ACA Compliance Roundtable Series

1. ACA Compliance Roundtable Series AffordabilityOffers of Coverage IRS Reporting Update

2. Welcome to the ACA Compliance Roundtable Series!!! • Monthly discussion of specific health care reform related topics • Small group discussions • Address individual questions or concerns • Possible session topics: • Transition Relief • Change in Employment Status • Related Entity Status • Offers of Coverage • Break in Service rules • Tracking/recordkeeping Application

3. ACA Compliance Continuum PenaltyAssessment Affordability Reporting Tracking CoverageStatusMonitoring

4. Agenda • Affordability • Requirements • Methods • Offers of Coverage • Requirements • Rules • IRS Reporting update • Review of newly released forms

5. Affordability Requirements • Plans offered to eligible employees must meet the affordability standard – 9.5%. • If plans do not meet affordability standard employer could face penalty of $3,000/year X the number of employees who enroll in an Exchange plan. • Affordability is determined by looking at the employee’s contribution for single coverage under the least expensive plan available to that employee ONLY. • Contributions for the actual plan the employee elects and for dependent or family coverage are not included.

6. Affordability Requirements • Three methods of determining affordability – W-2 Wages, Rate of Pay and Federal Poverty Level. • Employer may elect to use one method for all employees or different methods for different groups of employees (hourly/salary, different locations, different departments). • Must use same method for all individuals in a category • May not use a different method for each individual

7. Affordability Requirements • July 24, 2014 – IRS changes rate to 9.55% for 2015 for individuals receiving tax credit from the Exchange. • Some question as to applicability in employer calculations • May be reconciled at a later time

8. Affordability Methods Rate of Pay • Cannot be used for employees paid on commission or tips or non-hourly employees whose pay is reduced during the year. • Must use lowest rate of pay for the employee during the month. • Determined on a monthly basis. • If coverage is offered for even one day during a month, must determine affordability for that month.

9. Affordability Methods Rate of Pay • Hourly employee formula – Lowest monthly single contribution Hourly rate of pay X 130 • Non-hourly employee formula – Lowest monthly single contribution Monthly salary

10. Affordability Methods W-2 Wages • Use wages from box 1 of the W-2 • Affordability is determined at the end of the calendar year • Affordability is determined on an employee by employee basis • May not use this method if employee contribution (for lowest single coverage available) changes during the plan year

11. Affordability Methods W-2 Wages • Salary amount pro-rated if coverage not offered for the entire calendar year. • Example, employee was employed from May 15 – December 31 and is offered coverage from August 1-December 31 • Wages found in Box 1 would be prorated (5/8) to determine if coverage was affordable • If employed or offered coverage for one day in the month it is included in the proration calculation

12. Affordability Methods • W-2 Wages • Hourly and non-hourly employee formula • Full amount of employee contribution (annual or prorated) • Amount from Box 1 of W-2 (or prorated amount)

13. Affordability Methods • Federal Poverty Level • Cost for lowest cost single only coverage does not exceed 9.5% of single individual Federal Poverty Level. • Federal Poverty Level for 2014 = $11,670 • 9.5% of $11,670 = $1,108.65/year • $1,108.65/12 = $92.39/month

14. Affordability Methods • Federal Poverty Level • If the employee contribution for lowest cost single coverage available is $92.39 per month or less the plan is deemed to be affordable REGARDLESS OF AN EMPLOYEE’S ACTUAL WAGES • FPL is released each January/February • Employer can rely on figures in force up to 6 months before the start of the plan year

15. Affordability • Perform calculation using all three methods • Determine which calculation has the most advantageous result • Must use FPL method if attempting to report using “Qualified Offer Method.” • May use any affordability method if using General or 98% reporting methods

16. Group Discussion

17. Offer of Coverage Requirements • Coverage must be offered to at least 95% of “full-time” employees • 70% in 2015 • Employers with 50-99 FTE do not need to comply until 2016 • ACA does not require employers to actually cover employees – only require coverage to be offered • An offer of coverage from one ALE member of a controlled group is considered an offer by all members of the controlled group

18. Offer of Coverage Requirements • If the plan meets MV and the employee’s cost of coverage (lowest cost single coverage) is equal to or less than 9.5% of the FPL it will be assumed that coverage has been offered • Offer for coverage made to a union during negotiations is not considered an offer of coverage • If offer of coverage is made by a staffing firm on behalf of an employer the fee paid to the staffing firm must be higher than the normal fee.

19. Offer of Coverage Rules • Employee must have the opportunity to enroll in coverage at least once per year • If coverage does not provide minimum value or is not affordable, employee must be given the opportunity to decline coverage at least once per year • Continuing previous year’s election qualifies as an offer of coverage if the employee does not elect to opt out

20. Offer of Coverage Rules • Employer not required to obtain a signed statement from the employee • Employer may want to consider requiring a signed statement • Coverage must be offered to employee and certain dependents • Spouse – not required • Children up to age 26 and Adopted Children – required • Stepchildren and Foster Children – not required • Children must be offered coverage for the entire month in which they reach age 26

21. Group Discussion

22. Reporting Forms

23. Reporting Forms • Draft forms released on July 24, 2014 • 5 forms released • Form 1095-A only used by insurance carriers on the Exchange • Forms were released without instructions • Instructions currently scheduled to be released during August 2014 • Same forms required regardless of Reporting Method used

24. Reporting Forms • Employers having over 50 FTE and offering fully insured coverage will be required to file Forms 1094–B and 1095–B • May be completed by the insurance carrier

25. Reporting Forms

26. Reporting Forms

27. Reporting Forms • Self funded employers with over 50 FTE will be required to complete Forms 1094 – C and 1095 – C. • Unless a “Simplified Reporting Method” is used.

28. Reporting Forms

29. Reporting Forms

30. Reporting Forms

31. Reporting Forms

32. Group Discussion

34. Questions