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Wondering how you can continue to grow, or even survive, in the face of Obamacare and increased healthcare costs? Fellow business owner Rich Boehling, who runs a company with 380 employees, shared the unique strategy he has implemented in his company to turn this big problem into a big opportunity. A FREE, comprehensive white paper, additional details, and many of the resources Rich used in developing his strategy can be found at http://www.pbjandaca.com/. "ACA Business Strategies: Workshop for Employers of Vulnerable Wage Populations" presented by: Rich Boehling, President and CEO of Productiv Inc. (http://getproductiv.com/) on May 22, 2013 at the Virginia Society of Certified Public Accountants 12th Annual Industry Conference (http://www.vscpa.com/).
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Hurricane Warning
ACA Business StrategiesWorkshop for Employers of
Vulnerable Wage populations
Presented by: Rich Boehling
President and CEO of Productiv [email protected]
•Property•Provisions•Processes •People
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•Property•Provisions•Processes •People
ACA has significant impact on some percentage of this “P”
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5
ACMEPBJCo.
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ACME PBJ
ACME PBJ: 2012 YE
BASELINE: $216,000
$216,000
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Population<$15/hr
Population 15<23/hr
Population >23/hr
0% 10% 20% 30% 40% 50% 60%
ACME PBJ Co Census
Data Source: Bureau of Labor Statistics
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ACME “PAY”
ACME 2014 Forecast
Down $196,000
PAY Fines$216,000
$20,000
Base Adjustment: -$ Net Sales 7,500,000.00$
Base Adjustment: -$ Cost of Goods Sold 6,100,000.00$
Gross Profit (Loss) 1,400,000.00$
Base Adjustment: HCP savings (140,000.00)$ Total Expenses 900,000.00$
Net Income 500,000.00$
Owner's Tax 200,000.00$
After Tax Income (Loss) 300,000.00$
ACA Penalties: 140 FTEs at 2000 each 280,000.00$
SG&A Expenses
INCOME Tax
EXCISE Tax
PAY CASEACME PBJ12/31/2014
Financial Statements in U.S. Dollars
Revenue
Cost of Goods Sold
Cancel Plan
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ACME Wants to Play
7 9 11 13 15 17 19 21 23 25 27 29 31 $-
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
$3,500.00
$4,000.00
$4,500.00
Hourly Wage
EE P
rem
ium
Cos
t
Expa
nded
Med
icai
d Subsidized Region
EE Cost after Subsidies
Max EE Cost “PLAY” plans
Data Source: Aetna Group plan for 217 EE (silver), Kaiser Family Health
Policy Cost Line
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ACME’s Cost to Play
Data Source: Aetna Group plan for 217 EE (silver), Kaiser Family Health
7 9 11 13 15 17 19 21 23 25 27 29 31 $-
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
$3,500.00
$4,000.00
$4,500.00
Hourly Wage
EE P
rem
ium
Cos
t
Expa
nded
Med
icai
d Subsidized Region
EE Cost$1600/EE
Policy Cost Line
ACME wage cut off
ACME CO
ST$2300/EE
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ACME “ALL PLAY”
ACME 2014 Forecast
Down $110,000
Base Adjustment: -$ Net Sales 7,500,000.00$
Base Adjustment: -$ Cost of Goods Sold 6,100,000.00$
Gross Profit (Loss) 1,400,000.00$
Base Adjustment: 2012 HCP Cost 182,000.00$ Total Expenses 1,222,000.00$
Net Operating Income 178,000.00$
Owner's Tax 71,200.00$
After Tax Income (Loss) 106,800.00$
ACA Penalties: None -$
SG&A Expenses
INCOME Tax
EXCISE Tax
ALL PLAY CASEACME PBJ12/31/2014
Financial Statements in U.S. Dollars
Revenue
Cost of Goods Sold
Expand coverage
$216,000
$106,000
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ACME “PLAY with PT”
ACME 2014 Forecast
Down $65,000
SalesDecline
$151,000
Base Adjustment: 1% decline (75,000.00)$ Net Sales 7,425,000.00$
Base Adjustment: save 8000 hours (88,000.00)$ Cost of Goods Sold 6,012,000.00$
Gross Profit (Loss) 1,413,000.00$
Base Adjustment: HCP 30% escalation 121,940.00$ Total Expenses 1,161,940.00$
Net Income 251,060.00$
Owner's Tax 100,424.00$
After Tax Income (Loss) 150,636.00$
ACA Penalties:None -$
SG&A Expenses
INCOME Tax
EXCISE Tax
PLAY w/PART TIME CASEACME PBJ12/31/2014
Financial Statements in U.S. Dollars
Revenue
Cost of Goods Sold ReduceHours
Premium Increase
$216,000
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ACME Asks “BUT WHY?”
7 9 11 13 15 17 19 21 23 25 27 29 31 $-
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
$3,500.00
$4,000.00
$4,500.00
Hourly Wage
EE P
rem
ium
Cos
t
Expa
nded
Med
icai
d Subsidized Region
EE Cost$1600/EE
Data Source: Aetna Group plan for 217 EE (silver), Kaiser Family Health
Projected Policy Cost Line
+30%
LOOK
EMPLO
YER COST
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ACME “SOME Play”
ACME 2014 Forecast
Down $92,000
SalesDecline
ReduceHours Pay Max
Fine
Base Adjustment: 1% decline (75,000.00)$ Net Sales 7,425,000.00$
Base Adjustment: save 8000 hours (88,000.00)$ Cost of Goods Sold 6,012,000.00$
Gross Profit (Loss) 1,413,000.00$
Base Adjustment: 63FTE @ new cutoff (18,284.00)$ Total Expenses 1,021,716.00$
Net Income 391,284.00$
Owner's Tax 156,513.60$
After Tax Income (Loss) 234,770.40$
ACA Penalties37 FTE at $3000 each 111,000.00$
SG&A Expenses
INCOME Tax
EXCISE Tax
"SOME PLAY" CASE ACME PBJ
12/31/2014
Financial Statements in U.S. Dollars
Revenue
Cost of Goods Sold
New Cutoff
$123,000
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ACME Chooses ALL PLAY with Part TimeAND RAISES PRICE by 6.5%
TotalCOST
5.3% of Sales
PriceIncrease
6.5%
Scenario Average Results: Owner’s NET = ($115,000) excluding any supply chain price increase.
RECAP• Play or Pay• Penalties• Price Increase• PED
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ACME Steps to ACA Compliance
What the Law Really Says
• Americans must purchase health insurance• Minimum standard• Costs less than 9.5% of their income• Employer fines
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How Are the Feds Doing This?
• Through 3 insurance markets:1. Employer Group Plans 2. Expanded Medicaid 3. Govt Assisted Markets / Exchanges
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BEST Employee Value
• The best value will be expanded Medicaid• The second best will be the Exchange• Group plans
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3 Different Groups ACME Employs
• Disadvantaged Wage Class– Minimum wage to 133% FPL ($15,281 W2)
• Semi Skilled – 134% to 300% FPL (up to $34,470 W2)
• Skilled and Professional – 301% FPL and Up (over $34,470 W2)
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Groups and Markets
Large EMP Groups BEST VALUEL1 (Disadvantaged Wage Class) MedicaidL2 (Semi Skilled) Exchange with SubsidyL3 (Skilled and Professional) Employer Group Plans
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Where is Landfall?Large Employer
PART TIMELarge Employer
FULL TIMEP3: Safe Harbor L3: PLAY
P2: Safe Harbor L2: PAY or PLAY
L1: Medicaid Safe Harbor
ACME Risk Exposure to IRS Fines is
Directly tied to the L2
population
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ACME Started to See the Problem W2 Income Small Employer
<50FTE + SeasonalLarge Employer
50+ FTE
Group 3 >$34,470 S3 L3
Group 2 $15,282 to $34,470
S2 L2
Group 1 <$15,281 S1 L1
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Large Employer Determination “Look Back”
FTE<49FTE
Test
ERISAAffiliated
GroupTest
Seasonal EE<120days
Test
OPTION 1: Maintain Small Biz
Safe Harbor
OPTION 2: GO TO Large Employer
GroupOR
Is ACME Small?
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0 100 200 300 400 500 600 700$0.00
$2,000.00
$4,000.00
$6,000.00
$8,000.00
$10,000.00
$12,000.00
Series1
Hurricane Preparedness
Paid Hours
Earned Wage
Medicaid Cutoff
300% FPL Cutoff Part Time Cutoff
P3
P2
P1
L3
0
+
+
L2
L1
So ACME is Large, NOW What?
LB “Look Back”
FT EE>30hrsTEST
PT EE<30hrsTEST
EE W2<15281
TEST
OPTION 2Safe Harbor
OPTION 1Pay or Play and
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Paid Hours
Earned Wage
Medicaid Cutoff
300% FPL Cutoff Part Time Cutoff
P3
P2
P1
L3
0
+
+
L2
L1
0 100 200 300 400 500 600 700$0.00
$2,000.00
$4,000.00
$6,000.00
$8,000.00
$10,000.00
$12,000.00
Series1
Productiv Inc Example
L3
9P2 L2
35 128L1
303
Current CENSUS
Data ACME MUST Use forStorm Tracking
• Name• DOB• Hire DATE• Gender• Zip Code• YTD Hours paid• YTD Compensation• Statutory Notifications• Employment Status
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Hurricane Preps: Storm Tracking
L1 Reduce Wage
S2:Change Control
L3Increase Wage
P2Reduce Hours L2
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ACME Has an “AH HA” Moment
• ACME can control the L2 Outflows but has only limited control of the Inflows
• ACME must constantly monitor migrations of people between census blocks
• L2 must be constantly checked
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Partitioning“L2S”
ACME CORP StructureHQ
(Corporate)
Location 1Physical Plant,
shop, store
Location 2Physical Plant,
shop, store
Location 3Physical Plant,
shop, store
Property, Plant Equipment,
and Inventory
ProcessesCore Business Functions (L3)
Staff (L1, L2)
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ACME Plant Location 1 Group Population Map
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Think About Building a House
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ACME Hires a General Contractor:“An L2S Safe Harbor Pilot”
General Contractor
Subcontractor Subcontractor
L2S SAFE HARBOR StructureHQ
(Corporate)
Location 1Physical Plant,
shop, store
Location 2Physical Plant,
shop, store
Location 3Physical Plant,
shop, store
Property, Plant Equipment,
and Inventory
ProcessesCore Business &
Management
IndependentSubcontractor
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ACME “L2S”
ACME 2014 Forecast
+ $53,000
Scenario AVGs = ($115,000)
L2SAdmin
Fee
Market Share
Up
New Cutoff
$269,120
$216,000
Base Adjustment: Market Share up 1.3% 97,500.00$ Net Sales 7,597,500.00$
Base Adjustment: 49 FTEs in S2 27,250.00$ Cost of Goods Sold 6,127,250.00$
Gross Profit (Loss) 1,470,250.00$
Base Adjustment: 63FTE @ new cutoff (18,284.00)$ Total Expenses 1,021,716.00$
Net Income 448,534.00$
Owner's Tax 179,413.60$
After Tax Income (Loss) 269,120.40$
ACA Penalties37 FTE move to S2 =
SG&A Expenses
INCOME Tax
EXCISE Tax
L2S CaseACME PBJ
12/31/2014
Financial Statements in U.S. Dollars
Revenue
Cost of Goods Sold
39
Accountability Instrument (Master Services Agreement)
Partitioning Instrument
Partitioning A Small Business Solution
General Contractor“Process Controller”
HOST
L2S Inc
Tripartite Arrangement
1. Owner not Highly Compensated2. Prime has no ownership in sub3. Host has no ownership in Sub or Prime
Partitions
• Tax ID (Separate Accounting)• No Common Ownership or Affiliated Group status• No Brother/Sister• No co-employment• ACA Safe Harbor <50 FTE’s• Statutory Obligations FICA/FUTA/SUTA/WC• Business Banking• Capital Financing• Payroll Functions• B2B Transactions (Invoicing/Payments)
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HOMEBASE™Payroll
eBanking
Notifications
Client MobileAccounting and Finance
Tax and Insurance
MRP“CimPull”
Time & Attendance
RemoteDesktop
