Open Enrollment is Over – Now What?

1. This UBA Employer Webinar Series is brought to you by United Benefit Advisorsin conjunction with Jackson Lewis For a copy of this presentation, please go to www.UBAbenefits.com. Go to the Wisdom tab and scroll down to HR Webinar Series and click. Under Employer Series click the Registration and Presentation link. Click the red Presentation button to see the slides.

2. Presented by: Randy Limbeck (Omaha) December 10, 2013 Open Enrollment is Over – Now What?

3. About the Firm Represents management exclusively in every aspect of employment, benefits, labor, and immigration law and related litigation Over 750 attorneys in 53 locations nationwide Current caseload of over 5,000 litigations and approximately 300 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.  IRS Circular 230 disclosure: Any tax advice contained in this communication (including any attachments or enclosures) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication. (The foregoing disclaimer has been affixed pursuant to U.S. Treasury regulations governing tax practitioners.)

5. Topics for Discussion • 2013 Plan Document Amendments • October 31, 2013 IRS Notice on Changes to Health FSAs • PPACA • Guidance to be issued soon • Recently released guidance • 2014 compliance items • How Are Your Nerves – What’s On Hold? • Premium Tax Credit for lower income individuals

6. Plan Document Amendments • Cafeteria plans must be amended by December 31, 2013 for the $2,500 contribution cap on health flexible spending accounts (FSA) • Defined benefit pension plans must be amended for Code §436 (unfunded plans) • Extended deadline is last day of the first plan year that begins on or after January 1, 2013 • Many plans included in Pension Protection Act of 2006 Amendments • No other qualified plan (401(k) and pension) required in 2013 • Plan document and Summary Plan Description (SPD) updates for PPACA – generally can be done in 2014 if changes are not effective until 2014

7. Health FSAs – IRSOctober 31, 2013 Notice • Allow $500 carryover to next year for health flexible spending accounts/forfeited under old rule • Can use carryover during entire next plan year • Does not affect the next year’s $2,500 limit • Amounts in excess of the $500 carryover are forfeited • Must apply the carryover rule to all participants

8. Health FSAs – IRSOctober 31, 2013 Notice (cont.) • Alternative to the grace period (which allowed extending the period for incurring expenses to the 15th day of the 3rd month after the end of the plan year (March 15 for calendar year plans) • If want to use carryover, must amend the plan by end of plan year from which amounts may be carried • However, for 2013 carryovers, the plan may be amended in 2014 • Note effect on a plan’s current grace period

9. General PPACA Compliance Issues of Importance Accept that PPACA is here to stay Keep Plans grandfathered Amend your Plan/SPD Still consider the Small Business Health Options Program (SHOP) Decide to pay or play

10. IRS to Release PPACA Guidance “Around” Year-End The IRS has stated that it is “working very assiduously” on PPACA guidance and “we (IRS) will hopefully complete those near (or) right after the end of the year, maybe earlier.” (11/26/13 IRS Statement) In October 2013, IRS official acknowledged there is a lot of confusion around transition rules, effective dates and similar matters. The IRS official stated these items would be addressed First on the IRS schedule – final rules under penalty provisions (IRC § 4980H) Next – shortly after the 4980H rules – the IRS will issue the final reporting rules under Sections 6055 and 6056, including hopefully simplified reporting requirements for 6055 and 6056

11. IRS to Release PPACA Guidance “Around” Year-End (cont.) • Next – Definitely after year-end • Final regulations on medical loss ratio for BCBS plans (proposed regulations on May 10, 2013) • Final regulations under Code § 45R – tax credits to small employers. Proposed regulations were issued on August 23, 2013 • Regulations under § 36B regarding minimum value and other provisions related to the premium tax credit • Proposed rules on the individual shared responsibility requirements

12. PPACA Mandatory Reporting Code §§ 6055 and 6056 §§ 6055 and 6056 are PPACA reporting requirements intended to provide information to the IRS and employees in order to enforce certain PPACA requirements (i.e., 4980H penalties, the premium tax credits and the individual penalty tax for failure to have coverage) Delayed the reporting requirements from 2014 to 2015. Thus, reporting will occur in 2016 for 2015

13. PPACA Mandatory Reporting Code §§ 6055 and 6056 (cont.) • On September 5, 2013, the IRS issued proposed rules implementing the information reporting requirements under IRC §§ 6056 and 6055 • The requirements will require many employers to modify payroll and benefit systems • Will employers be able to comply by 2015? Systems will need to be in place for information accumulation by January 1, 2015

14. § 6056 Reporting • What is it? • Employer reporting to the IRS whether the employer offers full-time employees and their dependents minimum essential coverage and certain other information • Intended to enforce the Employer Shared Responsibility Rules (pay or play penalties) and Premium Tax Credits (IRC §§ 4980H and 36B)

15. § 6056 Reporting (cont.) • Who is subject to the 6056 reporting requirements? • Applicable Large Employers only • Applied on a controlled group basis • Employer can use third parties to submit filing, e.g., other members of controlled group or outside vendors • Does not eliminate Applicable Large Employer’s liability for failure to file, untimely filing or improper filing • Employer must still sign the return • A filing must be made for each Applicable Large Employer even if member of a controlled group (different EIN)

16. § 6056 Reporting (cont.) • What information must be reported to the IRS? • The proposed regulations modify information otherwise required by § 6056; the proposed regulations add and delete statutorily required information • Information required to be provided per the proposed regulations: • The employer’s name, date and employer identification number (EIN) • Name and telephone number of contact person

17. § 6056 Reporting (cont.) • Information required to be provided per the proposed regulations (cont.): • A certification of whether the employer offers its full-time employees and their dependents the opportunity to enroll in “minimum essential coverage” under an eligible employer-sponsored plan per calendar month • The number of full-time employees the employer has for each month during the calendar year. This begins January 1, 2015 even for fiscal year plans

18. § 6056 Reporting (cont.) • Information required to be provided per the proposed regulations (cont.): • The name, address and taxpayer identification number of each full-time employee employed by the employer during the calendar year and the months during which the employee and any dependents were covered under a health benefit plan sponsored by the employer during the calendar year

19. § 6056 Reporting (cont.) • The statute also requires that employers that offer the opportunity to enroll in “minimum essential coverage” must also report the following, but the proposed regulations do not require this information: • The months during the calendar year for which coverage under the plan was available • The monthly premium for the lowest-cost option in each of the enrollment categories under the plan • The employer’s share of the total allowed costs of benefits provided under the plan • The length of any waiting period with respect to such coverage

20. § 6056 Reporting (cont.) • Additional information is expected to be required through the use of indicator codes (including whether the employer plan provided minimum value and whether spouses could enroll, the number of employees by month, whether an employee’s effective date of coverage was affected by a waiting period, plus certain other information about the filer)

21. § 6056 Reporting (cont.) • How is the § 6056 information reported? • Separate return for each individual (IRS Form 1095-C or other form) • Submitted with a transmittal form (IRS Form 1094-C) • Electronic filing is required for high volume filers (250 or more returns of any type during the calendar year, e.g., W-2s, 1099s, income tax returns, employment tax returns, and excise tax returns)

22. § 6056 Reporting (cont.) • How is the § 6056 information reported? (cont.) • IRS is considering simplified reporting methods, e.g.: • Substituting W-2 reporting in place of employee statements through a letter code • Not require identification of full-time employees if minimum value coverage offered to “all” full-time employees

23. § 6056 Reporting (cont.) • When is the reporting under 6056 due? • February 28 of following year if paper filed • March 31 of following year if electronic filing • Filed based on calendar year regardless of plan year or corporate/business year

24. § 6056 Reporting (cont.) • What reporting to individuals is required by § 6056? • A statement must be furnished to the individuals involved in the 6056 filing • Name, address, and contact information on reporting employer and information shown on 6056 filing for that individual • Due January 31 following the calendar year • IRS is considering other, hopefully simpler, methods of filing, e.g., W-2s

25. § 6055 Reporting • Very similar to 6056 reporting/same delay to 2015 • Reporting is required for insurers, plan sponsors of self-insured plans and other entities that provide minimum essential coverage to an individual • The entities do not have to be an Applicable Large Employer • Only report if “minimum essential coverage” is being provided • Designed to aid in enforcing the PPACA individual mandate and the premium tax credit provisions (not the 4980H pay or play penalties) • Must be filed by February 28 of following calendar year if filed by paper and by March 31 if filed electronically (same as 6056 reporting)

26. § 6055 Reporting (cont.) Same as 6056 reporting, a statement must be furnished to individuals identified on the 6055 return by the January 31 following the calendar year

27. § 6055 Reporting (cont.) • What information must be provided in the 6055 filing? • Similar to 6056 • Under the statute, the 6055 return must be in the form set out by the IRS and must contain the following information: • The name, address and taxpayer identification number (TIN) of the primary insured, and the name and TIN of each other individual obtaining coverage under the policy (different than 6056) • The dates during which the individual was covered during the calendar year

28. § 6055 Reporting (cont.) • Under the statute, the 6055 return must be in the form set out by the IRS and must contain the following information (cont.): • If the coverage is health insurance coverage, whether the coverage is a qualified health plan (QHP) offered through a health benefit Exchange (different than 6056) • If the coverage is health insurance coverage and that coverage is a QHP, the amount of any advance cost-sharing reduction payment or of any premium tax credit with respect to such coverage (different than 6056)

29. § 6055 Reporting (cont.) • In addition, under the statute, if health insurance coverage is through an employer-provided group health plan, the return must contain the following information: • The name, address and employer identification number (EIN) of the employer maintaining the plan • The portion of the premium (if any) required to be paid by the employer (different than 6056) • Any other information the IRS may require to administer the new tax credit for eligible small employers under Code § 45R

30. § 6055 Reporting (cont.) Individuals not enrolled need not be reported If the coverage is under an employer plan, the employer must also be reported and whether coverage was enrolled in through a SHOP Exchange Filers must implement strategies for collecting TINs from covered individuals in 2015. Under the proposed regulations, reasonable efforts must be made to do so, but in some circumstances birth date could be used as an alternative

31. § 6055 Reporting (cont.) • How is the 6055 information reported? • Separate return for each individual (on IRS Form 1095-B or other form) • Individual forms transmitted with IRS Form 1094-B • Must file electronically unless less than 250 returns filed in calendar year (same as 6056 reporting)

32. §§ 6055 and 6056 Combined Reporting The IRS is considering combined reporting for §§ 6055 and 6056, i.e., through a single statement The proposed regulations note the possibility of and difficulties with combined reporting For example, the sections apply to different types of entities, different information and different individuals The combination may include providing the individual information on the W-2

33. 2014 Compliance Items • Transitional Reinsurance Fee (2014) • $63 per covered life (4% increase for fully-insured plans) ALL plans (self-funded and fully-insured) • To fund high claimant costs on Exchanges from 2014-2016 • Payable by insurance company or administrator of self-funded plan • The one year extension of the PPACA penalties did not impact the other PPACA requirements/basically all other PPACA rules and requirements apply for 2014

34. 2014 Compliance Items (cont.) • The following apply for plan years beginning on or after January 1, 2014: • No pre-existing exclusions • No annual or lifetime limits • May not have a waiting period in excess of 90 days • Plan may not deny plan participant’s participation in an approved clinical trial, deny or limit coverage of routine patient costs furnished in connection with the trial, or discriminate against the individual based on participation in the trial (Exception for grandfathered plans)

35. 2014 Compliance Items (cont.) • The following apply for plan years beginning on or after January 1, 2014 (cont.): • Health insurance issuers offering coverage in the individual or small group market must ensure that such coverage includes the “essential health benefits package” (Exception for grandfathered plans) • Cost sharing limitations apply (Exception for grandfathered plans) • Fair Health Insurance Premium requirements applicable to individual and small group markets, i.e., only certain factors can be used to set rates (Exception for grandfathered plans)

36. 2014 Compliance Items (cont.) • The following apply for plan years beginning on or after January 1, 2014 (cont.): • The guaranteed availability and renewability of coverage requirements (Exception for grandfathered plans) • Wellness incentive increases from 20 – 30%

37. 2014 Compliance Items (cont.) • The following apply beginning January 1, 2014 • Individual mandate. No penalty if enrolled by March 31, 2014 • Annual fee on insurers

38. 2014 Compliance Items (cont.) • PPACA’s protection from retaliation is effective January 1, 2014 (whistleblowers) • PPACA amended the Fair Labor StandardsAct (FLSA) to include: • An employer may not retaliate against an employee either because the employee received a tax credit or subsidy via an Exchange • Or because the employer receives an PPACA penalty due to the employee buying coverage via the Exchange and receiving a tax credit or subsidy

39. 2014 Compliance Items (cont.) • PPACA’s protection from retaliation is effective January 1, 2014 (whistleblowers) (cont.) • Section 18C of the FLSA contains protections against employer retaliation for employee “whistleblowers” who: • Report to their employer, the federal government or state attorney general acts or omissions the employees reasonably believe are a violation of the PPACA • The employees testify, assist or participate in proceedings concerning violations of the PPACA • Refuses to engage in activities the employees reasonably believe violate the PPACA

40. What’s On Hold – How Nervous Should You Be? • One year (until January 1, 2015) extension of PPACA penalties. What the extension does: • No penalties for 2014 ($2,000/$3,000)/essentially nothing else • Affordability not an issue in 2014 • Minimum value not an issue in 2014 • Full-time vs. part-time vs. seasonal not an issue in 2014 (i.e., who to cover) • Large employer status not an issue in 2014

41. What’s On Hold – How Nervous Should You Be? (cont.) • Non-discrimination rules for insured plans • Health care reform changed the law to have the 105(h) non-discrimination provisions apply to insured health plans • Only applies to non-grandfathered plans • Three major implications: • Many small employers have discriminatory insured health plans • Exec-U-Care type programs • Bundle of individual policies may no longer be feasible

42. What’s On Hold – How Nervous Should You Be? (cont.) • Non-discrimination rules for insured plans (cont.) • Compliance with the non-discrimination rules applicable to insured plans will not be required and sanctions will not be imposed until after additional guidance is issued • No additional guidance has been issued as of December 6, 2014. No real indication of IRS urgency on this issue. Very possible not effective until 2015 or later

43. What’s On Hold – How Nervous Should You Be? (cont.) • Auto enrollment for employers with more than 200 full-time employees – DOL has consistently indicated no regulations before 2014. No enforcement until regulations issued. Therefore, unlikely effective prior to 2015, maybe later • The exemption of W-2 reporting of the value of employer provided health care coverage still is in effect for employers who did not file 250 or more W-2s in the preceding calendar year • No IRS indication on when this will change • Status can change from year to year, e.g., if number of W-2s increase to 250, the reporting is required for that year • 250 is not on a controlled group basis • No changes on multiemployer plans, but the IRS keeps discussing. What does this mean?

44. Premium Tax Credit For Lower Income Individuals • A refundable tax credit is available January 1, 2014 to assist in paying for coverage purchased by an individual through an Exchange • Eligibility for premium tax credits • Do not qualify for Medicare or Medicaid • Taxpayers with household income between 100% and 400% of the federal poverty line (FPL). For 2013 just under $46,000 for individuals and $94,000 for a family of four • Household income includes non-taxable Social Security benefits • Same-sex spouses are part of the family to determine FPL (even on state Exchanges in states that do not recognize same-sex spouses)

45. Premium Tax Credit For Lower Income Individuals (cont.) • Eligibility for premium tax credits (cont.) • If an employee is eligible for affordable employer coverage that provides minimum value, the employee is not eligible for the tax credit (even if the employee declines coverage) • An eligible employer sponsored plan will be affordable for “related individuals” (family members) if the cost of self-only coverage does not exceed 9.5% of the employee’s household income. Thus, for purposes of determining whether family members are eligible for premium tax credits, the cost of family coverage is not taken into account. All that matters is whether the cost of self-only coverage is affordable to the employee

46. Premium Tax Credit For Lower Income Individuals (cont.) • Eligibility for premium tax credits (cont.) • What is a related individual for purposes of the tax credit? IRC § 36B reads: “This clause shall also apply to an individual who is eligible to enroll in the plan by reason of a relationship the individual bears to the employee.” • Spouse? Yes, if eligible to enroll • Dependent children? Yes, if eligible to enroll • Dependent adults? Yes, if eligible to enroll • Adult non-dependent children? No

47. Randy Limbeck limbeckr@jacksonlewis.com ANY QUESTIONS?

48. 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.