FTE is defined as an employee who is employed on average at least 30 hours of service per week.

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1 On March 23, 2010, President Barack Obama signed int law cmprehensive health care refrm legislatin, the Patient Prtectin and Affrdable Care Act (H.R. 3590) passed in the Senate. The Health Care and Educatin Recnciliatin Act f 2010 (H.R. 4872) is a recnciliatin bill passed by Cngress t make changes t the PPACA, signed int law in March 30, Tgether, these bills represent the cmpleted health care refrm Act. The summary belw lists the main prvisins f the Act that directly affects emplyers. SHARED RESPONSIBILITY FOR EMPLOYERS Effective Jan 1, 2014 N mandate, but assessment fee fr large emplyers (mre than 50 FTEs) if emplyer has at least 1 FTE wh receives credit thrugh an Exchange. The idea is that large emplyers help ffset the csts t the American taxpayer if a firm has emplyees wh access taxpayer supprted health prgrams (i.e. in an Exchange). [Nte: This shuld affect a small sectin f large emplyers since mre than 96% f large emplyers ffered cverage in 2008, accrding t the Kaiser Family Fundatin]. FTE is defined as an emplyee wh is emplyed n average at least 30 hurs f service per week. Large Emplyers NOT ffering health cverage t its FTEs (and their dependents) AND at least 1 FTE is receiving a tax credit thrugh the Exchange, will be assessed a fee f $2,000 per FTE (whether the ther FTEs are receiving credit r nt); Large Emplyers that DO ffer health cverage t its FTEs (and their dependents) AND have at least 1 FTE wh received a premium credit thrugh the Exchange are required t pay the lesser f $3,000 fr each FTE wh received the credit AND enrll in an Exchange r $2,000 fr each FTE. [Nte: Because the assessment applies t FULL time emplyees nly, the law includes a mechanism t prevent emplyers frm evading the fee by decreasing the wrk hurs f their emplyees t PT. The law requires that a measure f FTE equivalents be cunted t determine whether the emplyer is subject t the assessment. The FTE equivalent is calculated by ttaling the number f hurs paid divided by the number f available regular hurs a FTE culd have wrked fr the year (r $2080, a maximum limit established by this law). With this measure, FTE equivalents can include mre than ne emplyee, which means that the ttal number f FTE equivalent des nt equal the head cunt f each emplyee. In ther wrds, BOTH the number f PTEs and FTEs are cnsidered when determining whether the emplyer emplyed an average f at least 50 FTEs. Fr example, if the wrk year is defined as 2,080 hurs, then ne wrker ccupying a paid FT jb all year wuld cnsume ne FTE; tw emplyees wrking fr 1,040 hurs each wuld cnsume ne FTE between the tw f them. This FTE equivalent scale, hwever, is nt cunted when determining the amunt f the penalty. Als, n penalties apply t PTEs.] It is against the law t discriminate against lw incme wrkers that qualify fr the tax credit r cst sharing subsidy that can be used in an Exchange.

2 The first 30 FTEs are excluded when calculating the amunt f the penalty. An emplyee is eligible fr Tax Credit r a Cst Sharing Reductin fr use in an Exchange if: The emplyee s husehld incme range is frm % f the federal pverty level (FPL) and, If the emplyer des ffer cverage, but the emplyee s required premium fr cverage in unaffrdable (exceeds 9.5% f their husehld incme) r, The emplyer des nt pay fr at least 60% f the allwed csts under the plan. The emplyer des nt determine if emplyee is eligible fr premium tax credit based n incme; instead, the emplyer is ntified by the exchange if the FTE qualifies. Large emplyers are nt required t have a standard benefits package r make minimum cntributins t premiums. BUT, if the emplyer pays less than 60% f the plan s premium, the emplyee may be eligible fr subsidy in an Exchange (depending n their incme), which then trigger the fee assessment fr emplyers (except in the case where emplyer ffers Free Chice Vuchers, see belw). Emplyers that DO ffer cverage will be required t autmatically enrll emplyees int the emplyer s lwest cst premium plan (emplyee may pt ut). Emplyers that DO ffer minimum essential cverage and pay a prtin f the cst f the premium are required t prvide a FREE CHOICE VOUCHER t emplyees t be able t buy insurance in an Exchange, IF: Emplyee s incme is less than 400% Federal Pverty Level (FPL), AND If the emplyee s share f the premium is greater than 8% but less than 9.8% f their incme r the emplyers plan pays less than 60% f the premium cst AND Emplyee pts ut f the emplyer spnsred plan int an Exchange Vucher amunt equals what the emplyer wuld have paid t prvide cverage (fr individual r family cverage). Vucher amunt will be used by emplyees t cver the premium csts fr the plan they chse in the Exchange. The amunt f the vucher used by the emplyee t purchase a plan in an Exchange is nt taxable t the emplyee; any amunt left ver nt applied t the premium cst f that plan will be taxable t the emplyee. Emplyers that prvide free chice vuchers will nt be penalized fr emplyees wh receive credits in the Exchange (i.e. n assessment payment impsed emplyer fr emplyees wh chse t take the vucher). Emplyers pay the credit amunt f vucher t the Exchange fr the premium f the plan. If the amunt f the free chice vucher exceeds the amunt f the premium f the plan, emplyers must pay that excess directly t the emplyee. If premium in an Exchange ends up being mre than what the emplyer wuld have cntributed t the emplyer spnsred plan, emplyees pay that difference ut f pcket.

3 Emplyees wh receive vucher wuld nt als qualify fr a premium tax credit in the Exchange. Many f the details are t be wrked ut in regulatin. One issue will be t determine the amunt the emplyer must cntribute and which plan t cnsider if emplyees csts falls between 8 9.8% f incme. [Nte: The idea behind the vucher is t allw lw incme individuals t have mre ptins in purchasing insurance] Emplyers with 200 r mre FTEs must autmatically enrll their emplyees in the emplyerffered lwest cst health care plan. Emplyees may pt ut. Any emplyer ffering emplyer spnsred insurance may nt impse any waiting perid in excess f 90 days (fr bth individual and family cverage). Hwever, there will be n fee impsed n emplyers that require waiting perids up t 90 days befre emplyees culd enrll in an emplyer spnsred plan. Emplyers are required t disclse the value f health benefits n emplyees W 2 tax frms. Emplyers with 50 r less emplyees are exempt frm this assessment. [Nte: less than 50% f these small emplyers ffer health insurance] EMPLOYER REQUIREMENT TO INFORM EMPLOYEES OF COVERAGE OPTIONS Effective March 1, 2013 All emplyers (nt just large emplyers) must prvide a written ntice t all emplyees abut the existence f an Exchange, including infrmatin n hw t cntact the Exchange t request assistance and their ptential eligibility fr a tax credit r cst sharing reductin if the emplyer cvers less than 60% f the allwed csts under the plan. This ntice must cntain infrmatin n an emplyee s eligibility fr a tax credit r cst sharing reductin thrugh the Exchange. PROTECTIONS FOR EMPLOYEES N emplyer is allwed t discharge r discriminate against any emplyee with respect t salary (i.e. discriminating in favr f higher wage emplyees), terms, cnditins, r ther privileges f emplyment, including credit r subsidy t buy in an Exchange. If emplyee believes that he/she was unlawfully discharged, they may seek relief in accrdance t the law. SMALL BUSINESS TAX CREDIT: FOR EMPLOYEE HEALTH INSURANCE EXPENSES OF TAX EXEMPT SMALL EMPLOYERS Effective January 1, 2010 (effective immediately)

4 Eligible emplyer: small emplyers with n mre than the equivalent f 25 FTE (a firm with fewer than 50 half time wrkers wuld be eligible) AND average annual wages belw $50,000 fr FTEs and cvers at least 50% f the ttal premium cst. [See infrmatin n Pg 1 n hw the FT equivalent number f emplyees is determined this scale allws emplyers t accunt fr PTEs s that an emplyer with mre than 25 emplyees may qualify fr this credit]. Phase I: Fr : Credit f up t 25% fr nn prfit emplyers (35% fr fr prfits) f emplyer s average premium cntributin tward the emplyee s health insurance premium. Fr nn prfit emplyers, credit amunt is based n the payrll taxes f the emplyer nn elective cntributins fr premiums paid fr health insurance cverage Phase II: 2014 n: fr businesses wh purchase cverage thrugh the Exchange, credit f up t 35% (50% fr fr prfits) f emplyer s cntributin tward the emplyee s health insurance premium if emplyer cntributes at least 50% f the ttal premium csts The requirement that the emplyer pays at least 50% f the ttal premium cst applies t the premium fr single cverage fr the emplyee, even if emplyee has family cverage. There are special rules in calculating the credit fr a tax exempt qualified emplyer. The amunt f the credit (25% f emplyer s premium expenses) cannt exceed the ttal amunt f incme and Medicare (i.e. Hspital Insurance) tax the emplyer is required t withhld frm emplyees wages fr the year plus the emplyer share f Medicare tax n emplyees wages. Any premium paid as a salary reductin arrangement under a sectin 125 cafeteria plan is nt treated as paid by the emplyer, therefre nt subject t this tax credit. Premiums paid by the emplyer in the 2010 year befre the new health care refrm law was signed in March 23, 2010, CAN be cunted in calculating the credit. Fr tax exempt emplyers that have n taxable incme, the credit is a refundable credit. The IRS will prvide further detail n hw t claim the tax credit since they can t claim it n the annual incme tax return. [Nte: the credit rates are lwer fr nn prfits t ensure that the value f the credit is apprximately equal t that prvided t fr prfit firms that cannt claim a tax deductin fr the amunt f the credit claimed] The amunt f the credit gradually phases ut based with average wage between $25,000 and $50,000 and fr firms with the equivalent f between 10 and 25 FTEs. An emplyer s eligible cntributin is limited t the average cst f health insurance in that state. This is t avid an incentive t chse a high cst plan. Fr mre detailed infrmatin n the tax credit fr small businesses, visit the IRS website.

5 EXCHANGE ELIGIBLE EMPLOYERS Exchanges are new entities that create rganized and regulated marketplaces that will allw small emplyers and emplyees nt cvered thrugh their emplyers t shp fr insurance at mre cmpetitive rates than is currently available. Effective Jan ; First Year small emplyers with 100 r fewer emplyees, but befre 2016, it s up t the state t limit eligibility t emplyers with n mre than 50 emplyees; Beginning in Jan 2017, states can chse t allw emplyers with mre than 100 emplyees t participate in the Exchange; Once an emplyer is permitted t participate in an Exchange, that emplyer may cntinue t be Exchange eligible regardless f the number f emplyees it emplys in the future. OTHER PROVISIONS Grup health plans that impse certain exclusins will n lnger be allwed. Grandfathered grup health plans are als subject t mst requirements. Althugh grup health plans will be respnsible fr cmplying with all the prvisins f the law, emplyers als have the respnsibility f ensuring that the plan(s) they spnsr abide by the Act. Sme prvisins are effective this year, but mst dn t take effect until January Sme f the main prvisins are listed belw: Grup health plans must nw cver unmarried dependent children up t age 26 wh have n access t ther emplyer spnsred health cverage, beginning in Sept 23, The law des nt require cverage fr the child f a child wh is receiving dependent cverage. The law des nt specify whether emplyers must cntribute tward the child s premium this is smething that will be further addressed in rule making. Grup health plans can n lner impse life time r annual limits n plan benefits, effective September 23, 2010; Grup health plan can n lnger exclude anyne due t pre existing cnditins, effective September 23, 2010 t children, effective January 2014 t all persns; Free preventive care under Medicare and private plans n c pays and exempt frm deductibles; effective September 23, 2010; The law limits health care reimbursement accunt cntributins t $2,500 per year and n lnger allws ver the cunter drugs t be reimbursed thrugh health reimbursement accunt r health saving accunt unless prescribed by a dctr; The law prvides a temprary reinsurance prgram (until Exchanges becme available in January 2014) fr early retirees (ages 55 64) and their dependants that prvides reimbursement t participating emplyment based plans fr a prtin f the csts f prviding health insurance cverage. This temprary prgram is created t help cmpanies maintain health cverage fr early retirees. The reimbursement t the emplyment based health plans equals 80% f the cst f benefits per enrllee that is between $15,000 and $90,000. This prvisin is effective June 23, 2010;

6 The law creates a Simple Cafeteria Plan available fr emplyers with less than 100 emplyees. This Simple Cafeteria Plan is a new prgram fr smaller emplyers t be able t ffer this taxfree benefit t their emplyees in a way that reduces the administrative burden f spnsring such plans; effective Jan 1, 2011; The law creates a temprary natinal high risk pl insurance cverage fr eligible individuals until Exchanges are up and running (in January 2014), effective June 23, Eligible individuals are thse wh have pre existing cnditins and have nt been cvered under any plan as f March 23, Emplyers are prhibited frm disenrlling emplyee frm emplyerspnsred plan r encuraging emplyees t disenrll frm emplyer spnsred plan fr the purpse f applying fr cverage thrugh this high risk pl. Healthcare flexible savings cntributin frm each emplyee will be limited t $2,500 per year, effective January 2013; A nndeductible excise tax equal t 40% f the cmbined cst f the annual emplyer and emplyee premium that exceeds the limit f $10,200 fr individual cverage and $27,500 fr family cverage (nt cunting dental and visin plans). The limits fr retirees and high risk prfessinals are between $11,850 and $30,950). The insurance cmpany will be taxed, nt the emplyer; effective January 2018; Eliminates the tax deductins fr emplyers wh receive Medicare Part D retiree drug subsidy payment, effective January There will be an increase in the Medicare tax fr high incme emplyees. Effective 2013, fr emplyees earning mre than $200,000/yr, this increase in Medicare tax will be levied n the emplyee s share f the incme. Emplyers will be required t withhld this additinal tax frm the emplyee s incme. [Nte: In the case f health insurance cverage under cllective bargaining agreement (negtiatin between emplyer and trade unin), that was ratified prir t law s enactment date (March 23, 2010), will nt be subject t the Act until agreement expires].