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Skip Murray, A. J. Gallagher
April 2015
Accountable Care and Local Governments
PPACA Definitions
– MEC Minimum Essential Coverage– MV Minimum Value Plan– FTE Full Time Equivalent Employee– QHP Qualified Health Plan– 4980h The PPACA name for health plan – 6055- Carrier or Plan Sponsor reporting– 6056 Employer reporting
2
Affordable Care Act The Solution?
• Quality Affordable Healthcare for all Americans
• Better the health for individuals and populations
• Bending the healthcare cost curve
3
4
2010
Smal
l bus
ines
s Tax
cred
it
Pre
existi
ng co
nditi
ons
Cove
rage
to a
ge 2
6
Prev
enta
tive
cove
rage
2011
Min
imum
loss
ratio
s ins
urer
s 2012
Acco
unta
ble
Care
Org
aniza
tions
Redu
ced
Med
icare
for R
eadm
its
2013
Stat
e Ex
chan
ges
Item
ized
dedu
ction
s
Flex
spen
ding
limit
Med
icare
tax N
et In
vest
men
t Inc
Tx
2014
Indi
vidua
l man
date
Exch
ange
s
Esse
ntial
hea
lth b
enefi
ts 2015
Empl
oyer
Req
uire
men
ts fo
r
Empl
oyer
s with
>10
0 EE
s
2016
for E
mpl
oyer
s with
>50
EEs
2018
Tax o
n em
ploy
ers o
f hig
h co
st
insu
ranc
e 10
,200
indi
vidua
l 27,
500
fam
ily
Key ACA Provisions Timeline
Shared Responsibility for Employers IRC 4980H
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• Large Employers• Affordable • Minimal Essential
Coverage & Minimal Value
• Effective 2015 or 2016
WhoWhatWhen
Large Employer Defined
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In the prior year did you average 50 (100 in 2015) or more full-time equivalent employees
(FTEs)?
Yes.You are a
LARGEemployer.
No.You are a
SMALLemployer.
Don’t know.
Time for the
calculator
7
Step A
• Calculate the number of full-time employees (130+hrs/mo.- 30 hrs X 4.3 weeks) for each month in the preceding year. (Note full-time employee is considered 30 hours a week). Educational Facilities bridge vacations and summer with AVERAGE hours worked for all employees, including educators.
Step B
• Calculate the number of full-time equivalent employees (FTEs) for each month in the preceding year.• Calculate the total number of hours worked in a month (may not exceed 120 hours for any
one employee) by variable hours (i.e., part-time) employees.• Divide the total in previous step by 120. This equals the number of FTEs for the month.
Step C
• Add the numbers calculated in steps (A) and (B) for each of the 12 months in the preceding year.
• Add the 12 monthly numbers in step (C) and divide the sum by 12 to get the total number of FTEs.
The Result
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You are a large employer, penalties may apply. Under 100? Penalties pended for 2015 Reporting is not pended
Your are a small employer, you are not subject to penaltyBe aware this can change if have seasonal employeesYo
u ha
ve 5
0 or
mor
e FT
E
You have less than 50 FTE
Special Classes of Employees
VolunteersHours contributed by bona fide
volunteers will not cause them to be considered FT employees (i.e. firefighters,
EMTs, vol. coaches)
Educational EmployeesTeachers and other educational
employees will not be treated as part-time simply because their school is closed
during summer
Seasonal WorkersExemption applies if employer’s workforce exceeds 50 FTE for 120 days or less. 2015
Seasonal Defined as 6 months
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Aggregation Rules
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Other arrangements
IRC 414o
Treated as Single Employer
Affiliated Service
IRC 414m
Controlled Group
IRC 414b
PartnershipProprietors
IRC 414c
Affordability Safe Harbors9.56% for 2015
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W-2 Safe Harbor
• Use employees’ Box 1 wages per W-2 of current year
Rate of Pay Safe Harbor
• Multiply EE lowest hourly rate by 130 to determine monthly wages
• Use salaried employees monthly pay.
Federal Poverty Line Safe Harbor
• Use Federal Poverty Line for single person
If an employer offers multiple healthcare coverage options, the affordability test applies to the lowest-cost self-only option available to the employee that also meets the minimum value requirement
Calculating the Shared Responsibility Payment
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95% Rule in 2016 (70% in 2015)
Do you offer Health insurance to at least 95% of employees?
Affordability TestSafe Harbor
EE payment for self only doesn’t exceed 9.56% of EE income
Minimum Value Requirement
Does the health plan meet the minimum value requirement?
No penaltyYour plan meets the
Affordability Test and the Minimum Value
requirement.
$2,000 Penalty $167/MonthPer full-time
employee in excess of 30 (80 in 2015) if any employee goes
to the Exchange and qualifies for a credit.
$3,000 Penalty$250/MonthPer full-time
employee who goes to the Exchange and qualifies for a credit.
$3,000 Penalty$250/Month Per full-time
employee who goes to the Exchange and qualifies for a credit.
YES YES
NO
NO
NO
YES
Minimal Essential Coverage Defined
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Government Plans Employer Sponsored Plan
Plans in Individual
Market
Grandfathered Health Plan
Other Coverage
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Employer Shared Responsibility
© 2014 GALLAGHER BENEFIT SERVICES, INC.
• Offer affordable, minimum value employee + dependent child coverage• Offer coverage within 90 days or pay penalty
Full-Time Permanent Employee (30+ hpw)
• Don’t need to offer coverage• No penalty applies
Part-Time Permanent Employee (<30 hpw)
• Use of reasonable, good faith definition of “seasonal employee” expired on 1-1-2015. 2015- 6 months or less can be a seasonal employee!
• Use measurement/lookback period to determine eligibility• Offer coverage no later than 13 ½ months from hire date or pay penalty
Seasonal Employee (30+ hpw)
• Can’t be determined that the employee is reasonably expected to work 30 hpw• Use measurement/lookback period to determine eligibility• Offer coverage no later than 13 ½ months from hire date or pay penalty
New Variable Employee (30+ hpw)
• Use measurement/lookback period to determine eligibility (no longer than 12 months)
• Offer coverage at end of admin period or pay penalty
Ongoing Variable Employee (30+ hpw)
© 2014 GALLAGHER BENEFIT SERVICES, INC.
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Proof of Coverage Elsewhere
Municipal Plans• Townships may offer
affordable coverage to their Employees with essential benefits
Employees applying for the government tax credit will not qualify because Township offers a health plan that meets the minimum value standard
If Employee is Waiving Medical Coverage
• Employee is required to complete the Medical Waiver Form, and indicate/proove that he/she has coverage elsewhere.
• Medical Waiver form must be signed and return to the HR office.
Reporting of Health Coverage
IRC
6055
Rep
ortin
g • Applicable to those who provide MEC to an individual (Health insurance companies, governmental unit or self-funded plans)
• Must file a return that includes• Name, address and EIN of person required to file return• Name, address and TIN of primary insured• Name, address and SS or DOB for each individual covered under
policy• Dates during individual was covered by MEC during calendar year• Each individual listed gets a written statement of information
furnished
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Employers ReportingIR
C 60
56 R
epor
ting
• Applicable to large employers• Must file a return that includes• The name, address, and employer identification number of the applicable large employer
member,• (ii) The name and telephone number of the applicable large employer member's contact
person,• (iii) The calendar year for which the information is reported,• (iv) A certification as to whether the applicable large employer member offered to its full-
time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan, by calendar month,
• (v) The months during the calendar year for which minimum essential coverage under the plan was available,
• (vi) Each full-time employee's share of the lowest cost monthly premium (self-only) for coverage providing minimum value offered to that full-time employee under an eligible employer-sponsored plan, by calendar month;
• (vii) The number of full-time employees for each month during the calendar year,• (viii) The name, address, and taxpayer identification number of each full-time employee
during the calendar year and the months, if any, during which the employee was covered under the plan
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• Used by non ALE employers – ALE Applicable Large Employer
• 50 or more FTE
Form 1095-B Health Coverage
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• Used by ALE (Applicable Large Employers)• Final Form released• Instructions reduced from 34 pages
Form 1095-C Employer-Provided Health Insurance Offer and Coverage
© 2014 GALLAGHER BENEFIT SERVICES, INC. 20
What if we don’t comply?Fines mirror those of payroll/W2 filings and apply to each EIN required to file:
Failure to file timely and correct returns$100 for each return, not to exceed $1.5M per year
Failure to furnish timely and correct statements $100 for each statement, not to exceed $1.5M per year
Township must comply with the Employer Shared Responsibility of PPACA: Minimum Essential Coverage (MEC) and Affordability
Failure to comply could lead to other compliance issues. Potential additional penalties could exceed $3 million
HIGHER PENALTIES FOR “INTENTIONAL DISREGARD”
© 2014 GALLAGHER BENEFIT SERVICES, INC. 21
Added complications if failed to comply?
If the IRS concludes “intentional disregard” because you fail to track hours, fail to test across locations or fail to address improperly classified 1099 workers, expect the IRS to contact the DOL for an audit.
DOL corrective actions include:• Fines and penalties• Payment of back pay, OT, taxes and benefits to the impacted employees• Payroll administration fees to reprocess the back payrolls and tax filings• Consulting and legal fees to assist you in making the corrections
COST OF NOT COMPLYING CAN BE IN THE MILLIONS
Who Reports What???
Employer reporting required:• IRS Section 6055 if your medical benefits
are self funded. • IRS Section 6056 if you are an Applicable
Large Employer (ALE).Plus the 6056 employee statements.
• Information filings are due January & March 2016 for 2015 data.
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© 2014 GALLAGHER BENEFIT SERVICES, INC. 23
What are 6056 employee statements?
Like a W2, 6056 statements tell your employees what you told the government about the benefits you provided them.
Section 6056 statements tell the employee whether they might qualify for a government subsidy if they bought medical insurance through the government exchange. More importantly, they provide your employee with proof of qualifying medical coverage.Data required
• Name, address and EIN of the ALE member• All information about the member that was reported in the 6056
filing
Deadline for providing statements is February 1st each year with the first employee statements due February 1, 2016 for the 2015 tax year.
Transitional Relief
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IRC 6055
• Reporting optional for 2014
• Penalties will apply if do not file in 2015
• Fully Insured- Carrier responsible
• Self Insured- Employer responsible
IRC 6056
• Reporting optional for 2014
• Penalties will apply if do not file in 2015
• Employer Responsible
IRC 4980H
• No penalties will be assessed for 2014
• Penalty for non-coverage excludes 80 EEs, not 30.
• Employers close to 50 FTE can use 6 months not a year
• Employers with 50-100 FTE can get relief in 2015
• 2015 70% instead of 95%
– Effective in 2018– Purpose
• Reduce aggregate demand for medical services• Subsidize coverage for the currently uninsured• Address perceived tax “inequities” caused by the
deductibility of benefits– 40% employer tax on the cost of plans in excess of
• $10,200 for single plans• $27,500 for family plans (including “couple” and “parent
child(ren)” plans– Applies to the combined cost of medical and Rx coverage– Includes aggregate cost including flexible spending accounts, health
savings accounts, and health reimbursement accounts
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Preliminary Briefing on the ACA Cadillac Tax
Preliminary Briefing on the ACA Cadillac Tax
– Adjustments may be made available for • Plans with pre-Medicare retirees age 55 and older• Plans with a high risk employees (police, fire, EMS, and possibly
DPW)– $11,850 single– $30,950 family
• Increases in the cost of the Federal Health Benefits Plan (FHBP) (appears unlikely), but not NJ SHBP.
• An adjustment is also possible to reflect age-gender differences between the FHBP and the general population.
• Indices rise by CPI +1% in 2019 and 2020, and by CPI thereafter• Unless medical inflation drops to the CPI, the impact of the tax will
grow year by year. (CBO estimates that, nationwide, 16% of all plans will be impacted in 2018 with 75% impacted within 10 years)
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Cadillac Tax Worksheet
• Current Public Sector client• 2014 rates Single $1,029.04, Family $2,161.00• 4 years of 7.5% increase means
– Single $1,374.25, Family $2,885.95– Annual = Single $16,491, Family $34,631Projected Tax = difference is $6,291 and $7,13150 singles and 70 families means a non-deductible tax of $325,500. (Ongoing & growing)
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Thank You!
Francis Murray, Area [email protected]
Gallagher Bollinger101 JFK Parkway
Short Hills, NJ 07078
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