FLEX-PAY CLIENTS AND AFFORDABLE CARE ACT SOLUTIONS KEY POINTS OF THE ACT

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1 FLEX-PAY CLIENTS AND AFFORDABLE CARE ACT SOLUTIONS KEY POINTS OF THE ACT Flex-Pay Payroll Services 723 Coliseum Drive, Suite 200 Winston-Salem NC

2 KEY POINTS FOR CLIENTS AND THE ACA Classifying employees. Includes setting measurement periods, administrative periods and stability periods. Tracking and reporting for insurance eligibility and government reporting. Monitoring employee hours worked by week. Minimum coverage and minimum value. Affordability compliance reports.

3 CLASSIFYING CURRENT EMPLOYEES Two main classifications for both payroll and timekeeping systems: Employees who will be full time (30 hours or more of service on average per week). Employees who will work variable hours (these are the employees to monitor each week). Employees are classified as a variable hour employee if it cannot be determined on the employee s start date that the employee is reasonably expected to have an average of 30 or more hours in a week. Entering these two main classifications into the payroll software will help with the reports required to track the employee s insurance eligibility during the various ACA periods. Once the classifications are entered into the timekeeping software, this will help to simplify the reporting required for monitoring the variable hour employees. (Examples will be included in later slides for clients that use Swipe Clock.)

4 DEFINITIONS OF THE ACA PERIODS Measurement Period (aka Look Back Period) Defined: The Measurement Period is the period which the employer uses to look back at the employee s hours in order to determine if the employee has averaged 30 or more hours of service each week. (Or 130 hours each month.) There are two types of Measurement Periods, the Standard or Ongoing Measurement Period and the Initial Measurement Period for new hires. Administrative Period (maximum of 90 days) Defined: A period after the Measurement Period and before the beginning of the next stability period during which the employer performs administrative tasks, such as calculating the hours from the measurement period, to determine eligibility for coverage and giving time for insurance enrollment. There are two types of Administrative Periods, the Standard or Ongoing Administrative Period and the Initial Administrative Period for new hires. Stability Period Defined: This is the period of insurance coverage or the look-forward period where the employee s status (as determined by the measurement period) is locked in regardless of the employee s actual hours during the stability period. There are two types of Stability Periods, the Standard or Ongoing Stability Period and the Initial Stability Period for new hires.

5 DETERMINING THE MEASUREMENT PERIODS Measurement Period (aka Look Back Period) Each employer will choose 3: The regular ongoing Measurement Period (aka Standard Measurement Period ) which will be the same for each year once it is chosen. Employers may choose to use a 12 month Measurement Period in order to help minimize the amount of tracking. The 2013 Measurement Period (which can be less than the ongoing Measurement Period for 2013 only). Transitional relief allows that the 2013 Measurement Period may be a shorter length of time than the company s chosen Ongoing Measurement Period. If a 12 month Ongoing Measurement Period is chosen, then the 2013 Measurement Period must be at least 6 months and must begin no later than July 1, The Initial Measurement Period for newly hired employees which must be the same length of time for all newly hired employees. This period may be a different length than the employer s Ongoing or Standard Measurement Period. Note: The initial Measurement Period plus the initial Administrative Period for new hires can be 13 months plus a partial month (it cannot be a total of 14 months). Note: Measurement periods must be the same for all employees in the same category with four permissible categories - (1)salaried or hourly employees, (2) primary places of employment in different states, (3) collectively bargained and non-collectively bargained employees or (4) employees covered by different collective bargaining agreements. Note: Some analysts have determined that shorter measurement periods may result in more employees being eligible for insurance coverage. (Employers may decide to choose a Measurement Period of 3 12 months.)

6 DETERMINING THE ADMINISTRATIVE AND STABILITY PERIODS Administrative Period (maximum of 90 days) Each employer will choose 2: The Administrative Period for Ongoing Employees. The Administrative Period for Newly Hired Employees can be a different length of time than the Ongoing Employees Period. (Employers may choose to consider the number of the newly hired full time and variable hour employees to help choose the new hire Administrative Period.) Note: Companies may decide to use the first of the month following 30 or 60 days from the employees hire date as the coverage beginning date to help simplify the administrative process since it is easier to track insurance coverage when it begins on the 1 st of a month. (Employees must be covered by the 91 st day of employment, not 3 months.) Stability Period - Each employer will choose 2: The Stability Period for Ongoing Employees. (Cannot be shorter than the Ongoing or Standard Measurement Period chosen by the employer.) The Initial Stability Period for New Hires. (Cannot be shorter than the Ongoing or Standard Measurement Period.) Note: Companies may choose a 12 month stability period in order to ease the administrative burden of tracking employees.

7 ONGOING PERIODS CHOSEN FOR OUR EXAMPLES: Ongoing Measurement Period Oct 1 to Sept 30 th each year. The initial measurement period in these examples will go back to Oct 1, Employers that choose a 12 month ongoing measurement period are allowed to choose a shorter measurement period (no less than 6 months) for the 2014 benefit plan year only, offered as transitional relief. Stability Period Jan 1 st to Dec 31 st each year. The ongoing stability period cannot be shorter than the ongoing measurement period. A 90 Day Administrative Period.

8 EXISTING FULL TIME EMPLOYEES Once an employee is determined to be an ongoing full time employee, their full time classification will stay the same until their employment ends or their classification changes to a variable hour employee. Stability Period (which is the period of insurance coverage). If an employee is reasonably expected to remain full time, the measurement period and stability period safe harbors do not apply. Essentially, the existing full time employees will not have a measurement period or stability period unless the employee classification/status changes to a variable hour employee. A 90 Day Administrative Period. In order to prevent any gaps in coverage, the administrative period must overlap with the prior stability period. Full time employees enrolled in coverage must continue to be covered through the administrative period.

9 GRAPH LAYOUT FOR NEWLY HIRED FULL TIME EMPLOYEES This table helps to illustrate the sample periods for newly hired full time employees: If the employee is expected to work more than an average of 30 hours per week on average at the time of hire, then the employee must be offered coverage by the 91 st day of employment at the very latest. Measurement Periods and Stability Periods do not apply for newly hired full time employees. The employee is treated as full time until their classification changes from full time to variable hour or until their employment ends. If the employee changes to a variable hour employee, the employee s insurance coverage would continue through the company s current ongoing stability period and the employee would also fall into an initial measurement period, similar to a newly hired employee.

10 GRAPH LAYOUT FOR ONGOING VARIABLE HOUR EMPLOYEES This table helps to illustrate the sample periods for ongoing variable hour employees: A 12 month Measurement (Look Back) Period. If the client s regular ongoing measurement period will be 12 months, the 2013 measurement period can be 6 months for 2013 only and it must start by July 1, 2013 at the latest. A 12 Month Stability Period (which is the period of insurance coverage). A 90 Day Administrative Period.

11 GRAPH LAYOUT FOR NEWLY HIRED VARIABLE HOUR EMPLOYEES This table helps to illustrate the sample periods for newly hired variable hour employees: A 12 Month Initial Measurement (Look Back) Period. (This period may start on the employee s hire date or the 1 st of the month following the employee s hire date.) A 12 Month Initial Stability Period (which is the period of insurance coverage). A 30 Day Initial Administrative Period. Note: In this example the new employee falls into both an Initial New Hire Measurement Period and the Ongoing Measurement Period.

12 SPECIFIC SCENARIOS FOR A NEWLY HIRED VARIABLE HOUR EMPLOYEE Using the example below with a hire date of July 10, 2013: The new employee s initial measurement period plus their administrative period can be 13 months plus a partial month. (cannot be a full 14 months) If the new employee works less than an average of 30 hours per week in the initial measurement period but more than an average of 30 hours per week during the ongoing measurement period, insurance coverage should be offered on Jan 1, If the new employee works more than an average of 30 hours per week in the initial measurement period, coverage should be offered by Sept 1, 2015 and coverage would go through Aug 31, If the new employee works more than an average of 30 hours per week in the initial measurement but less than 30 an average of 30 hours per week in the ongoing measurement period, the employee s insurance coverage continues through Aug 31, 2016 and then the employee would not be eligible for coverage from Sept 2016, until Dec 31, 2016.

13 ONCE THE PERIODS HAVE BEEN DETERMINED: The employee s insurance eligibility status can be tracked (including date driven fields) in the payroll software using the event codes for spreadsheet reporting on the employee s eligibility status. This report can be used for determining which employees are offered health insurance coverage during open enrollment for benefits and/or further customized for your needs. This date driven tracking of your periods will assist with government required reporting and help during any government audits.

14 TRACKING EMPLOYEE STATUS DURING VARIOUS ACA PERIODS If the client isn t already tracking the Employee Status Codes in the HR system (or other method) for periods, the status codes can be set up and customized for the client within the payroll system. Date driven fields under the events tab allow for the period status codes to be added any time during or preceding the period.

15 ADDITIONAL EMPLOYEE PERIOD TRACKING ITEMS Reports can be produced if the client is utilizing employee event codes for employee periods and classifications that will help with tracking the requirement that insurance must be offered to at least 95% of employees. (The reports can be run by month and/or for the entire client period.) Utilizing event codes will also provide a method to produce a report that will list any employees who have an upcoming administrative period that will require insurance enrollment outside of the ongoing employees enrollment period. By using the Event Codes in the payroll system, this provides the client with a date driven field for tracking any employees who opted out of insurance which may be required as part of the government reporting requirements. Beginning in 2015, employers with 200 or more Full Time Employees are required to automatically enroll newly hired full time employees in the health insurance coverage and the employee must specifically opt out. The opt out employee status can also be tracked by using the event codes.

16 UPCOMING STANDARD PAYROLL REPORT INCLUDES EXCEL FORMAT OPTION

17 EXCEL SAMPLE OF UPCOMING REPORT Initial sample of the new report with employee hours by check dates including gross pay and Employment Type Classifications (such as the two main classifications of full time and variable hour employees) are two of the items that will be included.

18 ADDITIONAL NOTES FOR NEW PAYROLL REPORT The new payroll report that is coming soon will provide the average hours per week during the measurement period. This information is helpful with many aspects of ACA tracking requirements as well as assisting clients with information to minimize costs. Any date range of the measurement period may be used when running the report. For instance, it can be run at the end of each month of the measurement period to include a cumulative total for the period. Additional information may be included in this new report once the report is released and additional reports will become available with future payroll updates.

19 PAYROLL SOFTWARE QUICK REMINDER TRACKING EMPLOYEE DEPENDENT INFORMATION If dependent information is not currently being tracked by HR, employee dependent information can be tracked in the payroll software for ACA purposes. (Which can then be pulled into Excel.) If the client is paying any portion of dependent care coverage, this will help to monitor costs by tracking the dependent s age. (Dependents up to 26 years of age can be included in the employee s insurance coverage.)

20 CLASSIFYING EMPLOYEES IN SWIPE CLOCK ALLOWS FOR FILTERING OF REPORTS If any of these three fields are not currently being used in Swipe Clock, then clients may utilize these fields for entering employee classifications to filter out full time employees. This makes it easier for anyone such as supervisors or managers reading reports to monitor the variable hour employee hours.

21 MONITORING HOURS TO MINIMIZE COSTS Filtering the reports in Swipe Clock to exclude full time employees will make the process easier for Supervisors, Employee Managers, Location Managers or Corporate Level Managers to monitor the employee hours on a weekly basis. There are various reports in Swipe Clock that can be used to monitor the variable hour (non-full time) employees weekly hours. One report that can be used is the Detail Report that can be used by Supervisors, Managers, HR or Corporate Administrators to show hours for the work week.

22 SWIPE CLOCK REPORTS FOR MONITORING HOURS OF SERVICE This detail report allows supervisors and management to see the total hours for the week (including any PTO, sick or vacation if this is entered into the timekeeping system for ACA purposes.)

23 MINIMUM ESSENTIAL COVERAGE VS MINIMUM ESSENTIAL VALUE Minimum Essential Coverage Employers must off an employer sponsored health plan that meets basic requirements to avoid the $2,000 per full time employees penalty (less the first 30 full time employees). Clear definition of this broad term has not yet been provided. Covers a set of preventive services. Initiatives/Health-Insurance-Market-Reforms/index.html Has no annual or lifetime dollar-limits on benefits. IRS Link with more information: Minimum Essential Value Requirements Employer plans must pass the minimum value test: The plan s share of the total allowed costs of benefits provided under the plan is less than 60% of those costs. Determined by you and your insurance broker. Link to calculators provided by the federal Health and Human Services Organization: Guidance/index.html.

24 AFFORDABILITY Flex-Pay s report writer report can the client to calculate the affordability limitation of the employees maximum monthly premium amount which is 9.5% of one of three safe harbor amounts: The rate of pay method is 130 times the employee s hourly rate of pay or monthly salary for salaried employees (at beginning of the benefit plan year and cannot be reduced during year). Recommended by some analysts. The total in Box 1 of the employee s W-2 form. The Federal Poverty Line of the most recently published poverty guidelines as of the first day of the plan year.

25 SAMPLE OF AFFORDABILITY REPORT This report calculates the max monthly premium amount for employee only coverage for affordability requirements using the hourly rate of pay method. If preferred, the report can be customized to calculate the maximum premium on the employee s Box 1 wages. This spreadsheet may also be useful as part of the client s planning phase or decision making when they are shopping for health insurance plans.

26 FLEX-PAY PAYROLL SERVICES Flex-Pay s staff includes CPAs and Certified Payroll Professionals CPPs that regularly attend seminars and webinars on a multitude of topics that affect employers including the Affordable Care Act. Flex-Pay is a member of the EBIA Employee Benefits Institute of America. Flex-Pay is a member of the American Payroll Association. Flex-Pay is a member of the CAI Capital Associated Industries that provides guidance for HR and people management. Flex-Pay is a member of the IPPA Integrity in Payroll Processing Organization of independent payroll providers. Flex-Pay subscribes to all newsletters of the above organizations along with the IRS e-news for Payroll Providers and Payroll Professionals. These organizations provide a pool of resources where we work with a network of Payroll Professionals and Organizations to assist with determining client solutions.

27 HEALTH CARE REFORM Flex-Pay keeps clients informed on important issues with two monthly newsletters, special edition newsletters and blasts. Flex-Pay diligently stays informed by attending educational seminars and webinars on any issues that not only affect payroll but issues that affect our clients. As the IRS releases more information about the required ACA employer reporting, Flex-pay will work toward providing additional solutions. Flex-Pay s position is to be proactive about learning about issues so that we are prepared to offer clients the information they will need. Flex-Pay products offer reporting and tracking solutions to employers for determining employee classifications, safe harbor employee classifications, tracking employee dependents, tracking employee insurance coverage and tracking employees that declined insurance coverage.

28 THANK YOU Flex-Pay thanks you for taking the time to view this Affordable Care Act presentation. Please contact your Payroll Specialist at Flex-Pay for more information or if you have any questions.