Government Matters: 2012 Update Brad D. Steele Vice Pres. of Government Relations and General Counsel steele@nationalclu

1. Government Matters: 2012 Update Brad D. Steele Vice Pres. of Government Relations and General Counsel steele@nationalclub.org ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

2. Our Mission • “To defend, protect and advance the interests and well-being of private social and recreational clubs” • As the trade association for the private club industry, NCA is based in Washington, DC to: • Be involved in the political world, and • Shape the policies that come from it • Simply put, we make sure the private club industry’s voice is heard • On Capitol Hill, • In the agencies, • In the statehouses, and • In the courthouses ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

3. Today’s Roadmap • Election Review • Legislative Outlook • Regulatory Outlook ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

4. Election Review ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

5. The House of Representatives • Balance of power: • Pre-election: 242 Republicans - 193 Democrats • Post-election: 232 Republicans – 193 Democrats, as of now • 10 seats still too close to call (7 Republican, 3 Democratic) • Reps. Bachmann (R), Bono Mack (R), and Barber (D) (replaced Giffords) • Republicans flipped 10 seats and Democrats flipped 13 seats • So, net gain of three seats for the Democrats • Total net loss can be no more than 10 for Republicans • Speaker of the House John Boehner (R-Ohio) will retain the gavel • Worst case scenario is the Republicans have a majority of 14 seats • Redistricting caused races to be interesting • Four of the 11 Republican seats in Illinois flipped • Three of the seven Democratic seats in North Carolina flipped ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

6. The Senate • Balance of power: • Pre-election: 53 Democrats (with 2 Independents) – 47 Republicans • Post-election: 55 Democrats (with 2 independents) – 45 Republicans • Republicans flipped Nebraska • Democrats flipped Indiana, Maine and Massachusetts and held six of their seven other six open seats • Conn., Hawaii, N.M., N.D., Va., and Wis. – Neb. was the seventh • So, net gain of two seats for Sen. Majority Leader Harry Reid (D-Nev.) • Major success for the Democrats to their expand majority • However, without 60 votes, the Republicans will still be able to filibuster any controversial bill • The gridlock will only get worse ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

7. The White House • The President wins re-election • 2012 vote: 60,100, 000 (51%) – 57,415,000 (49%) • 2008 vote: 66,880,000 (53%) – 58,340,000 (46%) • 2012 Electoral College vote: 303 – 206 (Fla.’s 29 still to close to call) • 2008 Electoral College vote: 365 – 173 • First President to win re-election with less EC votes than the previous election • 2012 States: 26 (w/DC) – 24 (Fla. is too close to call) • 2008 States: 29 (w/DC) – 22 • The President won every battleground state: Colo., Iowa, Nev., N.H., Ohio, Va., Wis., and Fla. is leaning his way • Ind. and N.C. returned to the Republican fold, but it did not matter • At the end of the day, the polls were right ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

8. Legislative Outlook ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

9. The Patient Protection and Affordable Care Act (ACA) • The law will go into effect on January 1, 2014 • This year’s new requirement – the W-2 reporting mandate • Clubs must disclose all money spent for health insurance premiums by both the employer and employee on the employee’s W-2 form • Clubs that issued less than 250 W-2s in the preceding year are exempt in 2012 • Still not taxable income, yet.... • However, the President has proposed removing the tax exemption for those who traditionally join private clubs ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

10. The Patient Protection and Affordable Care Act (ACA) • American Health Benefit Exchanges • By 2014, each State must have an Exchange that offers government approved plans • It is a marketplace to purchase health insurance policies – like Travelocity or Expedia • An Exchange must: • Certify that each policy meets the government established requirements • Provide a comparative analysis of each plan • Provide cost information for each plan • Assign a rating to each plan ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

11. The Patient Protection and Affordable Care Act (ACA) • The Exchange and private clubs • SHOP Exchange – Small Business Health Options Program • Clubs with 100 or less employees may use the Exchange to purchase insurance for their workers • All such employers may pool together to lower costs • States may allow clubs with 100 + employees into a SHOP Exchange in 2017 • Club leadership may select the level of coverage and employees may select any plan within that level • Platinum Level – 90/10 • Gold Level – 80/20 • Silver Level – 70/30 • Bronze Level – 60/40 ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

12. The Patient Protection and Affordable Care Act (ACA) • Beginning March 1, 2013, clubs are required to notify employees about the Exchange • HHS will provide a model disclosure form • You must disclose: • What services the Exchange provides, • How to contact it, • That your employees may be eligible to receive a tax credit or subsidy, and • That they may lose the employer’s contribution, but any payment they make for health insurance will be tax exempt ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

13. The Patient Protection and Affordable Care Act (ACA) • The Employer Mandate • Clubs with an average of 50 full-time employees must offer insurance • Clubs with 50 that offer ins. will be fined $3,000 for each employee who: • Is not offered or declines the plan, goes to the Exchange and receives a tax credit or subsidy • Clubs with 50 that do not offer ins. will be fined $2,000 per full-timer (less the first 30) if: • One employee goes to the Exchange and receives a tax credit or subsidy • Clubs will only pay the lesser of the total $3,000 penalty vs. the total $2,000 penalty • Penalties are indexed to the nat’l average premium growth rate • So, who is “full-time” and how does he get a tax credit or subsidy ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

14. The Patient Protection and Affordable Care Act (ACA) • Full-time employee – one who is employed on average at least 30 hours/week during any month (120 hours in a four-week span) • These are the employees who will determine if you fall under the law • These are the employees to whom you must offer ins. or risk being fined • The IRS has issued a request for comments on this definition and its workability – 130 hours/month • Part-time employees are to be counted when determining if your club has 50 full-timers • Take the total hours worked by part-timers in a month and divide by 120 then add that number to the number of full-timers to see if you reach 50 • Part-timers are counted but you don’t have to offer them insurance ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

15. The Patient Protection and Affordable Care Act (ACA) • What about Variable Hour Employee – is he full-time? • Variable Hour Employee – Based on facts and circumstances at his start date, it cannot be determined he is reasonably expected to work 30 hours/week • If he is full-time, you must offer ins. or risk being fined • Ongoing Variable Hour Employees –Safe Harbor from fine • Club picks a Standard Measurement Period (3-12 months) and a Stability Period (6-12 months, but no shorter than SMP) • If the employee averages 30 hours/week during the SMP, heis full-time • Club must offer him ins. for the Stability Period • If he does not, no need to offer ins. • A club following this guidance will not be fined if the employee goes to the Exchange and receives a tax credit or subsidy ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

16. The Patient Protection and Affordable Care Act (ACA) • New Variable Hour Employees – Safe Harbor from fine • Club picks an Initial Measurement Period (3-12) and the Stability Period but the Stability Period must be the same number of months as for ongoing employees • If the employee averages 30 hours/week during the IMP, heis full-time • Club must offer him ins. for the Stability Period • If he does not, no need to offer ins. • BUT, club must test him again as an “ongoing employee” beginning with the 1st SMP that begins after his start date – this may overlap with the IMP • A club following this guidance will not be fined if the employee goes to the Exchange and receives a tax credit or subsidy ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

17. The Patient Protection and Affordable Care Act (ACA) • Administrative Period – Safe Harbor from fine • For ongoing employees, a clubs may have a 90 day Administrative Period between the SMP and the Stability Period to get these employees notified and enrolled in a plan • For new employees, a club may delay the start of the IMP and it may also have an Administrative Period after the IMP • BUT, the total delay may still only be 90 days • Also, the IMP and the Administrative Period cannot total more than 13 months from a new employee’s start date ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

18. The Patient Protection and Affordable Care Act (ACA) • Employee eligibility for the Exchange’s tax credit or subsidy • For clubs that offer ins., a FTE is eligible for a tax credit/subsidy if: • That employee’s household income is no more than 400% FPL ($92,200 for a family of 4), and • His premium cost for a self-only plan is more than 9.5% of his household income – “unaffordable” • IRS proposed safe harbor – no fine for a club if the employee’s premium cost is no more than 9.5% of his W-2 wages • Eligibility is also there if the insurance plan pays less than 60% of health care costs • HHS will issue guidance on how to determine if a plan meets this requirement • For clubs that don’t offer ins., a FTE is eligible if: • That employee’s household income is no more than 400% of FPL ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

19. The Patient Protection and Affordable Care Act (ACA) ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

20. The Patient Protection and Affordable Care Act (ACA) • Rules for seasonal workers • If a club has 50 full-timers, then its full-time seasonal workers must be offered insurance • If the seasonal workers are new Variable Hour Employees, then the IMP may be longer than their seasonal employment • If a club has less than 50 full-timers, but seasonal workers push it over the threshold, then: • Club will have to offer ins. if it reaches the threshold for more than 120 days with clearly full-time seasonal workers • Club will not have to offer if it reaches the threshold for 120 days or less • If your seasonal workers are Variable Hour Employees, then you may have to establish whether they are full-time for the 120 day requirement (and offer ins. to your other full-time employees), but you will not have to offer ins. to the seasonal workers until after the IMP ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

21. The Patient Protection and Affordable Care Act (ACA) • Rules for probationary periods for new full-time employees • Clubs with 200 or less employees • You may have up to a 90 day probationary period for new full-time employees before offering insurance • New Variable Hour Employees who are later deemed to be full-time will have longer than 90 days because of the Initial Measurement Period • Clubs with more than 200 full-time employees • You may not have a probationary period and must automatically enroll new full-timers in the insurance plan • New Variable Hour Employees who are later deemed full-time will have the Initial Measurement Period as their probationary period • This requirement has been delayed until regulations are issued ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

22. The Patient Protection and Affordable Care Act (ACA) • What must be included in the government approved plans? • Each plan must have the government’s Essential Health Benefits package: • Ambulatory patient services • Emergency services • Hospitalization and prescription drugs • Maternity, newborn care and pediatric services, with oral/vision care • Mental health, behavioral health and substance use disorders services • Rehabilitative and habilitative services and devices • Laboratory services • Preventative, wellness & chronic disease services (no cost to employee) • HHS will add other benefits, too • These new benefits are expected to increase costs by an average of 3%-5% ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

23. The Patient Protectionand Affordable Care Act (ACA) • All government approved plans must be “nondiscriminatory” • The nondiscrimination rules are in the Internal Revenue Code § 105(h) • Clubs are required to offer the same benefits, waiting periods, contributions and type of coverage to all classes of employees regardless of their compensation • Failure to meet this requirement makes the plan discriminatory and the fine is $100/day for each employee the plan discriminates against • There is a cap of the lesser of $500,000 or 10% of the price of the plan the club paid the previous year • This requirement has been delayed until regulations are issued ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

24. The Patient Protection and Affordable Care Act (ACA) • What additional costs can be expected? • A fee on drug manufacturers • Starting next year, a 2.3% tax on medical device makers • A bill to repeal this tax passed the House 270-146; no action in the Senate • Starting in 2014, an insurance comp. fee for all policies sold - a.k.a. the “Health Insurance Tax” (HIT) • This is expected to cause a nearly 4% premium increase • Starting in 2018, a 40% excise tax on ins. companies for selling high cost policies • $10,200 premium threshold for self-only plans • $27,500 premium threshold for family plans • All of these new costs will be added to your club’s insurance premium ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

25. The Patient Protection and Affordable Care Act (ACA) • What new taxes will be imposed on club members? • New Medicare taxes starting 2013 • For unearned income, a 3.8% tax on net investment income (interest and dividends) for those making more than $200,000/$250,000 • For earned income, a payroll tax hike of .9% for every dollar made over $200,000/$250,000 (payroll adjustments need to be in place) • Neither one of these is indexed for inflation • Clubs need to budget for a potential decrease in revenue • With the .9% payroll tax increase alone, a club with 50 families making $500,000 per year could lose over $100,000 ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

26. The Patient Protection and Affordable Care Act (ACA) • Congressional Budget Office (CBO) issued new projections this year • CBO said the total cost for the ACA in ‘10-’19 was $938 billion • The ‘14-’23 cost is now $2.6 trillion • CBO says more employers will stop offering insurance • New estimates say gov’t will earn $15b because of the employer mandate • A House Ways and Means survey found 70% of Fortune 100 companies: • Could save $29 billion by dropping ins. in 2014 ($415 million each), and • Could save almost $422 billion from ‘14-’23 (nearly $6 billion each) • CBO also says 4 million employees will go into Exchanges (2.5%?) • Ways and Means survey says up to 65 million could go into Exchanges • More people in Exchanges means more subsidies paid by gov’t • Thus, greater pressure on Congress to hike taxes on private club members ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

27. Potential Tax Increases • 1/1/13, the marginal income tax rates go up • The 28% rate will jump to 31% • The 33% rate will jump to 36%, and • The 35% rate will jump to 39.6% • Capital gains and dividend tax rates go up, too • Capital gains increases from 15% to 20% • Dividend rates go from 15% to an individual’s marginal rate • Family making $500,000 will pay more than $11,000 in new fed. taxes • With 20 such families at your club, you could lose more than $200,000/yr. • Do not forget that the payroll tax break and many business tax breaks expire on 1/1/13, too ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

28. Regulatory Outlook ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

29. Dept. of Labor’s H-2B Regulations • H-2B “Wage Rule” • Hikes the “prevailing wage” by nearly $4.50/hour • Rule was to go into effect on September 30, 2011 • NCA and our allies on the H-2B Workforce Coalition filed suit • DOL delayed the rule to let the court act, then Congress stepped in • Congress passed DOL’s spending bill for FY13 and removed funding for it • Unfortunately, the funding law is good for only 6 months of FY13 • Thus, clubs are relieved from this requirement until March 27, 2013 • The lawsuit is still pending ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

30. Dept. of Labor’s H-2B Regulations • The H-2B “Overhaul Rule” – revamps the entire program • Corresponding Employment: • Clubs must pay U.S. workers the prevailing wage if they do “substantially the same work” as H-2B workers • Not for U.S. workers who have been employed at least 1 year and whose responsibilities aren’t cut back • Clubs must pay H-2B workers 75% of their hours in a 12 week period - whether they work or not • Full-time for H-2B workers is 35 hours not 30 • Clubs must post a “workers’ rights poster” from DOL in all necessary languages ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

31. Dept. of Labor’s H-2B Regulations • The H-2B “Overhaul Rule,” continued • Clubs must pay transportation, hotel, food and visa costs for H-2B workers or reimburse them in the first week • Clubs must provide transportation costs to U.S. workers and offer housing if it is offered to their H-2B workers • Clubs must offer the job to a U.S. worker up to 21 days before the H-2B worker is to start – even if the H-2B worker is already on the way • “Temporary” is now 9 months not 10 • A federal lawsuit was filed in Florida to stop the rule • The judge stopped the rule until the case is resolved and DOL appealed ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

32. National Labor Relations Board • The National Labor Relations Board (NLRB) is a five-member board that governs relations between unions and employers • Majority selected by the President • It can issue regulations and establish case law • On 1/1/12, the NLRB lost one member and was left with only two • On 1/4/12, the President recess appointed three new members • This is the first time a President has used the recess appointment power while the Senate was still in session • Questions have been raised regarding the legality of these appointments • If the appointments were done inappropriately, then everything the NLRB does will be thrown out, but until then clubs must follow the NLRB’s rules/case law ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

33. NLRB Regulations • The “Poster Rule” – was to start April 30, 2012 • Clubs must display a “Notification of Employee Rights” poster describing: • How employees can unionize, and • What constitutes unfair labor practices • However, the poster does not state how employees may decertify a union • Failure to post the notice is an “unfair labor practice” in and of itself • NCA’s issue with this rule is that disgruntled employees will have more of an opportunity to bring a union into the club or file unfounded claims against the club • If this happens, immediately contact club counsel before responding to employees ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

34. NLRB Regulations • The “Poster Rule,” continued • NCA and our allies filed a federal lawsuit in D.C. to stop the rule • The District Court ruled against us and we appealed • The U.S. Court of Appeals stopped the rule until the case is resolved • The decision should come by the end of the year • A similar case was also filed in a South Carolina federal court • That District Court ruled for us and the NLRB appealed • The U.S. Court of Appeals could rule by late Spring 2013 • If we lose the DC appeal, we will ask to stop the rule from going into effect until the South Carolina appeal is resolved • We have used the S.C. judge’s rationale to bolster our DC appeal argument ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

35. NLRB Regulations • The “Quickie Election Rule” – was to start April 30, 2012 • Allows unions to call for an election within 10-21 days of a petition being filed • Severely limits your workers’ ability to receive complete information about union costs • Severely limits a club’s ability to effectively prepare for a union election battle • Promotes union “stealth campaigns” • This is where union organizers quietly secure the necessary votes and then call for an election ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

36. NLRB Regulations • The “Quickie Election Rule,” continued • The Chairman of the House Education and the Workforce Committee, Rep. John Kline (R-Minn.), introduced a bill to kill the “Quickie Election Rule” • It passed the House, but no action in the Senate • On the same day that bill passed the House, the NLRB passed the rule 2-1 • NCA and our allies filed a federal lawsuit in this matter, too • The D.C. District Court ruled for us and the NLRB appealed • The decision should come by mid-2013 ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

37. NLRB Case Law • Specialty Healthcare • NLRB ruled that unions are entitled to select smaller subsets of larger employee groups to organize • Burden is on employers to prove that the excluded employees “share an overwhelming community of interest” with the smaller subset • Lancaster Symphony Orchestra • NLRB ruled musicians were employees (not independent contractors) and could vote on forming a union • Since orchestra set work hours, pay schedules, dress code and standards for behavior, they were “employees” • Roundy’s, Inc. (Pending) • Will give unions access to clubs during business hours to campaign if you let others into the club during business hours (Red Cross, etc.) ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

38. DOL’s Disclosure Regulation • The “Gag Rule” • DOL issued a proposed rule that will severely impact a club’s ability to get legal advice during a union organizing campaign • If a club hires a lawyer to help with almost any aspect of a union campaign, then it must file complicated disclosure reports with DOL • It is a paperwork nightmare • The lawyers must also file reports disclosing all clients seeking labor advice and the fees charged • Many law firms will pull back from this type of work • Without lawyers, most clubs will be unable to effectively give their side of the story ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

39. NLRB & Department of Labor • Together, the NLRB’s regulations/rulings and the Dept. of Labor’s rule mean: • Unions will have more agitated workers because of the “Poster Rule;” • Unions will have a quicker official election campaign because of the “Quickie Election Rule;” • Unions will be able to target a smaller subset of your workers; • Unions will be able to include your caddies and other independent contractors; • Unions will be entitled to come onto your property during business hours to conduct the campaign; and • Unions will be less likely to encounter opposition because you can’t find adequate legal assistance ADVOCATE FOR CLUBS, ANSWERS FOR CLUB LEADERS

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