offered coverage under the Employer sponsored plan Independent Contractors or Conduct analysis to determine if the contractor is correctly classified Temporary Employees - If they are not a variable hour or seasonal but work an average of 30 hours or more per week Staffing Company and Leased Employees - Conduct analysis to determine if a common law employee Union - If they are an employee of the Employer; can be offered a plan through the Union; suggest certification letter of compliance Seasonal Employees Test in new variable hour rules 12 6

7 DOL Guidance on some Employee Categories Adjunct Faculty and Similar Educational Employees Difficult to track hours Receives compensation based on number of courses or credits Compensation not based on actual classroom time Much time spend on non-classroom activities Must use a reasonable method of crediting hours that takes into account non-classroom time One reasonable method offered is 1 hour of service for each hour in the classroom plus 1.25 hours of credit for non-classroom activity Categories of Employees that can be Excluded Non-paid student interns or externs Federal work study-programs or similar State program Non-paid volunteers 13 New Full-time Eligibility Test Variable Hour and Seasonal Employee Testing (Aggregate Hours) and NOT for Full-Time Employees (Average Hours) Measurement Method Look-back Total hours worked in the prior 3 to 12 months Administrative Time period for HR to determine eligible employees; can be up to 90 days but when combined with Look-back; cannot be more than 13 months for the Initial Measurement Stability Forward time period when an employee is offered coverage under the plan; must be at least the standard measurement period or 6 months, whichever is greater Time Periods of Analysis Standard Period Based on the anniversary date of plan Initial Period Based on each new employee hire date 14 7

8 Measurement Example Standard Period ABC Company Plan Year Date: January 1, 2015 Open Enrollment: End of November, 2014 Eligibility Testing: Current Variable Hour and Seasonal Employees Aggregate Hours: 1,560 hours (30 hours x 12 months) Look-back Period November 1, 2013 thru October 31, 2014 Admin Period November 1, 2014 thru December 31, 2014 Stability Period January 1, 2015 thru December 31, Months 2 Months 12 Months 15 Measurement Period for New Employees What do we do with new variable hour or seasonal employees hired after the standard measurement period has started? 16 8

9 Measurement Example Initial Period ABC Company Bob is hired on April 1, He is a variable hour employee not expected to work an average of 30 hours per week. He is not benefits eligible as of April 1, He needs to be individually tested to determine if he worked 1,430 hours (30 hours x 11 months) to be eligible in the future. Look-back Period April 1, 2015 thru February 29, 2016 Admin Period March 1, 2016 thru April 30, 2016 Stability Period May 1, 2016 thru March 31, Months 2 Months 11 Months 13 Months 17 Initial Measurement Period - New Employee Bob Scenario One Bob is tested in his Initial Look-back of his aggregate hours that he worked in his first 11 months of employment. He did not work a total of 1,430 aggregate hours. He is NOT eligible for health coverage on May 1, Scenario Two He did work a total of 1,430 aggregate hours in his Initial Lookback period. He is eligible for health coverage on May 1, He will be re-tested again in the standard measurement period for the open enrollment for the 2017 anniversary date. April 1, Feb 29, 2016 May 1, March 31, 2017 Initial Look-back Admin Initial Stability 18 9

10 Standard Measurement Period - New Employee Bob Scenario One Bob is now tested in the Standard Look-back of aggregate hours worked for the plan anniversary date of January 1, He did not work a total of 1,560 aggregate hours. His coverage ends on March 31, Scenario Two He did work a total of 1,560 aggregate hours. His coverage would continue until December 31, April 1, Feb 29, 2016 May 1, March Initial Look-back Admin Initial Stability Standard Look-back Admin Standard Stability Nov 1, Oct 31, 2016 Jan 1, Dec 31, Calculating Total Number of Employees Determining if you are subject to the Employer Mandate Determine the number of Full-time employees by month in 2014 Determining the number of Full-time Equivalent employees by month in 2014 Total the number of FT and FTE s for all of 2014 NEW Final regulation allows an Employer to use only 6 months of consecutive data in 2014 rather than all of 2014 Seasonal worker exception: If an Employer is determined to be subject to the Employer Mandate, they can exclude seasonal workers who worked less than a 120 days in the FTE calculation and re-test. A seasonal employee is an employee who works during seasons or periods of the year and not continuously during the year

11 Calculating Total Number of Employees Full-time (FT) Employee Calculation A Full-time employee is an employee (including seasonal employees) who works, on average, 30 hours per week or 130 hours per month. Hourly employees Count actual hours Salaried employees Count actual hours or use a daysworked or weeks-worked equivalency method Total the number of Full-time employees for each month in 2014 Determine the average Full-time employees for 2014 or for any 6 month consecutive period during the year If you determine you average at least 50 Full-time employees, you will be subject to the Employer Mandate 21 Calculating Total Number of Employees Full-time Equivalent Employee (FTE) Calculation Any Employer with fewer than 50 Full-time employees needs to determine the number of FTEs. FTE s are all employees who are NOT Full-time employees. Calculate the total number of hours of all FTEs by month but do not use more than 120 hours for any one employee. Divide the total hours worked for all FTEs and divide by 120 to determine the number of FTEs for that month. Determine the average FTE employees for 2014 or for any 6 month consecutive period during the year. Add the FTE average to the total number of Full-time employee average to determine if you are subject to the Employer Mandate

12 Calculating the Number of Employees - Example Month Avg Jan 80 Feb 83 Mar 83 Apr 90 May 110 June 110 July 130 Aug 130 Sep 135 Oct 135 Nov 140 Dec 140 Avg 92 ABC Company 6 Months 12 Months Month Avg Jan 80 Feb 83 Mar 83 Apr 90 May 110 June 110 July 130 Aug 130 Sep 135 Oct 135 Nov 140 Dec 140 Avg When is my Plan Effective in 2015? Calendar Year Plans must comply on January 1, 2015 Transitional Relief for Non-Calendar Year Plans Must have been in place on December 27, 2012 and could not have subsequently changed plan year to a later calendar date Employers who changed to a December 1, 2013 plan year (early renewal strategy) will not qualify for transition relief and must comply on January 1, Must meet one of the following criteria: Offered coverage to at least 33% of all employees or 50% of full-time employees during the most recent open enrollment period prior to ; OR Covered at least 25% of all employees or 33% of full-time employees between and

13 Employer Mandate Penalty Penalty A No Offer Penalty Must offer coverage to substantially all full-time employees (30 or more hours per week) and children or pay an annual $2,000 penalty per full-time employee At least one full-time employee obtains premium tax credit Year Must Offer coverage to Penalty Begins on the % of FT EEs 81st FT EEs 2016 and each future year 95% of FT EEs 31st FT EEs 25 Employer Mandate Penalty Penalty B Unaffordable Penalty Coverage offered must meet Minimum Value Employee contribution for self only coverage for the lowest cost option plan cannot exceed 9.5% of wages Affordability Safe Harbors Form W-2 Box 1 retrospective in application Rate of Pay Hourly rate times 130 hours or monthly salary Penalty is only on each employees who is deemed unaffordable and receive a tax credit Annual penalty of $3,000 No major changes in final regulations 26 13

14 Strategies Strategy #1 - Spousal Carve Out PROS An Employer may exclude spouses without penalty Eligibility for a premium tax credit is based on the affordability of Employee Only coverage. If the employee s coverage is affordable, the spouse will be ineligible for a premium tax credit. By excluding the spouse from coverage, the spouse s eligibility for a premium tax credit is preserved Cost Savings CONS Household income is unknown. Spouse may still be ineligible for premium tax credit Difficult to communicate; Employees see as reduction in benefits Not permissible in some states such as NY, TX and WI 28 14

15 Strategy #2 - Offer a Skinny Plan PROS For Employers with 50+ employees Would qualify as Minimum Essential Coverage (MEC) for covered individuals to avoid individual mandate (very basic medical care) Would avoid Penalty A of Employer Mandate Cost Savings CONS Many plans do not satisfy the 60% Minimum Value Not available for fully insured plans because of State mandates Employer could be subject to Penalty B of Employer Mandate for those employees deemed unaffordable 29 Strategy #3 - Cut Hours of Full-time Employees An Employer can always make business decisions in regards to the business needs, but it should not terminate an employee or reduce their hours solely based on benefits eligibility Possible interaction with Section 510 of ERISA Unlawful for any person to discharge or otherwise discriminate against a plan participant or beneficiary: For exercising a right the participant or beneficiary is entitled to under ERISA or under an employee benefit plan (i.e., retaliation for the past exercise of protected rights); OR For the purpose of interfering with any right the participant or beneficiary may become entitled to under ERISA or under an employee benefit plan

16 Strategy #4 - Terminate Group Plan This strategy is to terminate group plan and assist employees in the purchase of individual coverage Cannot be done on a tax advantaged basis Employer looses business deduction of premium and Medicare and FICA tax savings of employee contributions Section 125 regulations prohibit an employee for paying for individual exchange coverage through the cafeteria plan IRS Notice prohibits a standalone HRA and the reimbursement of individual policy premiums on a pre-tax basis Premiums are not a qualified expense under a Health FSA plan An HSA plan can only reimburse premiums for an individual on COBRA, receiving unemployment compensation, or age Other Compliance and Reporting Requirements 16

17 ERISA Summary Plan Document (SPD) ERISA Summary Plan Document (SPD) - All Employers regardless of size must have a compliant SPD; this is the first request from the DOL in an audit and the majority of clients are aware they are out of compliance. SPD should include the following requirements: Eligibility Definitions for Full-time Employees including New Measurement Periods Waiting Period Pre-Existing Limitation Minimum Essential Coverage Annual Limits No Dollar Limits Essential Health Benefits 33 Wellness Programs Wellness Programs If your company sponsors a wellness program that requires an individual to satisfy a standard related to a health factor in order to obtain a reward, confirm the program complies with revised nondiscrimination rules for plan years beginning on or after January 1, Wellness reward limit increased from 20% to 30% Tobacco penalty limit increased from 20% to 50% Coverage of Preventive Services Monitor guidelines for preventive services, which are regularly updated to reflect new scientific and medical advances. As new services are approved, non-grandfathered group health plans will be required to cover them with no cost-sharing

18 Credits and Rebates Small Business Health Care Tax Credit Determine if your company qualifies for the small business health care tax credit. Beginning in 2014, the maximum credit increases to 50% for small business employers; however, only premiums paid for qualified health plans offered through a Small Business Health Options Program (SHOP) count for the credit. Until online functionality for the federally-facilitated SHOP is available, small businesses may work with a broker to enroll employees in a qualified health plan and apply for SHOP eligibility. Medical Loss Ratio (MLR) Rebates Distribute rebates received from insurance companies to eligible plan enrollees as appropriate. Rebates are due to employer-policyholders by August 1st (starting in 2015, rebates are due by September 30th). These rules do not apply to employers who operate selfinsured plans. 35 Fees and Taxes Additional Medicare Tax for High Earners Additional Medicare Tax (0.9%) on wages or compensation paid to an employee in excess of $200,000 in a calendar year. PCORI Fees Employers sponsoring certain self-insured health plans (including HRAs and FSAs not treated as excepted benefits) are responsible for fees to fund the Patient-Centered Outcomes Research Institute (PCORI). IRS Form 720 must be filed annually to report and pay the fees no later than July 31st. Transitional Reinsurance Program Fees The Transitional Reinsurance Program is a three-year program, beginning in 2014 and continuing through 2016, that reimburses insurers in the individual market for high claims costs. The program will be funded through fees to be paid by issuers of fully insured health plans. Employers sponsoring certain self-insured plans providing major medical coverage must remit directly to the IRS

19 Documents to be Reviewed ERISA Plan Documents As referenced earlier Section 125 POP Document If employee contributions are done pre-tax, update with new ACA language. Section 125 Health and Dependent Plans Employers who maintain a cafeteria plan may need to modify the arrangement in order to comply with certain ACA requirements. Health Reimbursement Arrangement (HRA) Employers who maintain an HRA plan may need to modify the arrangement in order to comply with certain ACA requirements Wrap Document Consider wrapping all products into one ERISA plan document for ease of filing. 37 Reporting Requirements Reporting of Employer-Provided Health Coverage Continue to report the cost of health coverage provided to each employee annually on Form W-2, which must be furnished to employees by January 31st each year, unless transition relief applies. This requirement does not apply to employers required to file fewer than 250 Forms W-2 for the preceding calendar year. Health Insurance Exchange Model Notice Provide written notice with information about a Health Insurance Exchange to each new employee at the time of hiring, within 14 days of the employee s start date. Summary of Benefits & Coverage (SBC) Provide to Employees and dependents at specified times during open enrollment and upon request

20 Reporting Requirements NEW IRS 6055 Reporting Applies to all Employers Purpose to administer individual mandate Fully insured plans Carrier is responsible. Self-funded plans Employer is responsible. Due to employees by 1/31/2016 Due to IRS by 2/28/16 NEW IRS 6056 Reporting Applies to large Employers Purpose to implement the Employer Mandate penalty, Affordability Testing and Minimum Value Fully insured plans Employer is responsible. Self-funded plans Employer is responsible. Due to IRS by 2/28/16 (3/31, if electronically) 39 Thank You! Dan Timmermann David Hunt Philip Floyd

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