For a copy of the following presentation, please visit our

1. This UBA Employer Webinar Series is brought to you by United Benefit Advisorsin conjunction with Jackson Lewis P.C. For a copy of the following presentation, please visit our website at www.UBAbenefits.com. Go to the Wisdom tab and then to the HR webinar series page.

2. Presented by: Joy Napier-Joyce (Baltimore) August 12, 2014 “Planning for 2015 - Open Enrollment and Other PPACA Issues”

3. About the Firm Represents management exclusively in every aspect of employment, benefits, labor, immigration law and related litigation Over 770 attorneys in 55 locations throughout the U.S. and Puerto Rico Current caseload of over 6,500 litigations and approximately 550 class actions Founding member of L&E Global

4. Disclaimer This presentation provides general information regarding its subject and explicitly may not be construed as providing any individualized advice concerning particular circumstances. Persons needing advice concerning particular circumstances must consult counsel concerning those circumstances.  Indeed, health care reform law is highly complicated and it supplements and amends an existing expansive and interconnected body of statutory and case law and regulations (e.g., ERISA, IRC, PHS, COBRA, HIPAA, etc.).  The solutions to any given business’s health care reform compliance and design issues depend on too many varied factors to list, including but not limited to, the size of the employer (which depends on complex business ownership and employee counting rules), whether the employer has a fully-insured or self-funded group health plan, whether its employees work full time or part time, the importance of group health coverage to the employer’s recruitment and retention goals,  whether the employer has a collectively-bargained workforce, whether the employer has leased employees, the cost of the current group health coverage and extent to which employees must pay that cost, where the employer/employees are located, whether the employer is a religious organization, what the current plan covers and whether that coverage meets minimum requirements, and many other factors. 

5. Your Presenter Today • Joy Napier-Joyce, Shareholder and Chair of the Employee Benefits Practice Group (Baltimore) • Counsels clients in a broad range of benefit matters, including general compliance and administration of qualified retirement plans under ERISA and the Internal Revenue Code. • Assists clients with welfare plan issues involving cafeteria plans, health plans, flexible spending accounts, group insurance products, COBRA and HIPAA.  • Focuses on assisting employers with the various compliance requirements associated with federal health care reform and has been a frequent speaker on the topic. • Advises on non-qualified deferred compensation arrangements and other executive compensation matters, including issues related to compliance with Section 409A of the Internal Revenue Code.  • Represents clients in dealings with the Internal Revenue Service and the Department of Labor, including EPCRS applications, private letter rulings, determination letter applications and plan audits.  

6. Review of 2014 Plan Design Requirements • Eligibility Waiting Period • No more than 90 days; applies to all plans (effective 2014) • Be careful – plan could be designed to comply with maximum eligibility period, and still run afoul of employer shared responsibility penalties • Penalties may apply beginning with first day of the 4th full calendar month of employment • Orientation Period • Up to one month orientation period, in addition to 90 day waiting period, permitted as a condition of eligibility • Begins with start date, all calendar days count • Employers should review handbooks/policies regarding probationary periods

7. Review of 2014 Plan Design Requirements Must be bona fide - • Parties evaluate whether employment situation is satisfactory • Standard orientation and training processes begin • May not be a mere passage of time • Caution – many employers have longer probationary/orientation periods that may need to be revised/evaluated with regards to health plan eligibility

8. Counting Employees to Determine ALE Status • Applicable Large Employer (ALE) - employed 50 full-time employees (including full-time equivalents (FTEs)) on business days during the preceding calendar year. • Aggregate all employees within controlled group • Determine all FT employees averaging 30+ hours/week • Determine all FTEs by: • (1) Adding the total hours for all non-FT employees (but no more than 120 hours/month for any one non-FT employee); and • (2) Divide the number in (1) by 120.

9. Counting Employees to Determine ALE Status Add the Full-Time Employees and the FTEs for each month and divide by 12 If the average number is under 50, the employer is not an ALE for the following year Special rules for seasonal employees

10. Counting Employees to Determine ALE Status • Transition Relief for 2015 for employers with 50-100 full-time and FTEs however, the employer must: • Employ on average at least 50 full time employees (including FTEs), but fewer than 100 full time employees (including full-time equivalent employees) on business days during 2014; • For the period 2/9/14-12/31/14, not reduce the size of its workforce or hours of its employees in order to meet (1) above, except for bona fide business reasons; • May not, between 2/9/14 and 12/31/15,  eliminate or materially reduce any health coverage it may have offered as of 2/9/14; and • Certify that it meets the requirements in (1)-(3) above on a transmittal form provided by the IRS in connection with reporting obligations.

11. “Common Law” Employee • Must count and offer coverage to “full-time” employees, using the common law definition (does not include sole proprietors, partners, 2% S Corporation Shareholders) • Still hoping for more guidance on what employees fall within the definition of “common law” – generally, the common law employer is the entity with the right to control the individual’s performance • Potential penalties for employers who use contingent workforces and are at risk for a misclassification claim • Independent Contractors

12. “Common Law” Employee • Leased Employees • Determine who is properly considered the common law employer • Examine leasing contracts for language regarding provision of health plan by leasing organization • In the event the recipient employer is the common law employer, coverage offered by the leasing organization can satisfy the recipient employer’s obligation to offer coverage if part of the fee the recipient employer pays to the leasing organization takes into account the provision of coverage

13. Special Enrollment and Section 125 Change in Status • Marketplace Plans • Like Medicare, an individual can enroll in a Marketplace plan only during certain periods • Open Enrollment (11/15/14 - 2/14/15 for 2015) • For coverage to be effective 1/1/15, an enrollment must occur by 12/15/14 • Special Enrollment Periods – Must enroll within 60 days of “Qualifying Life Event” – includes • Loss of Minimum Essential Coverage (group or individual coverage) • Birth, Adoption, Marriage, Divorce, Moving and other change in status events

14. Special Enrollment and Section 125 Change in Status • Exhaustion of COBRA (end of maximum period) • Does not include loss of coverage for failure to pay premiums • Does not include cessation of employer-provided subsidy • Marketplace coverage is effective on the 1st day of following month if the individual enrolls by the 15th of the previous month • Marketplace coverage is effective on the 1st day of the second month if the individual enrolls on or after the 16th of the previous month • If COBRA is elected, an individual is not eligible for subsidized Marketplace coverage

15. Special Enrollment and Section 125 Change in Status • Issues with transitioning from COBRA to Marketplace coverage • Individuals need to enroll in Marketplace coverage during Annual Enrollment or Special Enrollment Periods • Limited special enrollment period for COBRA participants ended 7/1/14 • Changes in model COBRA notices highlight the availability of Marketplace coverage and the special enrollment rules (without a lot of detail)

16. Special Enrollment and Section 125 Change in Status • COBRA coverage is retroactive and Marketplace coverage is prospective • At the time active group coverage is lost, and during the COBRA election period, an individual could incur claims that he or she needs to elect COBRA for -- claims that would not be covered with prospective Marketplace coverage • Employers should use the model COBRA forms and review other documents (handbooks, benefits summaries, severance agreements, etc.) to refer individuals to options in the Marketplace.

17. Special Enrollment and Section 125 Change in Status While COBRA will still need to be offered at this point, the availability of subsidized Marketplace coverage may lead to fewer COBRA elections

18. Special Enrollment and Section 125 Change in Status • Difficult leave situations • How to count hours while on leave • What to do with employees who return from leaves or other breaks in service • In general, if an employee is gone less than 13 weeks, the employee is treated as a continuous employee upon return -- meaning that for measurement purposes, if the employees was eligible for coverage within a stability period when he or she left, he or she remains and comes back into the standard measurement period. • Reoffer coverage • New elections based on 125 plan rules?

19. Special Enrollment and Section 125 Change in Status • If the employee is gone for more than 13 weeks or falls within the “Rule of Parity” (explained below), the employee is treated as a new hire and begins a new initial measurement period • The Rule of Parity provides that if an employee is gone for more than 4 weeks, but less than 13 weeks, and the employee’s leave/break was longer than the initial period of employment, the employee can be treated as a new hire for purposes of measuring hours and determining full-time status • Need to track paid leaves and special unpaid leaves of absence (FMLA, USERRA and jury duty) for purposes of crediting hours • Employers are considering being more generous to make things easier from an administrative standpoint

20. Special Enrollment and Section 125 Change in Status • Remember 125 Plan Rules still apply • The start of a new Stability Period or Measurement Period is not a status change and does not give rise to a new election right • If a stability period crosses open enrollment, the employee has a right to participate in open enrollment (even if he or she entered an initial stability period) and change elections • Follow 125 rules regarding when to reinstate elections versus allowing new elections following a break

21. Fees • PCORI - 7/31/14 deadline to pay for 2013 Calendar Year Plan Year • $2/Covered Life– Several ways to count covered lives • Assessed on self-insured and fully insured plans • Ends in 2019 • Reported on Form 720 • Transitional Reinsurance • For 2014, $63/covered life; For 2015, $44/covered life • Enrollment counts due to HHS by 11/15/14

22. Fees • HHS will notify the contributing entity by December of the amount due - payment is due within 30 days of notice • Contributions paid in 2 installments • Self-insured, self-administered plans exempt in 2015 & 2016 • Reinsurance contributions can be deducted as ordinary and necessary business expenses • They are also permissible plan expenses under ERISA that can be paid with plan assets (to the extent the plan is funded by a trust)

23. SBC Refresher • Distribution Rules • Before enrollment or re-enrollment • At renewal, only required to provide the SBC with respect to the option the participant is enrolled in (must provide others upon request) • 60 days prior to effective date of material modifications • “Good Faith” compliance • Can be provided electronically—ERISA safe harbor rule regarding electronic disclosure (safe harbor may be revised soon) • Civil fines for failure to provide – up to $100/day per individual

24. MLR Rebates We are still seeing MLR Rebates Employers should remember that how rebates are handled is a fiduciary decision Is at least part of the rebate considered “plan assets”? Who shares in the rebate – former participants? Should the rebate reduce future premiums or be paid as a rebate? Taxable income to the participant?

25. Recent Developments • Subsidies • Recent federal appeals court decisions take contrary approaches regarding whether subsidized coverage can be available in a federally run Marketplace • Text of the statute refers specifically to state run Marketplaces • IRS regulations interpreted this to mean subsidies would be available under all Marketplaces • Only 14 states and D.C. run their own Marketplaces • Being eligible for a subsidy is a key trigger for employer penalties • Other, similar challenges pending • Likely to end up in U.S. Supreme Court

26. Recent Developments • Forms for IRS Reporting (waiting for instructions) • Get systems in place to collect data for 2015 (report in 2016) • Review transition relief for first year

27. Regulatory Pipeline • Nondiscrimination Rules • Proposed rules expected anytime • Will build in time for comments and transition to enforcement • Highly anticipated • Does not affect grandfathered plans • HPID – group health plans meeting the definition of a “controlling health plan” must obtain a health plan identifier number by 11/5/14; small plans have until 11/5/15. • Still questions regarding what is a controlling health plan; hopeful for additional guidance/transition relief.

28. napierj@jacksonlewis.com ANY QUESTIONS?

29. Thank you for your participation in the UBA Employer Webinar Series If your question was not answered during the webinar or if you have a follow-up question, you can email the presenters today or tomorrow at: UBAwebinars@jacksonlewis.com www.UBAbenefits.com www.jacksonlewis.com To obtain a recording of this presentation, or to register for future presentations, contact your local UBA Partner Firm.