PPACA Employer Mandate Compliance Essentials
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Executive Vice President Michael Gomes provides the knowledge and insight every business owner should know to remain compliant with the Patient Protection and Affordable Care Act (PPACA). More specifically, the webcast is the first of a two-part series designed to address information these groups need to know on the following topics: • Important dates employers must know to comply with PPACA provisions • Which employee groups should receive health insurance coverage • Union employee rules • Employer “no coverage” and “unaffordability penalties” • Safe harbor rules
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PPACA Employer Mandate Compliance Essentials
- 1. • You are participating in an online webcast today. • The audio for this webcast will stream through your computer. • You do not need to dial-in by phone. • Please make sure your computer sound is turned on and volume is adjusted. • You can follow us on Twitter during the call @BenefitMall - #PPACAready
- 2. PART 1 • DATE Michael Gomes, Executive Vice President BenefitMall
- 3. WELCOME!
- 4. ONGOING BLOGS COMPLIANCE WHITEPAPERS & TOOL KIT WEBINARS REGULATORY COMPLIANCE BenefitMall Compliance Suite PROGRAM PAY OR PLAY SEMINARS & CALCULATOR TRAINING PROSPECT ANALYSIS TOOL
- 5. WEBINAR OVERVIEW Attendees will learn about AUTOMATIC KEY EMPLOYEE ENROLLMENT & EMPLOYER SAFE HARBOR COMPLIANCE DATES GROUPS WAITING PENALTIES CALCULATIONS PERIOD
- 7. EMPLOYER MANDATE COMPLIANCE DATE INDIVIDUAL MANDATE EMPLOYER STATE HEALTH SHARED BENEFIT RESPONSIBILITY EXCHANGES PROVISIONS JANUARY 1, 2014
- 8. • Will my company have to comply with employer-shared responsibility provisions? • What kind of insurance will my company have to provide? • To whom will I have to provide insurance? • What about seasonal, per diem, or part-time employees?
- 10. FULL-TIME EMPLOYEES A full-time employee is someone employed an average of at least 30 hours of service per week Employers must make an offer of coverage to at least 95% of its full-time employees and their dependents
- 11. FULL-TIME EMPLOYEES Hours of service include: EACH PAID HOUR OF WORK: Vacation Holiday Illness or Leave of Absence Incapacity Layoff Jury Duty Military Duty
- 12. PART-TIME EMPLOYEES • Includes any employee who does not fall under the full-time designation • Will be included in calculation to determine whether employer is an applicable large employer, and thus subject to employer shared responsibility requirements • Employers will not have to make an offer of health coverage to these employees
- 13. OTHER CATEGORIES OF EMPLOYEES • PER-DIEM: can be counted as full- or part-time depending on average hours of service worked o If employee is not paid on hourly basis, calculate hours worked using: actual hours from records, days-worked equivalency, or weeks-worked equivalency
- 14. OTHER CATEGORIES OF EMPLOYEES (cont.) • SEASONAL: critical in determining whether an applicable large employer may claim an exception from employer shared responsibility requirements based on seasonal workers
- 15. OTHER CATEGORIES OF EMPLOYEES (cont.) • UNION: to date, union workers are not treated as distinct entity in determining whether or not to offer coverage
- 16. AUTOMATIC ENROLLMENT & WAITING PERIOD
- 17. AUTOMATIC ENROLLMENT • Employers that are subject to the Fair Labor Standards Act, and have more than 200 full- time employees, must automatically enroll new full-time employees • Employer must also provide adequate notice and the opportunity for the employee to opt out
- 18. 90 DAY WAITING PERIOD REQUIREMENTS • For plan years beginning on or after January 1, 2014, a group health plan or health insurance issuer offering group health insurance coverage shall not apply any waiting period that exceeds 90 days o If the employee takes additional time to elect coverage, the employer will not be penalized
- 19. 90 DAY WAITING PERIOD – SAFE HARBOR FOR NEW VARIABLE HOUR AND SEASONAL EMPLOYEES • IF a group’s health plan conditions eligibility on an employee regularly having a specified number of hours of service per period (or working-full time), • AND it cannot be determined that a newly hired employee is reasonably expected to regularly work that number of hours per period, (or working-full time) the plan may take a reasonable period of time • Time not to exceed 12 months and beginning on any date between the start day and first day of calendar month following start day
- 20. 90 DAY WAITING PERIOD – SAFE HARBOR FOR NEW VARIABLE HOUR AND SEASONAL EMPLOYEES (cont.) • The employer may take a reasonable period of time to determine if the employee meets the plan’s eligibility condition • Coverage must be made effective no later than 13 months (and a fraction of one month) after the employee’s start date
- 21. 90 DAY WAITING PERIOD – EXAMPLE • Group health plan provides that employees are eligible for coverage after one year of service. • In this example, the plan's eligibility condition is based solely on the lapse of time. • Therefore, it is impermissible because it exceeds 90 days.
- 23. EMPLOYER PENALTIES: OVERVIEW The Patient Protection and Affordable Care Act (PPACA) requires most large employers offer affordable minimum essential coverage to their full time employees, or pay a monthly tax penalty.
- 24. NO COVERAGE • If at least one full-time employee receives a premium tax credit, the employer will be assessed a monthly penalty equal to the number of full-time employees, minus the first 30, multiplied by one-twelfth of $2,000 any applicable
- 25. NO COVERAGE • Example: o Employer has 80 full-time employees, does not offer coverage. One is certified to receive a tax credit. o 80 full-time ee – 30 x ($2,000 x 1/12) = $8,333.33 per month
- 26. UNAFFORDABLE/INADEQUATE COVERAGE • Coverage exceeds 9.5% of employee’s income • Coverage does not pay for at least 60% of covered health care expenses • Penalty would be for each employee who receives coverage
- 27. UNAFFORDABLE/INADEQUATE COVERAGE • Example: o Employer has 80 full-time employees, offers coverage that does not meet affordability requirements. o 30 employees receive credits for coverage x ($3,000 x 1/12) = $7,500
- 29. COVERAGE SAFE HARBOR 1. Form W-2 Safe Harbor 2. Federal Poverty Line Safe Harbor 3. Rate of Pay Safe Harbor
- 30. LOOK-BACK PERIOD • Standard measurement period for ongoing employees: 3 to 12 months • Determine whether employee worked an average of 30 hours per week during that period o YES: treat employee as full-time during subsequent stability period o NO: may treat employee as part-time during subsequent stability period Stability period must be at least 6 months, but cannot be shorter than the standard management period STANDARD ADMINISTRATIVE STABILITY MEASUREMENT PERIOD PERIOD PERIOD
- 31. EMPLOYEE LOOK-BACK CATEGORIES 1. Collectively bargained employees and non-collectively bargained employees 2. Salaried and hourly employees 3. Employees of different entities 4. Employees located in different states
- 32. CONCLUSION
- 33. FINAL THOUGHTS • Next Webinar will focus on: o W-2 Issues o Control Group Rules o Exchanges/Subsidies o Equivalency Test o Essential Health Benefits and Covered Costs
- 34. Q&A For additional health care Reform updates, please monitor: • www.benefitmall.com • www.healthcareexchange.com • www.compupay.com
Editor's Notes
- Even though the employer-shared responsibility provisions of the Patient Protection and Affordable Care Act (PPACA) will not take effect until January 1, 2014, applicable employers should start preparing for compliance now. Here are some of the most common questions employers have.An applicable large employer with 50 or more full-time equivalent employees will be required to offer affordable health benefits to virtually all of their full-time employees and their dependents. Let’s take a closer look at this requirement, and what employers need to know to remain compliant.
- Good morning.Today’s webinar on PPACA 2013 Complex Issues & Advanced Topics I will feature Michael Gomes, Executive Vice President of BenefitMall.Mr. Gomes brings more than 30 years of experience in planning, developing, and executing national sales initiatives, including expertise in the area of Government Relations and Legislative Affairs.He joined BenefitMall almost 15 years ago, and has been accountable for managing all of their more than 60 offices nationwide. Mr. Gomes’s career has included a number of senior executive roles for health care carriers as well as the head of the Life and health Divisions for the New Jersey Department of Insurance.Over the past three years since the inception of PPACA, he has led numerous training programs, public speaking engagements, and court testimony associated with health care reform and implementation of public exchanges.
- Welcome everyone. My name is Michael Gomes, Executive Vice President of BenefitMall. Headquartered in Dallas, Texas, BenefitMall is the fastest growing provider of integrated payroll and employee benefit products and services. The company offers thousands of healthcare plans from more than 125 leading insurance carriers. These plans are sold through 20,000 independent registered brokers in the US, producing more than $1 billion in annual insurance premiums. We are the largest Employee Benefits General Agency in the nation as well as the 2nd largest privately held payroll company.Today’s webinar, “PPACA 2013 Complex Issues & Advanced Topics I” will be the second of our regularly scheduled webinars to provide you with information that you, and your clients, will need to know to remain compliant with the Patient Protection and Affordable Care Act. These presentations are being created to provide useful information to our valued distribution partners who we are proud to provide our portfolio of benefits and payroll products.
- Our first slide describes the role we are taking in the ever changing environment of healthcare reform. Since the Health Care Reform debate began, we have published more than 250 blog postings, over 75 Legislative Alerts, and timely issue briefs to bring to all of you the latest developments on reform. As we move closer to 2014, we are accelerating these efforts, including today’s presentation. We have listened to your feedback and are attempting to bring you shorter but more frequent webinars at a more detailed level. For those of you who take hours each week to keep informed on these latest trends, these webinars will simply reinforce the information that you may already be familiar with.Later in the 2nd quarter, our Impact Indicator will be completed with additional tools following in the 3rd quarter. The Impact Indicator, a special tool that assesses some of the compliance and financial requirements of PPACA, will help you gain insight into how the new regulations may impact you and/or your clients.The Impact Analyzer, which goes a step further by creating “actionable” information, will help you and/or your clients further understand the effects of that impact, and how changes to your benefits package can help optimize results. Our compliance tool kit also will be made available so that you can access material and information that will help you and/or your clients stay compliant with PPACA and other federal regulations.
- Now, let’s take a deeper dive into some of the key issues related to the implementation of PPACA.First, we’ll summarize key compliance dates associated with the employer mandate. We’ll tell you what provisions will apply to different employer groups, and how you can advise your clients to efficiently and effectively act to comply with these provisions.Next, we’ll showcase how PPACA treats different employee groups including full-time, part-time, seasonal, per diem, and union employees. We will detail the type of coverage you must offer, and to whom, to remain compliant. In addition, we’ll also touch on PPACA’s automatic enrollment & waiting period limitation, so that you can tell your clients which employees they must enroll in coverage, and when.Further, we’ll discuss Employer Penalties for failure to offer coverage, and failure to offer coverage that is affordable. Finally, we’ll review the different safe harbor calculations that that an employer can use to defend your employer’s calculations in case they are assessed a tax penalty. Let’s get started!
- Perhaps the biggest upcoming compliance date on every employer’s mind is January 1, 2014. That’s the date that employers must be in compliance with employer shared responsibility provisions, the date that the individual mandate takes effect, and the estimated date when state health benefit Exchanges will be opened to the public and small businesses. January 1 is also the date that the IRS will begin to levy penalties against large employers who are subject to the employer mandate, but fail to offer coverage, or fail to offer affordable coverage. We’ll get into the specifics of this requirement in a few minutes.
- Even though the employer-shared responsibility provisions of the Patient Protection and Affordable Care Act (PPACA) will not take effect until January 1, 2014, applicable employers should start preparing for compliance now. Here are some of the most common questions employers have.An applicable large employer with 50 or more full-time equivalent employees will be required to offer affordable health benefits to virtually all of their full-time employees and their dependents. Let’s take a closer look at this requirement, and what employers need to know to remain compliant.
- Employers must make an offer of coverage to virtually all of its full-time employees. Under section 4980H(c)(4), a full-time employee with respect to any month is an employee who is employed on average at least 30 hours of service per weekA full-time employee is determined based on hours of service. Hours of service include the following:Each hour for which 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 by the employer on account of a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence.
- Hours of service will be computed differently for hourly and non-hourly employees. We’ll discuss this a bit more in our section on Per Diem employees, coming up in a few minutes.Employers subject to the employer shared responsibility requirements must make an offer of coverage to virtually all of their full-time employees and their dependents. By virtually all, the employer will avoid being assessed a tax penalty if an offer of coverage is made to at least 95% of their full-time employees and those employee’s dependents.While coverage offered to the employee must meet affordability thresholds, the coverage offered to the dependent does not have to meet affordability requirements.Dependents are also listed as children under the age of 26; however, spouses are not included as dependents.Employers will be able to use a look back/stability period safe harbor method of up to 12 months to determine who constitutes a full-time employee. This safe harbor will be detailed later in this presentation.
- A part-time employee is anyone who does not fall under the full-time designation. Part-time employees are included in the calculation to determine whether an employer will be required to offer health insurance starting on January 1. However, an employer does not have to make an offer of health coverage to these employees.
- PER DIEM: Per diem employees will be counted as full-time or part-time depending on the average hours of service worked by the employee over the prior calendar year.If the employee’s per diem rate is based on an hourly rate, the employer should use the number of hours of service worked by the employee calculated directly from records of hours worked and hours for which payment is due.If the employee’s per diem rate is based on a non-hourly basis, the employer may use one of three methods in calculating the hours of service:Count actual hours of service from records using records in the same approach as used in the hourly employee approach we just detailed.Use a days-worked equivalency method where the employee is credited with eight hours of service for each day for which the employee would be required to be credited with at least one hour of service; orUse a weeks-worked equivalency of 40 hours of service per week for each week for which the employee would be required to be credited with at least one hour of service If a per diem or seasonal employee has worked sufficient hours to be considered full-time, that employee must also be offered coverage.
- SEASONAL: Seasonal employees are also included in the calculation of whether an employer is an applicable large employer. However, a large employer may be able to claim an exemption from coverage requirements if their workforce is made up of seasonal employees.If an employer exceeds the 50 full-time equivalent employee threshold, that employer must determine whether the seasonal exemption applies.If the employer’s workforce exceeds 50 full-time employees for 120 days or fewer during a calendar year AND the employees in excess of 50 who were employed during that period of no more than 120 days were seasonal employees, the employer will not be considered a large employer. A seasonal employee is defined as an employee “who performs labor or services on a seasonal basis as defined by the Secretary of Labor, including seasonal workers and retail workers employed exclusively during holiday seasons.” Employers are permitted to use a good faith estimation of whether an employee is seasonal in these calculations.Employers are permitted to use a measurement period in calculating whether the employee is full-time or not.
- UNION: To date, all guidance issued on determining whether an employer qualifies as a large employer with over 50 full-time equivalent employees does not distinguish between union and non-union employees. There also has not been any distinction made between union and non-union employees as to whether an employer must offer the individual coverage. It appears that if an employer is subject to employer shared responsibility requirements, and thus must offer coverage to virtually all of its full time employees, the health insurance coverage must be offered by the employer regardless of an employee’s potential to obtain coverage through a union.If your confused at this point – you’re in good company. As I read the daily deluge of information regarding reform, often we see conflicting definitions and opinions. A number of IRS notices such as 2012-58 outlines the definition of Full Time employees and how to factor their equivalents. Our hosted site, HealthcareExchange.com provides additional information and tools to help guide you through this process.
- Section 18A of the Fair Labor Standards Act, as added by section 1511 of PPACA directs an employer to which the FLSA applies and that has more than 200 full-time employees, to automatically enroll new full-time employees in one of the employer’s health benefit plans, and to continue the enrollment of current employees in a health benefits plan offered through the employer. Further, the employer must provide adequate notice and the opportunity for the employee to opt out of any coverage in which the employee was automatically enrolled.
- Section 2708 provides that, for plan years beginning on or after January 1, 2014, a group health plan or health insurance issuer offering group health insurance coverage shall not apply any waiting period that exceeds 90 days. A waiting period is defined as the period that must pass with respect to an individual before that individual is eligible to be covered for benefits under the terms of the plan. Guidance issued by the Department of Labor clarifies that a waiting period can mean the period that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of a group health plan can become effective. Eligibility conditions that are based solely on the lapse of a time period are permissible for no more than 90 days. Additional conditions for eligibility are generally permissible unless the condition is designed to avoid compliance with the 90 day waiting period limitation. If an employee takes additional time to elect coverage, the employer will not be penalizedGuidance clarifies that this provision does not require employers to offer coverage to any particular employee or class of employees, but rather only prevents an otherwise eligible employee (or dependent) from having to wait more than 90 days before coverage becomes effective
- If a group health plan conditions eligibility on an employee regularly having a specified number of hours of service per period (or working full-time), and it cannot be determined that a newly-hired employee is reasonably expected to regularly work that number of hours per period (or work full-time) the plan may take a reasonable period of time, not to exceed 12 months and beginning on any date between the employee’s start day and the first day of the calendar month following the employee’s start date, to determine whether the employee meets the plan’s eligibility condition.
- Except in cases in which a waiting period that exceeds 90 days is imposed in addition to a measurement period, the time period for determining whether such an employee meets the plan’s eligibility condition will not be considered to be designed to avoid compliance with the 90-day waiting period limitation if coverage is made effective no later than 13 months from the employee’s start date, plus if the employee’s start date is not the first day of a calendar month, the time remaining until the first day of the next calendar month
- Employers are considered large employers for purposes of the mandate if the company employs: 1) 50 or more full-time employees; or 2) a combination of 50 or more full-time and full-time equivalent (FTE) employees. An employee is considered full-time or part-time based on the hours of service worked by the employee during the previous calendar year, or 12 month “look-back” period. The employer penalty for failure to comply with employer shared responsibility requirements will be triggered in one of 2 ways: failing to provide coverage, or failing to provide affordable coverage. Let’s take a look at each.
- NO COVERAGEBeginning in 2014, individuals who are not offered employer-sponsored coverage and who are not eligible for Medicaid or other programs may be eligible for premium credits for coverage through an Exchange. These individuals will generally have income levels between 138% and 400% of the federal poverty level.The penalty for a large employer that does not offer coverage where at least one full-time employee receives a premium tax credit will be equal to the number of full-time employees, minus the first 30, multiplied by one-twelfth of $2,000 for any applicable month.The penalty will be determined monthly and will apply to all full-time employees, regardless of whether or not they have coverage under the employer-sponsored plan.
- In this example, the employer has 80 full time employees, does not offer coverage and the one employee is certified to receive a tax credit. Using the description from the last slide, we would take 80 full time employee’s minus the fist 30. The remaining 50 would be multiplied by $2,000 and then divided by 12 as the monthly penalty of $8333.33.
- An employee may also get a premium tax credit if the employer-sponsored coverage offered to them is unaffordable or does not meet actuarial requirements. Coverage will be deemed unaffordable if the cost of the individual’s plan premium for self-only coverage exceeds 9.5% of their household income. Coverage must also pay for at least 60% of covered health care expenses.If an employer’s coverage fails to meet affordability or actuarial thresholds, the monthly penalty assessed to the employer for each full-time employee who receives a tax credit will be one-twelfth of $3,000 for any applicable month or the number of full-time employees minus the first 30 multiplied by 1/12 of $2,000, whichever is less.
- Using similar math to our previous example, in this case we see total credits of $7,500.
- Many employers are justifiably worried about their responsibility to provide adequate coverage to their employees. To this end, the IRS released guidance that clarifies the affordability threshold for employees, and provides three safe harbor methods an employer can use in determining whether their coverage meets the 9.5% affordability threshold.The three methods are as follows:Form W-2 Safe Harbor: compare the amount of employee contribution for self-only coverage for your lowest plan that meets minimum value with the amount of the employee’s current W-2 wages. Coverage will be deemed affordable if the amount of the employee contribution is less than 9.5% of reported wages.2. Federal Poverty Line Safe Harbor: if the cost of self-only coverage under the employer-sponsored plan does not exceed 9.5% of the federal poverty level for a single individual, coverage will be deemed affordable.3. Rate of Pay Safe Harbor: Take the hourly rate of pay for each hourly employee who is eligible to participate in the plan year, multiply that amount by 130 hours per month, and determine if the cost of coverage is 9.5% of the total rate of pay.
- Earlier we mentioned the “look-back” safe harbor period an employer may use in determining whether an employee is a full-time employee for employer responsibility payment calculations. Employers can use a standard management period of 3 to 12 months to determine full-time status, if the employee is an ongoing employee. This period can be a calendar year, or any other start and end date, as long as the determination is made on a uniform and consistent basis for all employees in the same category.Once the employer determines the standard measurement period, the next step is to determine whether the employee worked an average of 30 hours per week during that period. If so, the employee should be treated as a full-time employee during the subsequent stability period. This stability period must be at least 6 months, but cannot be shorter than the standard management period. If the employee is not a full-time employee during the standard measurement period, and the employer will be permitted to treat the employee as part-time during the subsequent stability period, regardless of how many hours the employee worked during that period. Employers will also be permitted to include an administrative period in addition to the standard measurement period in order for the employer to make a determination of the employee’s status and have time to administer the plan. This administrative period will have to overlap with the prior stability period in order to avoid gaps in coverageEmployers should use a reasonable expectation of whether a new employee will work full- or part-time in deciding whether an employee should be offered coverage. Employers should be sure to document their process
- Employers will be permitted to use different categories for measurement periods, based on the following categories:Collectively bargained employees and non-collectively bargained employeesSalaried and hourly employeesEmployees of different entitiesEmployees located in different states While other categories may apply, these are the four categories specifically contemplated in the noticeEmployers should be careful to only use one process for each category of employees.
- While todays format does not allow us do a Q&A session, we encourage you to log on and register with healthacreexchange.com. This is our forum where we provide much greater detail on all our reform initiatives as well as to give you a process to ask questions that we can share responses with all of you.We look forward to continuing to provide you with future webinars as well as regular blog postings and Legislative Alerts. We’ll be back next month with more in depth coverage of complex & advanced issues in PPACA. Thank You.