2014 Employee Benefits Year in Review …and What’s Coming for 2015! Brian Gilmore Lead Benefits Counsel Click here for audio recording JANUARY 29, 2015
Agenda The ACA Never Sleeps… - Employer mandate pay or play rules - Expatriate plans get clarity - §6055/§6056 Health care reform - New excepted benefits rules information reporting - End of HIPAA certificates of creditable - 90-day waiting period rules coverage - Out-of-pocket maximum rules - Health FSA employee salary reduction inflation increase - Reference-based pricing - New SBCs for 2015 - Transitional Reinsurance and PCORI fees - U.S. Supreme Court to rule on federal - Health plan identifiers (HPIDs) exchange subsidies - Skinny plans and minimum value issues - Big topics we may see in 2015 - Preventive care services (including contraception) …Plus a Few Non -ACA Topics - New ACA section 125 permitted election change events - Wellness programs in the news - Updated COBRA notices to address - SF Bay Area commuter benefits ordinance exchange coverage - California paid sick leave law - Individual policy reimbursement guidance (again) - Changes to SF Health Care Security Ordinance (HCSO) . 2
The ACA – Employer Mandate “Pay or Play” Rules IRC §4980H penalties generally apply as of January 1, 2015 Generally requires applicable large employers to offer minimum essential coverage that is affordable and provides minimum value to all full-time employees (and their children to age 26) to avoid potential penalties. • Applicable Large Employer • Generally an average of at least 50 full-time employees (including full-time equivalents) in the preceding calendar year • Minimum Essential Coverage (MEC) • Includes virtually any employer-sponsored major-medical coverage (but not dental, vision, health FSA, EAP, disability, etc.) • Affordable • Employee share of the premium for the lowest cost self-only plan option that provides minimum value does not exceed 9.5% of employee’s income under one of three safe harbor approaches • Minimum Value (MV) • The percentage of the total allowed costs of benefits provided under the plan is no less than 60 percent (aka 60% actuarial value, Bronze level plan) • Full-Time Employees • Employees averaging at least 30 hours of service per week under the monthly or look-back measurement method 3
The ACA – Employer Mandate §4980H Penalties §4980H(a) —The “A Penalty” §4980H(b) —The “B Penalty” • Applies where the employer is not • Failure to offer MEC to at least 70% of subject to the A penalty all full-time employees (and their children to age 26) • Failure to: • Threshold rises to 95% in 2016 and • 1) Offer coverage that’s affordable beyond • 2) Offer coverage that provides MV • The A Penalty is triggered by at least one such full-time employee who is • 3) Offer MEC to a full-time employee (where the employer has still offered at a not offered MEC enrolling in sufficient percentage to avoid A Penalty subsidized exchange coverage liability) • A Penalty liability is $2,000 annualized • The B Penalty is triggered by any such ($166.67/month) multiplied by all full- full-time employee enrolling in subsidized time employees exchange coverage 80 full-time employee reduction from • • B Penalty liability is $3,000 annualized multiplier in 2015 ($250/month) multiplied by each such full- time employee who enrolls in subsidized 30 full-time employee reduction from • exchange coverage multiplier in 2016 and beyond • Note that although the B Penalty amount is higher ($3,000 vs. $2,000), the multiplier is generally much lower • The multiplier is only those full-time employees not offered affordable/minimum value coverage who enroll in subsidized exchange coverage — not all full-time employees 4
The ACA – Employer Mandate Look-Back Measurement Method The look-back measurement method provides an alternative to the monthly measurement method. Under look-back, employers test whether an employee averages 30 hours of service per week in a measuring period to lock in full-time or part-time status for the associated stability period. Employers can also place new variable hour, seasonal, and part-time employees in an initial measurement period prior to reaching full-time status. NEW HIRES CONT’D ONGOING EMPLOYEES NEW HIRES • New full-time employees must be offered coverage • Generally, if look-back measurement method is • New Full-Time Employee: An employee who by the first day of the fourth full calendar month of used for one employee to determine full-time is reasonably expected at the employee’s employment to avoid potential penalties status, it must be used for all employees start date to be a full-time employee (i.e., average 30 hours of service per week) — and • New variable hour, seasonal, and part-time • Exception: Employer can choose separate is not a seasonal employee employees may be placed in an initial measurement methods for: measurement period before being treated as full- time • New Variable Hour Employee: The employer • Hourly vs. salaried cannot reasonably determine whether the • Combined duration of initial measurement period and employee is expected to average at least 30 initial administrative period cannot exceed 13 months • Employees in different states hours of service per week during the initial (plus a partial month for mid-month hires) measurement period • Union vs. non-union • Typical structure for new variable/seasonal/part- Employees in different union groups • time employee: • New Seasonal Employee: An employee who is hired into a position for which the • Hired on March 15, 2015 • Typical structure: customary annual employment is six months or less, and the period begins each calendar • Initial administrative period: 3/15/15 – 3/31/15 (front- • Measurement period: 10/15 – 10/14 end of split administrative period) year in approximately the same part of the year • Administrative period: 10/15 – 12/31 • Initial measurement period: 4/1/15 – 3/31/16 • Stability period: 1/1 – 12/31 New Part-Time Employee: An employee who • • Initial administrative period: 4/1/15 – 4/30/16 (back- end of split administrative period) is reasonably expected to average less than Note: 90-day administrative period limit prohibits 30 hours of service per week during the measurement period running from 10/1. • Initial stability period: 5/1/16 – 4/30/16 initial measurement period Note: Special rule permits 11-month initial measurement period, which would allow a two-month back-end initial administrative period. 5
The ACA – Employer Mandate 50-99 FTE Transition Relief Transition relief provides these mid-sized employers an exemption from the §4980H pay or play penalties in 2015 if they meet certain requirements. Note that the §6055/§6056 reporting requirements still apply! • Limited Workforce Size: The employer employs on average at least 50 full-time employees (including full-time equivalents) but fewer than 100 full-time employees (including full-time equivalents) • Maintenance of Workforce and Aggregate Hours of Service: During the period from 2/9/14 – 12/31/14, the employer did not reduce the size of its workforce or the overall hours of service of its employees to meet the limited workforce size requirement above. Reductions for a bona fide business reason are permitted. • Maintenance of Previously Offered Health Coverage: During the period from 2/9/14 – 12/31/14 (longer for non-calendar year plans), the employer does not eliminate or materially reduce the health coverage offered as of 2/9/14. Employer qualifies if: • (i) The employer continues to offer eligible employees an employer contribution for employee- only coverage that either (a) is at least 95% of the 2/9/14 contribution (i.e., can’t reduce dollar amount of contribution by more than 5%), or b) is at least the same percentage of 2/9/14 contribution; • (ii) If the plan changes, the coverage provides minimum value after the change; • (iii) The employer does not narrow or reduce the class(es) of employees or dependents eligible for coverage as of 2/9/14 • Certification of Eligibility for Transition Relief: The employer must certify on the §6056 reporting (via the Form 1094-C at the beginning of 2016) that it meets all of the requirements above to qualify for the mid-sized employer transition relief. 6
The ACA – 6055/6056 Reporting Background The ACA added two new tax code sections: §6055 & §6056 §6055: Requires providers of health coverage to report to the IRS and covered individuals that the persons were covered by “minimum essential coverage.” • This will demonstrate that each person has satisfied their individual mandate, and therefore will not be subject to the tax penalty. §6056 : Applies to “applicable large employers”—or “ALEs”— subject to the employer mandate pay or play rules — generally employers with at least 50 full-time employees, including full-time equivalent employees. • This will be used to determine whether the employer is subject to any pay or play penalties under §4980H. • It will also be used to determine whether the individual is eligible for the premium tax credit on the Exchange. 7
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