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Insert Presentation Title Here Rehmann Live! ACA Impact: Update on the Affordable Care Act Presented by: Don McAnelly, CPA, ABV, CGMA Michael P. James, JD, MBA, CSSGB
Insert Presentation Title Here
Rehmann Live! ACA Impact: Update on the Affordable
Care Act
Presented by:
Don McAnelly, CPA, ABV, CGMA
Michael P. James, JD, MBA, CSSGB
Don McAnelly, CPA, ABV, CGMA
Principal
Rehmann
• Principal in Charge - Saginaw
• Rehmann Healthcare
Management Advisors Leader
• Serves as the primary CPA
contact for healthcare clients in
East Michigan
© 2014 Rehmann
[email protected] 989.797.2331
Michael P. James, JD, MBA, CSSGB
Senior Health Care & Business Attorney
Fraser Trebilcock Davis & Dunlap, P.C.
• Provides representation and counseling related to all facets of business enterprise, health care law matters and employer-employee relations
• Specializes in Health Care Reform and its impact on businesses of all sizes
© 2014 Rehmann
[email protected] 517.377.0823 (Lansing)
(313) 237-7300 (Detroit)
Overview of Recent Changes to the Requirements and
Deadlines under the Affordable Care Act
© 2014 Rehmann
Overview of Recent Changes • Employer Responsibility Requirements
– Large Employer Mandate Delayed • Applies to large employers with 50-99 FTEs.
• Will not be penalized for not providing insurance to full-time employees until 2016.
• Previous requirement: Provide insurance to full-time employees in 2015 or face penalties.
• Large Employer Mandate Modified – Applies to large employers with 100+ FTEs.
– Only required to provide adequate and affordable coverage to 70% of full-time employees in 2015.
– In 2016, these employers must provide appropriate coverage to 95% of full-time employees.
– Previously requirement: Large employers were required to provide appropriate coverage to 95% of full-time employees starting in 2015.
© 2014 Rehmann
Overview of Recent Changes • Employer Responsibility Requirements
– “Pay or Play” Penalties Modified for 2015
• Applies to large employers with 100+ FTEs.
• If employer fails to provide health insurance coverage to full-time employees, a 100+ FTE Employer is subject to a penalty equal to:
– $2,000 x (# of full-time employees – 80)
• Previous requirement: The penalty was calculated as:
– $2,000 x (# of full-time employees – 30)
• 2015 modification applies to “Unaffordable / Minimum Value” Penalty as well (discussed later).
• In 2016, the “no coverage” penalty for all large employers is equal to:
– $2,000 x (# of full-time employees – 30)
© 2014 Rehmann
Overview of Recent Changes • Seasonal Employees Redefined
– A “Seasonal Employee” is an employee in a position for which the customary annual employment is 6 months or less. The seasonal period should begin around the same part of the year each year.
– Seasonal employment may be extended under certain circumstances.
• Members of Religious Orders – In determining whether its members are full-time employees, a
religious order is permitted to not count the hours of service related to any work performed by an individual who is subject to a vow of poverty as a member of that order when the work is in the performance of tasks usually required for active members of the order.
© 2014 Rehmann
Overview of Recent Changes • Bona Fide Volunteers
– Government entities and 501(c) organizations with tax-exempt volunteers do not need to count the hours of service provided by bona fide volunteers when determining their status as a large or small employer under the ACA.
• Work Study Program Student Employees – Educational institutions do not need to count the hours worked
by students that are employed in positions subsidized through the federal work study program or a substantially similar program at the State or local level in determining whether they are a large or small employer under the ACA.
– However, the hours worked by students employed outside of these programs must be counted by the educational institution to determine whether it is subject to the shared responsibility requirements of the ACA.
© 2014 Rehmann
Overview of Recent Changes • Approved Methodology for Determining Adjunct
Faculty Hours
– Institutions that employ adjunct faculty are required to use a reasonable method to identify and track the hours of service for adjunct faculty.
– The IRS has identified one method that it deems reasonable:
• The institution must credit the adjunct faculty member with:
(a) 2 ¼ hours of services per week for each hour of teaching or classroom time (this would add an addition 1¼ hours for activities such as class preparation and grading); and, separately
(b) 1 hour of service per week for each additional hour outside of the classroom that the faculty member spends performing duties required to perform (office hours and faculty meetings).
© 2014 Rehmann
Overview of Recent Changes
• Web site: HealthCare.gov
– Open enrollment: October 2013 ??
– Plans go into effect: January 1, 2014
– Enrollment ends: March 31, 2014
– Glitches, delays and functionality problems:
• Slow start to enrollment through HealthCare.gov.
• 22,000 appeals need to be resolved.
• State Medicaid programs not finalized.
© 2014 Rehmann
Overview of Recent Changes • Individual Mandate Delayed
– Deadline for individuals to sign up for health insurance before facing tax penalties extended to March 31, 2014.
– “Short Coverage Gaps” protect individual for not having coverage for up to 3 months.
• Would have protected uninsured individuals from penalties until March 31, 2014.
– In practice, an individual must sign up by the 15th of a given month in order for health insurance to start the first day of the next month.
– Would have required insurance application by February 15, 2014 to qualify for Short Coverage Gap protection.
© 2014 Rehmann
Overview of Recent Changes • Cancelled Health Plans
– “If you like your health insurance plan, you can keep it.”
– Plans cancelled because plan was not compliant with ACA requirements. • Individuals impacted in 2013 for 2014 coverage.
• Some small businesses impacted in 2013 for 2014 coverage, but many will see affects in 2014 for 2015 coverage.
– 4% of U.S. population affected, 11 million consumers.
– Michigan Department of Insurance and Financial Services: • Insurers allowed to reinstate cancelled policies.
– Some Michigan insurance carriers elect not to reinstate policies.
– Job Killer: the CBO indicates ACA will kill 2.3M jobs by 2021.
© 2014 Rehmann
Overview of Recent Changes • Small Business Health Option Programs (SHOP)
– SHOP enrollment: October 1, 2013 November 1, 2013 November 30, 2013 …
– SHOP system down. Can still enroll in SHOP insurance products through authorized agents.
– Must enroll in a SHOP insurance product to be eligible for Small Business Health Care Tax Credits.
• 2010 - 2013:
– Non-profit employer may receive tax credit of up to 25% of employer’s contribution to employees’ health insurance premiums.
• 2014 - 2016:
– Non-profit employer may receive tax credit of up to 35% of employer’s contribution to employees’ health insurance premiums.
© 2014 Rehmann
Timeline of Key Effective Dates
© 2014 Rehmann
Understanding Employer Classifications
© 2014 Rehmann
Employer Classifications • Are You a Large or Small Employer?
– Large Employer: • Over 50 FTEs.
– 50-99 FTEs: Do not have to provide coverage until 2016.
– 100+ FTEs: Employer must offer minimally essential insurance.
» Insurance must cover at least 60% actuarial value.
» Insurance must be offered to:
• 70% of full-time employees in 2015.
• 95% of full-time employees in 2016.
– Small Employer: • Under 50 FTEs.
• Employers do not have to offer insurance ... at least not yet.
• However, if health insurance is offered, it must meet the essential health benefits, metal levels and be available to full-time employees.
© 2014 Rehmann
Employer Classifications
• Which Entities Are Subject to the ACA
Requirements?
– Governmental Entities
– Institutions of Higher Education
– Parochial Schools
– Non-Profit Organizations
– Churches
– Public Schools
© 2014 Rehmann
Employer Classifications • Play or Pay Penalty for Large Employers: No
Coverage – Effective 2015 for 100+ FTE Employers; 2016 for 50-99
FTE Employers.
– IRS Code 4980H(a).
– Is triggered if an eligible employer does not offer coverage: • In 2015, 100+ FTE Employers subject to this penalty must pay a
$2,000 annual excise tax for each full-time employee in excess of 80 (does not include FTE’s generated by variable employees).
• In 2016, all large employers subject to this penalty must pay a $2,000 annual excise tax for each full-time employee in excess of 30 (does not include FTE’s generated by variable employees).
– The tax will go up annually.
© 2014 Rehmann
Employer Classifications • Play or Pay Penalty for Large Employers: Coverage
Unaffordable or Lack of Required Value – Effective 2015 for 100+ FTE Employers; 2016 for 50-99 FTE
Employers.
– IRS Code 4980H(b).
– Is triggered if an eligible employer offers coverage that is either: • (1) Unaffordable, or (2) does not provide a minimal value of coverage;
and
• A full-time employee goes to the Marketplace and receives a tax credit or subsidy.
– The Excise Tax is the lesser of: • The “no coverage” penalty (different in 2015 and 2016); or
• $3,000 for each full-time employee who enrolls in insurance through the Marketplace and receives a tax credit or subsidy.
– The tax will go up annually.
© 2014 Rehmann
Employer Classifications • Applicable Large Employer and Applicable Large
Employer Member – Employer Shared Responsibility Requirements apply to
applicable large employers and to all of the applicable large employer members that comprise that applicable large employer.
– Final Regulations from Department of Treasury: • Continue to reserve a section of §54.4980H-2(b) for special
rules for government entities, churches, and conventions and associations of churches to determine whether they are applicable large employers.
– Expect further guidance from the IRS.
© 2014 Rehmann
Understanding How to Classify and Count Your Employees
© 2014 Rehmann
Employee Classification • Which Employees Count Toward FTEs?
– Government Employees?
– Elected Officials?
– Election Workers?
– Adjunct Faculty?
– Coaches?
– Hourly Employees?
– Seasonal Employees?
– Independent Contractors?
• All employees are subject to the Act’s requirements!
© 2014 Rehmann
Employee Classification
• Full-Time Employees
– Evaluated based on monthly hours:
• Average at least 30 hours per week; or
• 130 hours of service in a calendar month.
– Must consider each hour an employee is paid or
entitled to be paid.
• Include: vacations, holidays, illnesses, incapacity (including
disability), layoffs, jury duty, military duty or leaves of
absence (up to a maximum of 160 hours for any continuous
period).
– Each full-time employee is one (1) FTE.
© 2014 Rehmann
Employee Classification • Part-Time Employees
– If an employee does not meet the definition of full-time, his or her individual hours are included in your monthly full-time equivalent (FTE) calculation.
– How do part-time employees affect your classification as a large or small employer:
1) Monthly Calculation:
– Add up the hours for all part-time employees in a month and divide by 120.
» This is your monthly FTE for part-time employees.
– Add the number of full-time employees.
– Result is that month’s FTE number.
2) Annual Calculation:
– Add up the calculations for each month and divide by 12, round down.
– This is your annual FTE number.
3) Determine status based on annual FTE number.
© 2014 Rehmann
Employee Classification • Variable Hour Employees
– Employees that may work full-time hours at various intervals throughout the year and part-time hours the rest of the year cause difficulties for employers.
• If you offer health insurance to full-time employees, variable hour employees may migrate in and out of the employer’s insurance coverage throughout the year.
• Administrative difficulties for both employer and employee.
– Measurement and Stability Period Safe Harbor • Employer allowed to set a measurement period of 3 to 12 months to
determine whether an employee averaged at least 30 hours of service per week or 130 hours of service per calendar month during the defined period.
• Employer then has a stability period of at least 6 months (must be equal to measurement period) where employees who were full-time during the measurement period are treated as full-time an permitted to participate in employer health plan.
© 2014 Rehmann
Employee Classification Measurement and Stability Period Safe Harbor
© 2014 Rehmann
Employee Classification • Seasonal Employees
– Seasonal employees include: • An employee in a position for which the customary annual employment is 6
months or less.
• What does “customary” mean? – By the nature of the position an employee in the position typically works for a
period of 6 months or less; and
– That period should begin each calendar year in approximately the same part of the year, such as summer or winter.
• Seasonal employment may be extended under certain circumstances.
– Seasonal employees are included in initial FTE calculation for employer.
• If an employer's workforce exceeds 50 FTEs for 120 days (four calendar months) or fewer during a calendar year and the employees in excess of 50 FTEs who were employed during that period were seasonal employees, the employer would not be an applicable large employer.
• The 4 calendar months / 120 days are not required to be consecutive.
© 2014 Rehmann
Employee Classification • Employees of Controlled/Affiliated Groups
– Employees of a controlled or affiliated group may be treated as the employees of a single employer to determine whether an employer is a large or small employer under the ACA.
– IRS: final controlled group rules do not apply to certain church entities, a state or local government or a federal government entity.
– Until further guidance is issued, certain church entities and state or local government public schools that sponsor section 403(b) plans can continue to rely on a reasonable, good faith interpretation of the common control rules to determine whether they are large employers under the ACA.
© 2014 Rehmann
Live Q&A Session
© 2014 Rehmann
Thank you! Don McAnelly, CPA, ABV, CGMA
Phone:
(989) 799-9580
Email: [email protected]
www.rehmann.com
Michael P. James, JD, MBA, CSSGB
Phone:
(517) 377-0823 Lansing
(313) 237-7300 Detroit
Email: [email protected]
www.linkedin.com/in/MichaelJamesLaw
© 2014 Rehmann
