Employment Law Update

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Affordable Care Act Reporting

Angelica Fortney

David A. Thornton

Topics

The Employer Mandate, in Brief

Counting Hours, in Brief

Code Section 6055/6056 Reporting

IRS Forms

Practical Considerations

EMPLOYER MANDATE (“PLAY OR PAY”), IN

BRIEF

Employer Mandate PenaltiesBeginning 1/1/2015, an applicable large employer is subject to a penalty if at least one full-time employee receives subsidized exchange coverage and:

No Minimum Essential Coverage Offered

(“No MEC”)

Insufficient Minimum Essential

Coverage Offered

(“Insufficient MEC”)

Employer fails to offer to substantially all

of its full-time employees (and their

dependents) the opportunity to enroll in

minimum essential coverage

Employer’s offer of minimum essential

coverage to full-time employees (and

their dependents) is unaffordable or

does not provide minimum value

Penalty if No MEC Penalty if Insufficient MEC

Penalty (for a month) equals the number

of full-time employees (reduced by 30)

multiplied by 1/12th of $2,000 (indexed)

Penalty (for a month) equals the

number of full-time employees who

receive subsidized exchange coverage

multiplied by 1/12th of $3,000

(indexed); or, if less, the penalty that

would have been imposed for No MEC

Applicable Large Employer (“ALE”)

Applicable large employer – an employer that employed an average of at least 50 full-time employees (“FTEs”), including full-time equivalent employees, on business days in preceding calendar year► Full-time equivalent employee – (used ONLY

for determining if an employer is an ALE) Calculate aggregate hours of service for non-full-time employees for month and divide by 120

Minimum Essential Coverage (“MEC”)

Minimum essential coverage – coverage under an “eligible employer-sponsored plan,” which includes any self-insured group health plan► Also includes coverage under government-

sponsored programs, individual market plans

► NOT excepted benefits (such as limited scope dental/vision plans, certain EAPs)

Minimum Value

Minimum value – the plan’s share of the costs of benefits provided must be at least 60%

Approved methods of determining:

► IRS/HHS online calculator

► Design-based safe harbor checklist

► Actuarial certification

Affordability

Affordable coverage – coverage where employee’s required contribution for employee-only coverage under the lowest cost option does not exceed 9.56% of household income for the year

Safe harbor alternatives:

► Form W-2 safe harbor (Box 1 wages)

► Rate of pay safe harbor

► Federal poverty line safe harbor

Full-Time Employees (“FTEs”)

Employee – generally, a common law employee

Full-time employee – an employee that worked an average of at least 30 hours of service per week (or 130 hours of service per month)

► May exclude certain types of work (e.g., volunteer employees, work-study students)

Offer

Offer =► To FTEs and dependent children (not required for

spouses)► Must provide effective opportunity to enroll/decline

coverage► Must be for everyday of month (exception for hired

after first day of month/terminated mid-month)Offer must be to substantially all FTEs:► Must offer to cover all but 5%* of full-time employees to

avoid No MEC penalty► If any of the 5%* employees receives subsidized exchange

coverage, the Insufficient MEC penalty applies

* 2015 transition rule – 30% instead of 5%

COUNTING HOURS, IN BRIEF

What to Count

Each hour for which an employee is paid, or entitled to payment, for the performance of duties for any member of the controlled group or affiliated service group

Each hour for which an employee is paid, or entitled to payment on account of a period of time which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence

How to Count

For hourly employees: count actual hours

For non-hourly (i.e., salaried) employees: count actual hours or use the following equivalency methods:

► Days-worked equivalency – employee is credited with 8 hours of service for each day with an hour of service

► Weeks-worked equivalency – employee is credited with 40 hours of service for each week with an hour of service

When to Count

ACA requires an employer to determine whether each employee is a full-time employee on a month-by-month basis in real time – this creates administrative challenges, especially with respect to variable hour employees

Recognizing these challenges, the IRS provided a look-back safe harbor method under which an employee’s full-time or part-time status can be locked-in for a period of time

CODE SECTION 6055/6056 REPORTING

Section 6055 ReportingEvery provider of MEC must:► File an information return with the IRS► Furnish a statement to individuals

Providers include:► Health insurance issuers (insurance companies)► Self-insured plan sponsors (that aren’t subject to

employer mandate as ALEs)

Purpose:► Verifies employee’s compliance with individual

mandate

Forms 1094-B and 1095-B► If you are a self-insured ALE, you will use Part III of

1095-C

Section 6056 Reporting

Every ALE must:► File an information return with the IRS

► Furnish a statement to individuals

Purpose:► Verifies employer’s compliance with employer

mandate

► Determines individual’s eligibility for premium credit

Forms 1094-C and 1095-C

IRS FORMS

Forms 1095-B and 1095-B

1094-B: transmittal form for 1095-B

► Identifies filer: provider of MEC

1095-B: reports covered individuals

► Names primary covered individual

► Identifies who provides coverage (insurance company, self-insured plan sponsor, etc.)

► Identifies covered individual if covered one day in month

Form 1094-C

Form through which ALE (or ALE member) reports information about itself and transmits Forms 1095-C (like a cover page)► ALE member - each member of controlled

group with 50+ employees

► One authoritative transmittal each

Purpose: verifies ALE’s compliance with employer mandate

Information to Collect:Form 1094-C

Whether ALE offered MEC to at least 95% of FTEs and their dependents for each month► Deemed “yes” if certain transition relief applies► If “no,” no/limited penalty if certain transition relief applies

FTE count for each monthTotal employee count for each month as of first or last day of a) month or b) first payroll period starting in the calendar monthWhether ALE is part of controlled group► Members of controlled group► ALE member’s EIN, contact information► Number of 1095-Cs for all ALE members

Transition Relief: Deemed “Yes”

If offer made to 70% of FTEs or dependents

Certain plans not offering to dependents

Non-calendar year plans

Offered by first day of first payroll period

Transition Relief If “No”

No penalty for smaller ALEs (50-99 employees) if, after 2/9/14:

► No workforce reduction

► No change to plan year

► No elimination/material reduction of existing coverage

Penalty reduced for 2015: subtract 80 instead of 30 FTEs

Information to Collect:Form 1094-C

Certifications of Eligibility► Qualifying Offer Method: offered MEC with

minimum value to one or more FTEs (MEC to spouses and dependents) at cost of no more than 9.5% of FPL

► Qualifying Offer Method Transition Relief: offered to at least 95% of FTEs for one or more months

► Section 4980H Transition Relief (see previous slides)

► 98% Offer Method: offered affordable minimum value coverage for all months to at least 98% of employees for whom 1095-C is filed

Final Form 1094-C

Final Form 1094-C

Final Form 1094-C

Form 1095-C

Form through which ALE reports information about each FTE (or any covered EE if plan is self-insured)► Only one ALE member reports each employee each

month (whichever has more of the employee’s hours for month)

Purpose: for IRS to determine each FTE’s eligibility for premium tax credit, ALE’s compliance with employer mandate

Provide copy to employee as individual statement► Alternative statement available for qualifying offers if

NOT self-insured plan

Information to Collect:Form 1095-C

The ALE offered to the FTE either (choose):► MEC providing minimum value to employee, contribution for self-

only is no more than 9.5% of single federal poverty line; at least MEC to spouse, dependents

► MEC providing minimum value to employee only► MEC providing minimum value to employee and dependents (not

spouse)► MEC providing minimum value to employee and spouse (not

other dependents)► MEC providing minimum value to employee; at least MEC to

spouse and other dependents► MEC not providing minimum value to employee / employee and

spouse or other dependents / to employee spouse and other dependents

► MEC was not offered► Qualifying Offer Transition 2015

Information to Collect:Form 1095-C (continued)

Who is FTE for each monthCost to FTE for the lowest self-only MEC providing minimum value that was offeredWhether the employee was enrolled in the MECIf FTE was NOT enrolled in the MEC for any month, whether (for that month):► The FTE was not employed by the ALE on any day of the month► The FTE was in a waiting period► The FTE was in initial measurement period or associated

administrative period► The FTE’s first day of employment was not first day of month► Employee not FTE► Employee enrolled► Minimum value safe harbors met► Non-calendar year plan

Information to Collect:Form 1095-C (continued)

If self-insured ALE:

► Name of covered EE (whether FTE or not) and spouse or dependents covered

► SSN (start collecting now)

► Months covered

Final Form 1095-C

Sample Individual Statement:

Qualifying Offer Method

Sample Individual Statement:

Qualifying Offer Method

Transition Relief

Submission/Distribution of Forms

For IRS: paper or electronic► Paper:

- Deadline: February 28 after calendar year to which form relates

- February 29, 2016 for 2015► Electronic:

- Deadline: March 31 after calendar year to which form relates- Electronic required if 250+ employees

For individual statement:► Deadline: January 31 after calendar year to which form relates

- February 1 in 2016)► Must get employee consent to receive statements electronically

All deadlines as of day of mailing. Next business day if holiday/weekend.

Practical Considerations

Good faith effort: no penalty for incorrect or incomplete forms if good faith effort to comply is shown

Take advantage of transition rules

Employ service providers

Coordinate payroll and HR

Confidentiality Agreements

Timothy K. Garrett

Michael S. Moschel

Confidentiality Agreements

Under Scrutiny

Under intense scrutiny by several Government Agencies ► SEC most recently announced settlement► EEOC► NLRB► OIG

Will evaluate for “chilling effect” on lawful activity Will evaluate if undermines agency’s enforcement effortsWill engage broad reading to find violation

SEC Enforcement Action

Internal Company Investigation

Required Employees to Sign Confidentiality Agreement

► So restrictive that violated whistleblower protections of Dodd-Frank Act

► No examples of employees actually being discouraged from going to SEC

► $130,000 penalty

► Revise agreement

SEC Enforcement Action

(cont’d)

SEC joining in scrutiny by other governmental agencies in various settings

Employment Handbook

Code of Conduct

Severance Agreements

Internal Investigation Policies/Procedures/Practices

Handbooks/Codes of Conduct

NLRB

Report of the General Counsel

Offers guidance► Desire that employers will review their handbooks

and other rules

► And conform as necessary

Employees have Section 7 rights ► To discuss wages, hours and other terms and

conditions

► With fellow employees and nonemployees (i.e., union representatives)

Prohibited Work Rules

Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004)

► Mere maintenance of a work rule may violate Section 8(a)(1) of the NLRA

► If rule has chilling effect on Section 7 activity.

Rules explicitly banning protected activity violate the Act (e.g., rule banning union activity)

Prohibited Work Rules (cont.)

Rules not explicitly banning protected activity violate the Act if:

► Employees would reasonably understand the rule’s language to prohibit Section 7 activity;

► The rule was adopted in response to union or other Section 7 activity; or

► The rule was applied to restrict the exercise of Section 7 rights.

Examples of Unlawful

Confidentiality Rules

You must not disclose proprietary or confidential information about the Employer or other associates if the information was obtained in violation of law or lawful Company policy

Do not discuss customer or employee information outside of work including phone numbers and addresses

Examples of Unlawful

Confidentiality Rules (cont’d)

Never publish or disclose the Employer’s or another’s confidential or other proprietary information. Never publish or report on conversations that are meant to be private or internal to the Company.

Examples of Unlawful

Confidentiality Rules (cont’d)

Prohibiting employees from disclosing details about the Employer.

Sharing of overheard conversations at the worksite with your co-workers, the public, or anyone outside of your immediate work group is strictly prohibited.

Discuss work matters only with other employees who have a specific business reason to know or have access to such information.

Examples of Unlawful

Confidentiality Rules (cont’d)

Do not discuss work matters in public places.

If something is not public information, you must not share it.

Confidential Information is: All information in which its loss, undue use or unauthorized disclosure could adversely affect the company’s interests, image and reputation or compromise personal and private information of its members.

Examples of Lawful Confidentiality

Rules

No unauthorized disclosure of business secrets or other confidential information.Misuse or unauthorized disclosure of confidential information not otherwise available to persons or firms outside Employer is cause for disciplinary action, including termination.Do not disclose confidential financial data, or other non-public proprietary company information regarding business partners, vendors or customers.

Handbooks/Codes of Conduct

(cont’d)

State Department OIG Report (March 30)

Concerning provisions

► No discussion of confidential information

► Contact company if contacted by government

► Or, instructions to explain must consult with Company counsel before responding

► Non-disparagement

Severance Agreements

Problems► Waiver of right to file charge

– Traditional “carve-out” explaining expressly that employee can file EEOC charge

– Now need to be more specific and inclusive in “carve-out”

► Non-disparagement

► Confidentiality provisions– Must contact company before disclosing any

“underlying” information

– Seen as limiting participation in government investigation

Recommendations

Review these agreements and practices

Provide internal hotlines with anonymous reporting procedure

Settlement Agreements► Include that Employee has made company aware

in writing before signing agreement

► Other government agencies (not just EEOC) in carve-out

► Not a waiver of right to file charge or participate in any government investigation

Recommendations (cont’d)

Internal Investigation

► Case-by-case analysis of level of confidentiality needed

► Distinguish between management and non-management persons in process

► If give confidentiality instruction, explain why

Angelica Fortney – afortney@bassberry.com

Tim Garrett – tgarrett@bassberry.com

Michael Moschel – mmoschel@bassberry.com

David Thornton – dthornton@bassberry.com

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