1. This UBA Employer Webinar Series is brought to you by United Benefit Advisors in 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.

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3. Represents management exclusively in every aspect of employment, benefits, labor, and immigration law and related litigation. 800 attorneys in 55 locations nationwide. Current caseload of over 6,500 litigations and approximately 415 class actions. Founding member of L&E Global. 3

4. 4 55 Locations Nationwide* *Jackson Lewis P.C. is also affiliated with a Hawaii-based firm

5. 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, ADA, GINA, 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

6. Background on excise taxes under IRC 4980B, 4980D, 4980E, and 4980G What compliance violations will trigger an excise tax Identify who is liable for the tax What persons or entities liable for the tax must do if they discover a violation – Form 8928 Analyze “reasonable cause” exception to excise taxes Risks of not self-reporting Strategies for avoiding the self-reporting obligation 6

7. Plan sponsors have tended to think only about ERISA and the Dept. of Labor to enforce group health plan requirements Many ERISA provisions have parallel provisions in the Internal Revenue Code (IRC) ERISA/DOL has its enforcement scheme, IRC/IRS has its own – e.g., excise taxes 4980B, 4980D, 4980E, and 4980G Lax attempts at enforcement…until now, perhaps 7

8. Proposed regulations – July 16, 2008 Final regulations – September 8, 2009 Final regulations apply to Forms 8928 due on or after January 1, 2010 First Form 8928 issued in December 2009, updated in December 2013, including instructions 8

9. Confirm whether the violation could trigger an excise tax under IRC 4980B, 4980D, 4980E, or 4980G Correct it as soon as possible and to the extent you can Determine if you a party liable for the tax Assess whether you qualify for reasonable cause exception Consider whether you have to file Form 8928 9

10. IRC Section 4980B – COBRA continuation coverage and pediatric vaccines o COBRA notice failures: initial notice, election notice, notice of unavailability, notice of early termination o Failing to offer COBRA properly: HFSAs, on-site clinics, EAPs Allow coverage changes at open enrollment Mergers, reorganizations o Failure to calculate correct COBRA premium Don’t forget COBRA notice penalty under ERISA 10

11. IRC Section 4980D – Failure to meet requirements in Chapter 100 of the Code o HIPAA portability rules (IRC 9801) Preexisting condition limitation, creditable coverage notice Special enrollment rules, including CHIP o HIPAA nondiscrimination on basis of health status (IRC 9802) Discrimination on basis of eligibility and benefits Wellness program requirements Genetic Information Nondiscrimination Act 11

12. IRC Section 4980D – Failure to meet requirement in Chapter 100 of the Code o Guaranteed renewability in multiemployer plans and certain MEWAs (IRC 9803) o Protections for hospital stays for mothers and newborns (IRC 9811) o Mental health parity protections (IRC 9812) o Michelle’s Law (IRC 9813) 12

13. IRC Section 4980D – Failure to meet requirement in Chapter 100 of the Code o ACA Market Reform Mandates (IRC 9815) Annual and lifetime dollar limits on essential benefits Updates to appeals process and external review Coverage for dependent children to age 26 Nondiscrimination under insured plans Preventive health benefits with no cost sharing Protections against rescissions MLR rebates 13

14. IRC Section 4980D – Failure to meet requirement in Chapter 100 of the Code o ACA Market Reform Mandates (IRC 9815) Summary of benefits and coverage Clinical trial coverage 90-day waiting period o Does NOT include other ACA penalties/taxes, such as PCORI, Transitional reinsurance fee, Employer shared responsibility assessable payment (IRC 4980H), Cadillac Tax (IRC 4980I) 14

15. IRC Section 4980E – Archer MSAs o Failure to satisfy comparable contribution requirements for Archer MSAs IRC Section 4980G – Health Savings Accounts o Failure to satisfy comparable contribution requirements for Health Savings Accounts 15

16. Why Correct o Possibly no excise tax, mitigate exposure to DOL enforcement, damages, whistleblower claims Avoidance of 4980B and 4980D Excise Taxes o No one liable for the tax knew, or exercising reasonable diligence would have known, the failure occurred, or o The failure was due to reasonable case and not willful neglect and the failure is corrected within 30 days from the date anyone liable for the tax knew, or exercising reasonable diligence should have known, that the failure existed. 4980E and 4980G – No Correction, Potential Waiver 16

17. What Does Correction Mean? “retroactively undone to the extent possible and the persons to whom the failure relates is placed in a financial position which is as good as such persons would have been in had the failure not occurred.” Examples o COBRA notice failures o HIPAA special enrollment failures o Wellness program failures o ACA market reform failures 17

18. IRC Section 4980B – COBRA issues o “employer, group health plan, plan administrator, or plan sponsor” o Includes persons responsible for providing coverage IRC Section 4980D – HIPAA, GINA, ACA Reforms o “employer or group health plan” IRC Section 4980E/G – Comparability in Contributions o “employer” 18

19. IRC Section 4980B – COBRA issues o $100/day for each QE for whom there were one or more COBRA failures, but cap of $200/day if more than 1 QB o Example: Cobra notice 100 days late to terminated employee who also covered spouse and three children. Potential 4980B tax = $20,000 ($200 X 100) IRC Section 4980D – HIPAA, GINA, ACA Reforms o $100/day for each individual to whom failure applies o Example: CHIP notice 100 days late to employee who also covered spouse and three children. Potential 4980D tax = $40,000 ($400 X 100). 19

20. IRC Section 4980E and G o 35% of the aggregate amount contributed to Archer MSAs or HSAs of employees within the calendar year 20

21. IRC Section 4980B – COBRA issues o Basic small employer COBRA rule – with respect to QE that occurred during calendar year following calendar year employer normally employed fewer than 20 employees on typical business days IRC Section 4980D – HIPAA, GINA, ACA Reforms o Exclusion applies only when coverage is provided through insurance contract and failure results from health coverage o Must have employed at least 2 but not more than 50 employees on business days during preceding calendar year and at least 2 employees on first day of current year o Exclusion does not apply to protections for hospital stays 21

22. IRC Section 4980B and 4980D o Applies even for failures attributable to reasonable cause o Applies when failures not corrected below date of notice of examination of income tax liability sent from IRS, and failure(s) occurred during examination period o $2,500 for each QB o $15,000 for each QB, if failure is determined to be more than de minimus 22

23. IRC Section 4980B and 4980D o Single employer plans: lesser of $500,000 or 10% of aggregate amount paid or incurred during preceding tax year for the plan o Third-party administrator, HMO, or insurance company: $2,000,000 23

24. Covered compliance failure and tax due – yes Covered compliance failure and no tax due – unclear IRC Sections 4980B and D o Due date for filing income tax returns IRC Sections 4980E and G o April 15 following calendar year of failure Extension permitted (Form 7004), but NO extension for tax payment. 24

25. Interest o At statutory rate (IRC 6621) charged on taxes and penalties not paid by due date, even with extension Late filing penalty o For returns not filed by due date: 5% of the unpaid tax for each month or part of month return is late o Minimum penalty for return more than 60 days late is smaller of tax due or $100; maximum penalty 25% of tax Late payment penalty o Equal to ½ of 1% of unpaid tax for each month or part of month payment is late; maximum penalty 25% of tax 25

26. Compliance plan – o Written plan(s) that can support reasonable cause and diligence o Implement plan and document activities Vendor management – o Evaluate vendor’s compliance plan o Incorporate allocation of responsibilities that could trigger Form 8928 requirement into services agreement 26

27. To obtain a recording of this presentation, or to register for future presentations, contact your local UBA Partner Firm. 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