1. health and fitness

Navigating the Murky Waters of ACA:
Avoiding Costly Penalties
Mark Bradley – Axiom HRS
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All Applicable Large Employers (ALE) as Defined
by Section 4980H of the Code
–  Any Employer with an average of 50 or more Full-Time
Equivalent Employees during the previous calendar year*
•  Full-Time Equivalents By Month
–  Full-Time Employees = 1 FTE (No employee will be > 1 FTE)
–  All other employees (Part-Time, Variable Hour, Seasonal
(Excluded for 120 Days), Temporary)
»  Sum (Total HRS each/120)
•  Limit per head = 1 FTE Sample Totals For 1 Month Applegate
Austin
Baird
Bell
Brady
Cowell
Drake
Dullman
Evans
Frederick
Gull
Helman
Ivers
Jackson
Jerimiah
Jules
Kapps
Klapper
Totals
21
10
154
120
122
4
12
120
122
114
105
100
97
85
73
165
85
120
0.18
0.08
1.28
1.00
1.02
0.03
0.10
1.00
1.02
0.95
0.88
0.83
0.81
0.71
0.61
1.38
0.71
1.00
0.18 Lamping
0.08 Lester
1.00 Lowell
1.00 Mann
1.00 Means
0.03 Muller
0.10 Noe
1.00 Nurser
1.00 Opper
0.95 Paul
0.88 Peterson
0.83 Prawal
0.81 Quick
0.71 Rawls
0.61 Stevens
1.00 Suggs
0.71 Travis
1.00 Ulver
13.78
20
75
77
23
152
102
8
19
25
95
124
52
49
57
60
53
12
95
0.17
0.63
0.64
0.19
1.27
0.85
0.07
0.16
0.21
0.79
1.03
0.43
0.41
0.48
0.50
0.44
0.10
0.79
0.17
0.63
0.64
0.19
1.00
0.85
0.07
0.16
0.21
0.79
1.00
0.43
0.41
0.48
0.50
0.44
0.10
0.79
8.85
*Add Totals to Other Full-­‐Time Employees (i.e. all employees not above). All Monthly Totals Summed and Averaged for the Year. If Total is Greater than 50, EnFty or Related EnFFes are Subject to Mandates of ACA and Upcoming ReporFng Requirements. Very Brief and Consolidated Review of the
Affordable Care Act
• 
The federal Patient Protection and Affordable Care
Act (P.L. 111-148), signed March 23, 2010, as
amended by the Health Care and Education
Reconciliation Act, signed March 31, 2010, is also
referred to as the Affordable Care Act (ACA)
• 
Goal – Extension of health care to 32 million
uninsured Americans by expansion of public and
private insurance, control of costs and
improvement of the health care delivery system.
Key Initial Mandates of the ACA:
Individual Mandate
Employer Mandate
Require U.S. Citizens and Legal Residents of
the U.S. to maintain qualifying heath
coverage or pay a fine of the greater of $695
per year up to a maximum of three times that
amount ($2085) per family or 2.5% of
household Income in 2016. (2015 is $325 and
2%, 2014 was $95 and 1% of income)*
Require all “Large Employers” to offer
“qualifying” and “affordable” coverage to
their full-time employees. Those who do not
offer coverage and have an employee qualify
for a premium tax credit will pay $3,000 per
employee receiving a premium credit* or
$2,000 for each full-time employee (Excluding
30).
*Exemptions granted for financial hardship,
religious objections, American Indians, those
without coverage for less than 3 months,
undocumented immigrants, incarcerated
individuals, those for whom the lowest cost
option exceeds 8% of an individual’s income
and those below federal tax filing thresholds
($10,300 for Individual, $20,600 Family, $13
Require all employers with over 200
employees to automatically enroll employees
unless the employee opts out.
Key Question: How do I know whether my
employees would be eligible for a premium
tax credit on the exchange?
How to Limit Exposure to Premium Tax Credits
Employees who are offered coverage by an employer
are not eligible for premium tax credits if the plan
offered contains “minimum essential benefits,” has an
actuarial value of at least 60% and the cost of the
lowest tier qualified coverage does not exceed 9.5% of
the employees’ household income.
MAY INCORPORATE SAFE HARBOR IF
YOU FALL CLOSE TO THIS LINE
SAFE HARBOR OPTIONS ON AFFORDABILITY
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ENSURE THAT YOUR COMPANY’S LOWEST COST QUALIFIED
PLAN HAS A COST SHARE FOR INDIVIDUAL ONLY COVERAGE
THAT IS NOT IN EXCESS OF 9.5% OF AN EMPLOYEE’S
UNADJUSTED W-2 BOX 1 AMOUNT. Yes, this is a potential problem
due to section 125
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RATE OF PAY PROVISIONS AVAILABLE AS WELL BUT SAME BASIC
CALULATION AND 9.5% STIPULATION. (Hourly rate x 130 hrs. or
reasonable salary calculation)
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MONTHLY COST OF INDIVIDUAL COVERAGE FOR THE LOWEST
QUALIFIED PLAN CANNOT EXCEED 9.5% OF THE FEDERAL
POVERTY LEVEL DIVIDED BY 12. IN 2015:
–  9.5% X ($11,670 /12) = $92.38 PER MONTH FOR EE ONLY COVERAGE
SO THE GAME IS PRETTY CLEAR, PLAY OR PAY! But what about VARIABLE HOUR EMPLOYEES? Employee Classifications:
•  Full-Time (30 or More Hours a Week)
•  Part-Time (Less Than 30 Hours a Week Average)
•  Variable Hour Employee (An Employee for Whom it Cannot be
Predetermined Whether He or She Will Work an Average of 30
or More Hours Over a Predetermined Measurement Period)
•  Seasonal or Temporary Employee (Arguably Treated as Variable
Hour Unless Work < 90 days)
Full-­‐Time Part-­‐Time Variable Hour Max. Wait 90 Health Offered No Health Offered Enters IniNal Measurement 90 Days – 1 Year Decision Time Measurement Periods For Variable Hour EE’s
Initial Measurement Period
90 Days – 1 Year determined by the
Company.
Administrative Period
30 – 90 days in which to enroll eligible
employees as determined by the
Company.
Ongoing or Standard Measurement
Periods
This is our period to “True Up” and get all
employees on same measurement periods
(Plan Years).
Stability Period
180 Days – 1 Year (must be at least as
long as measurement for those that are
determined to be FTEs and not more
than one month longer than the initial
measurement period (plus any
administrative period in which the
initial measurement period ends.)
Variable Hour, Part-­‐Time, Seasonal 12 Month Example (No Escape) Hire 12 Months IniNal Measurement Period (Min 90 Days) 12 Months Stability Period (Min 6 months) Admin (30-­‐90 days) Ongoing (Standard) Measurement Periods
Under the safe harbor method for ongoing employees, an employer determines
each ongoing employee’s full-time status by looking back at the standard
measurement period (a defined time period of not less than three but not more
than 12 consecutive calendar months, as chosen by the employer). The employer
has the flexibility to determine the months in which the standard measurement
period starts and ends, provided that the determination must be made on a uniform
and consistent basis for all employees in the same category.
For example, if an employer chose a standard measurement period of 12 months,
the employer could choose to make it the calendar year, a non-calendar plan year,
or a different 12-month period, such as one that ends shortly before the start of the
plan’s annual open enrollment season.
TRUE IT UP UNDER THE STANDARD MEASUREMENT Once a new employee, who has been employed for an initial measurement
period, and an entire standard measurement period, the employee must be
tested for full-time status at the same time and under the same conditions as
other ongoing employees.
For example, an employer with a calendar year standard measurement period
that also uses a one-year initial measurement period beginning on the
employee’s start date would test a new variable hour employee whose start date
is February 12 for full-time status first based on the initial measurement period
(February 12 through February 11 of the following year) and again based on the
calendar year standard measurement period (if the employee continues in
employment for that entire standard measurement period) beginning on January
1 of the year after the start date. Restriction: Admin + Measurement < 1st of
Month Following 1 Calendar Year…..
Specifically, the initial measurement period and administrative
period together cannot extend beyond the last day of the first
calendar month beginning on or after the first anniversary of the
employee’s start date.
For example, if an employer uses a 12-month initial measurement
period for a new variable hour employee, and begins that initial
measurement period on the first day of the first calendar month
following the employee’s start date, the period between the end of
the initial measurement period and the offer of coverage to a new
variable hour employee who works full time during the initial
measurement period must not exceed one month.
WHY COMPLY? FINES IN A NUTSHELL
INDIVIDUAL FINES 2014
If you didn’t have coverage in 2014,
you’ll pay the higher of these two
amounts:
1% of your yearly household income.
(Only the amount of income above the
tax filing threshold, about $10,150 for
an individual, is used to calculate the
penalty.) The maximum penalty is the
national average premium for a bronze
plan.
$95 per person for the year ($47.50 per
child under 18). The maximum penalty
per family using this method is $285.
ALE FINES 2014
Delayed
2015 Fines
Individual
If you don’t have coverage in 2015,
you’ll pay the higher of these two
amounts:
2% of your annual household income.
(Only the amount of income above the
tax filing threshold, about $10,150 for
an individual, is used to calculate the
penalty.) The maximum penalty is the
national average premium for a bronze
plan.
$325 per person for the year ($162.50
per child under 18). The maximum
penalty per family using this method is
$975.
ALE (100+)
No Coverage Offered: $2000 Per FTE
Excluding 30 FTEs*
Coverage Not Affordable or Not 60%
Actuarial Value or MEC: $3000 per
person receiving premium tax credit.
Fine not to exceed $2000 per employee
excluding 30*
*For employers with fewer than 100 full-time
employees (including full-time equivalents) in
2014, no Employer Shared Responsibility
payment under section 4980H(a) or (b) will apply
for any calendar month during 2015. For
employers with non-calendar-year health plans,
this applies to any calendar month during the
2015 plan year, including months during the
2015 plan year that fall in 2016. 2016 Fines
Individual
Greater of $695 per adult and
347.50 per child up to $2085 or
2.5% of income.
ALE
Includes all employers with 50
or more FTE’s
How Does an ALE Get Caught
1.  If you have employees who go to state or federally sponsored
exchanges and qualify for a tax credit, your business and
affiliates are at risk.
o  An individual will not be eligible for premium tax credit under 36B if he
or she is offered affordable coverage under an employer-sponsored
plan that provides minimum value and minimum essential coverage.
Questions Thus Far?
2.  Section 6055 and 6056 (Enacted by Section 1514(a) of the ACA)
reporting requirements will also assist the IRS with identifying
compliance issues.
Question: Hey, I have determined that I am an ALE!
What do Sections 6055 and 6056 mean to me?
To Whom Does This Apply?
Self-Insured < 50 Employees
–  6055 Reporting
•  1094-B Transmittal
•  1095-B Return
> 50 FTEs who must report to non-employees (Directors, COBRA
Beneficiaries, Retirees)
–  6055 Reporting
•  1094-B or C Transmittal
•  1095-B or 1095-C Return
To Whom (Continued)
Fully-Insured with > 50 FTEs
•  6056 Reporting
•  1094-C Transmittal
•  1095-C Return (No Part III)
Self-Insured > 50 FTEs
•  6055 and 6056 Reporting
•  1094-C Transmittal
•  1095-C Return
Purpose of Reporting
1.  Assist with administration of Employer Shared
Responsibility Provision.
2.  Assist with administration of premium tax credits on
State and Federal Exchanges.
3.  Supplement W2 reporting requirements
Information Reported (Using “Indicator
Codes”)
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Provision of Minimum Value (60% Actuarial Value);
Spousal Coverage Offered;
Total Employees by Calendar Month;
Effective Dates and Waiting Periods;
•  Now no more than 90 days flat (with the exception of
“orientation” period). In essence nothing has changed with
the exception of language in policies.
•  Potential Affiliates of ALE (Aggregate Group under
414(b), 414(c), 414(m), 414(o));
Information (Continued)
•  If appropriately designated person is reporting on behalf
of an ALE member that is a governmental unit for
purposes of 6056, then the name, address and
identification number of the designated person;
•  If ALE member is a contributing employer to a Multiple
Employer Plan, then report whether or not relevant
employer is subject to assessable payment under 4980(h)
due to contributions to MEP;
•  If third party is reporting, the name, address, ID number
and EIN of third party.
6055 (Self-Insured) and 6056 Requirements
• 
Statement to Employees or form 1094-B or C before January
31, 2016 and every year thereafter; *
–  May be electronic but requires authorization. U.S. Mail or delivery in person.
Can be furnished in the Mail with W-2.
• 
Section 6056 Return by February 28, 2016 (which falls on a
Sunday so March 1, 2016 will be required date for 2016)*.
Electronic submission required for ALEs filing 250 or more
returns.
*Transitional relief available for 2015 for ALEs with 50-99 FTEs.
Simplified reporting available for 2015 only to all employers who
have mad qualified offer to 95% of FTEs, their spouses and their
dependent children.
HOW TO COMPLY WITH REPORTING REQUIREMENTS William Smith
1234 ACA Way
Carmel, IN 46033
January 7, 2016
Re: Employee Statement Pursuant to Section 6056 for Coverage Year 2015
Dear William Smith:
Pursuant to Section 6056 of the Patient Protection and Affordable Care Act (“PPACA”), we are
required to file an informational return with the IRS, which in part identifies the coverage that we
provided to you. This information will assist you and the IRS to establish that you have satisfied
your obligations under the Individual Mandate to maintain minimum essential coverage (“MEC”)
and are therefore not subject to a penalty.
Please note that in addition to the required informational return that we will file with the IRS, we
are required to provide you with a statement that includes the information that we will provide in
our IRS filing that relates to you. Your 1094-B is enclosed with this communication.
If you have a have any questions, please contact Jane Smith, SPHR at [email protected]
Sincerely,
The Paper Pushing ACA Compliance Team
RELAXED REPORTING SAFE HARBOR
May report without specifying or identifying number of
FTEs if qualified offer to at least 98% of employees
employer reports on Section 6056 Return
•  Qualified Offer
•  Affordable- Less than 9.5% of W2 income for lowest cost
individual coverage (household or individual to be safe).
• 
Absolute Safe Harbor in 2015 = $1100 (9.5% of poverty)
•  Minimum Value – 60% actuarial value
•  Minimum Essential Coverage……………….
Minimum Essential Coverage: What It Is Not!
Coverage providing only limited benefits, such as coverage only for vision care or
dental care, and Medicaid covering only certain benefits such as family planning,
workers’ compensation, or disability policies.
Most insurance types offered between each years open enrollment will be short
term health insurance, fixed benefit plans and supplemental insurance will not help
you avoid the fee on their own.
The following types of health insurance are not minimum essential coverage:
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Short Term Health Plans
Fixed Benefit Health Plans
Supplemental Medicare like Part D and Medigap
Some Medicaid covering only certain benefits
Vision only, Dental only, and limited benefit plans
Grandfathered Plans (You will avoid the fee, but won’t get the new
rights and protections)
•  Lets Discuss
Minimum Essential Coverage: What it is!
Certain Plans (Fully – Insured) Must Cover Essential
Health Benefits to Qualify as Minimum Essential
Coverage. A similar-sounding, albeit very different,
term is “minimum essential coverage.”
This term is to be distinguished from the term
“essential health benefits” and is merely a descriptor
for those types of coverages that qualify for purposes
of the individual and employer mandates, which take
effect beginning in 2014.
What is Included in MEC
Minimum essential coverage includes the following:
• 
Employer-sponsored coverage, including self-insured plans, COBRA
coverage and retiree coverage
• 
Coverage purchased in the individual market, including a qualified health
plan offered by the Health Insurance Marketplace • 
Medicare Part A coverage and Medicare Advantage plans
• 
Most Medicaid coverage
• 
Children's Health Insurance Program (CHIP) coverage
• 
Certain types of veterans health coverage administered by the Veterans
Administration
• 
Most types of TRICARE coverage under chapter 55 of title 10 of the United
States Code
MEC (Cont.)
•  Coverage provided to Peace Corps volunteers
•  Coverage under the Non-appropriated Fund Health Benefit Program
•  Refugee Medical Assistance supported by the Administration for
Children and Families
•  Self-funded health coverage offered to students by universities for plan
or policy years that begin on or before Dec. 31, 2014 (for later plan or
policy years, sponsors of these programs may apply to HHS to be
recognized as minimum essential coverage)
•  State high risk pools for plan or policy years that begin on or before
Dec. 31, 2014 (for later plan or policy years, sponsors of these program
may apply to HHS to be recognized as minimum essential coverage)
•  Other coverage recognized by the Secretary of HHS as minimum
essential coverage
98% Offer Method for Simplified Reporting
• 
• 
• 
For Full-Time Employees Only
Not for Employees of Less than Full Year
Only Fully-Insured Plans
–  98% offer to employees and dependents (not spouse) of MEC*
•  Do not have to report total number of FTEs for year
•  Do not have to identify particular employees’ status of FT or PT
–  Only relieves employer from filling out line 23 on form 1094-C
•  Alleviates need to track hours of service
•  May expand coverage requirement
*only suggested if qualifying offer is made to all who are at
or near the 30 hour threshold.
Qualifying Offer Method and (QOM Transitional
Relief 2015 Only)
•  Relief from provision of 1095-C Employee Notices*
•  Fully Insured Only
•  Qualifying offer for all 12 calendar months
•  Not to exceed 9.5% of Mainland Federal Poverty Level
•  $92.38 per month currently
•  Must extend to children to age 26 and spouses
*Still must provide simplified statements to employees
Key Difference between QOM and QOM
Transitional Relief 2015
•  The QOM Transitional Relief is only available if Company
hits 95% threshold and simplified statements can be
provided to all employees while QOM method is available
for 2015 and years to follow but only applies to only
employees to whom a qualified offer was made.
*Employers qualifying for 70% transitional relief for
2015 are not eligible. Most relief other that QOM is
not available beyond 2015 and is not available for
any employer that has adjusted plan year start
dates
Recommendation
Provide 1095-C’s and be done with it
You still will be required to provide 1095-C to
Government regardless of simplification
Fines for Non-Compliance (No Good Faith Effort) On
Reporting Requirements:
•  $100 per occurrence to a maximum of $1,500,000 per
company. (Simplified)
2014 and Beyond
2014 ACA Compliance Timeline:
Small employers with fewer than 25 full-time equivalents (FTEs) are eligible for tax credits in order to
offset the cost of offering coverage to employees.
2015 ACA Compliance Timeline:
Beginning in 2015, employers with more than 50 FTEs are required to provide health coverage to employees
and document that coverage to avoid fines. Small employers are exempt from penalties. FTEs are defined as
employees who average more than 30 hours of service per week. Service hours include hours worked, paid
time off and government mandated paid time, like FMLA. Employers must offer health coverage to 70 percent
of eligible FTEs to avoid penalties. Comprehensive reporting of health coverage and covered employees
must be provided to the IRS annually. At the end of the plan year, employers must provide summary reporting
to the government as well as employees for tax purposes.
2016 ACA Compliance Timeline:
In 2016, the provisions of the ACA become permanent. Employers must offer coverage to 95 percent of
eligible FTEs to avoid penalties. Summary reporting of the 2015 plan year is required to employees and the
IRS. Failing to submit this report to employees by January 31, 2016 can result in penalties.
If penalties were assessed, businesses must respond to prove that the penalty was not just. This can only be
accomplished through thorough documentation of the eligibility and notification processes.
2014 and Beyond (Continued)
2017 ACA Compliance Timeline:
Prior to 2017, employers with more than 50 FTEs were not eligible to purchase health coverage through the
health care exchanges. This option was limited to individuals and small employers. Selecting coverage
through a health care exchange can result in additional competition, which may ultimately decease an
organization’s cost for providing healthcare.
2018 ACA Compliance Timeline (Cadillac Tax):
The IRS has set maximum thresholds for the total cost of health coverage. This amount includes all
premiums, whether they are employer or employee paid. The limits are:
$10,200 for an individual plan.
$27,500 for a family plan.
In the event the total cost of health coverage exceeds these amounts, the employer is responsible for a 40
percent excise tax. For example, if a family plan is $28,000, it exceeds the maximum of $27,500 by $500. The
employer is this responsible for a 40 percent tax of $200 on the excess cost.
Questions on ACA
Compliance? Let’s talk.
Axiom Human Resources Solutions
317.587.1019
[email protected]
axiomhrs.com