1. Postlethwaite & Netterville
IF THE AFFORDABLE CARE ACT HAS BEEN DELAYED, WHAT DO I NEED TO WORRY ABOUT NOW?
William C. Potter, CPA, JD
Postlethwaite & Netterville
Baton Rouge, LA
October, 2013

2. What’s Been Deleted or Delayed
1099 reporting - deleted
Free choice vouchers – deleted
CLASS Act - deleted
Automatic enrollment - delayed
Nondiscrimination testing - delayed
Employer mandate and reporting - delayed
Income verification – delayed
SHOP – delayed
MSPP - delayed

3. Delay of the Employer Mandate
All other provisions continue on:
Individual mandate – expected to leave about 1 million people scrambling to get insurance
Monetary caps on annual out–of–pocket maximums
Elimination of lifetime and annual limits
New wellness plan rules
Notice of exchange options

4. Grandfathered Plan
Plan in existence on March 23, 2010 and employer has maintained the status quo
Only about 27% are GF plans
Don’t have to:
Offer free preventive services
Satisfy nondiscrimination
Enhance review and appeals process
Meet cost sharing restrictions

5. Additional Medicare Tax
Starts January 1, 2013
Wages - an additional 0.9% employee only
Threshold amounts - $250,000 MFJ, $125,000 MFS, $200,000 all others
Net Investment Income – an additional 3.8%
Same thresholds and applies to trusts
Statute – a couple of paragraphs
Proposed regs – 100+ pages
Planning for trusts and estates
S Corps

6. New Fees/Taxes Tanning bed tax DME tax
Prescription drug fee – other than orphan drugs
PCORI fee
Transitional reinsurance fee
Health insurance tax

7. New Regulations
You pay a fine if your spouse or dependent is not covered
Minimum essential coverage
Pretty much any group health plan meets this
Watch for proliferation of “skinny plans”
Small fines will incentivize more people to go without coverage
Particularly since no issue with pre-existing condition

8. Individual Mandate YEAR Applicable Dollar Amount 2014
Penalty is $95 per adult and $47.50 per child (up to $285 for a family) or 1.0% of family income, whichever is greater
2015
Penalty is $325 per adult and $162 per child (up to $975 for a family) or 2.0% of family income, whichever is greater.
2016
Penalty is $695 per adult and $ per child (up to $2,085 for a family) or 2.5% of family income, whichever is greater.

9. Individual Mandate Exemptions:
coverage is unaffordable (exceeds 9.5% of household income);
Not required to file an income tax return ;
Native Americans - eligible for IHS or participates in a healthcare sharing ministry;
short lapse in coverage = less than three months;
suffered a hardship – 11 listed events, such as, eviction and bankruptcy;
dependent;
Qualify for the foreign earned income exclusion
People who have no plan options in their states health insurance exchange
Religious conscience – member of a recognized religious sect (Amish) or meets the requirements of Section 1402(g)(1) which requires an annual application

10. Subsidies for Individuals
Three types for insurance purchased through an Exchange
Premium limits
Cost-sharing limits (co-pays, deductibles, co-insurance)
Out-of-pocket spending
Subsidy amount is dependent on income with respect to Federal Poverty Level (FPL)
For 2012, 400% of FPL is $44,680 for an individual and $92,200 for a family of 4

11. Subsidies - 2014 Income Level in terms of FPL
Max % of Income Paid for Insurance
Cost sharing Limit
Up to 133% 2%
150 – 200% 6%
133 – 150%
3 – 4%
200 – 250%
13%
4 – 6.3%
250 – 300%
27%
6.3 – 8.05%
300 – 400%
30%
8.05 – 9.5%
Out-of-pocket Spending Limits
9.5%
100 – 200%
$2,016(I)/$4,033(F)
200 – 300%
$3,025(I)/$6,050(F)
$4,033(I)/$8,067(F)

12. Large Employer Mandate
Delayed until 2015
Questionable whether Obama could delay it
Applicable large employer
Employees exceed 50 full-time
Full-time: average of at least 30 hours per week
Big issues with definitions:
Employee – common law test
Seasonal
Who is an employer?

13. Large Employee Mandate (cont.)
Measurement periods
Stability period
Coverage
Importance of HR records
Penalties
Offering no coverage
Offering coverage but fail to cover at least one qualifying employee
To be subject to the penalty at least one employee must go on the Exchange and get tax subsidies

14. Collecting the Individual Mandate or Excess Subsidies
No teeth – no fines, no levies, no interest
Can withhold from refund or SS payment
Can sue, but recovery limited to 2xs penalty

15. New W-2 Rules Guidance from Notice 2012-9 Regulations to come
Reporting starts in 2013 for 2012 W-2s
Exempt from filing: < 250 W-2s in the preceding year including those issued by a PEO, Indian tribal governments, and self-insured church plans not subject to COBRA, mutliemployer plans

16. W-2 Rules
No reporting required for a terminated employee requesting their W-2 before year end
Coverage included: Major medical, EAP if a group health plan, individual policies if considered a group, indemnity policies (AFLAC) purchased on a pretax basis, on-site clinic subject to COBRA, Er flex credits applied to FSA in limited situations

17. PCORI Fee
Funds the Patient Centered Outcomes Research Trust Fund – which pays for the Patient Centered Outcomes Research Institute to promote evidenced based medicine
Insured and self-insured plans to pay a poll tax based on the average number of lives covered
Plan years ending on or after 10/1/12 and before 10/1/19 - $1/head/12; $2/head/after

18. PCORI Fee Applies to most governmental plans
Applies separately to HRAs
Applies to FSAs that are not HIPAA excepted
Form 720 – calendar year plan due 7/31
Plan sponsor responsible for filing for self-funded plans

19. Controlled Group
Even if employer mandate is not resurrected these rules will be applicable to nondiscrimination
Businesses organized in multiple forms may be considered as a single employer
Controlled groups can be parent-subsidiary, brother-sister, combinations, or affiliated service groups
Existing tax law applies to corporations, this brings in partnerships, LLC’s

20. Parent-subsidiary
Control exists if parent owns more than 80% of the subsidiary
Could involve multiple subsidiaries

21. Brother – sister controlled group
The same five or fewer individuals own more than 80% of the related entities, AND
Effectively control more than 50% (identical ownership)
Must consider the rules of attribution and community property

22. Percentage of Ownership
Example
Percentage of Ownership
Member
A Corp
B LLC
Effective A
80%
20% B
10%
50% C 5%
15% D
Total
100%
40%
The four owners have more than 80% of A and B, so that requirement is satisfied. But identical ownership is only 40% so they fail the 50% test. They are two separate employers.

23. Affiliated Service Groups
Related entities may or may not have ownership relationships
Performing services to or on behalf of the other entity, and when capital is not a material income producing factor
Can be a subjective determination, particularly since the proposed regulations were pulled in 1993

24. Indirect Employment Taxes
PCORI fee
Funds the Patient Centered Outcomes Research Trust Fund – which pays for the Patient Centered Outcomes Research Institute to promote evidenced based medicine
Insured and self-insured plans to pay a poll tax based on the average number of lives covered
Plan years ending on or after 10/1/12 and before 10/1/19 - $1/head/12; $2/head/after

25. Transitional Reinsurance Fee
$25 billion collected from from insured and self-insured plans to stabilize the individual market
$5 billion to repay ERRP
$12 in 14, 8 in 15, and 5 in 16
Expected to be $63.50 per covered life in 14
Tax deductible and can be paid from plan assets
Submit info by 11/15 receive bill within 15 days

26. Health Insurance Tax
Annual fee imposed on health insurance companies; including, multiple employer self-funded plans not using a VEBA
Exceptions:
Self-insured single employer
Governmental entity
VEBA

27. Health Insurance Tax Fees to be collected: 2014 $8 billion
2019 thereafter indexed

28. Health Insurance Tax
Annual fee to be paid by each insurer is apportioned
Numerator = net premiums underwritten in prior year, with some exclusions
Denominator = aggregate of net premiums

29. Risk Adjustment A permanent program
Applies to non-grandfathered individual and small group plans
Modeled after Medicare
Transfers funds between health plans based on the relative risk of the insureds
Designed to compensate for adverse selection

30. Risk Corridor Temporary 2014 – 2016
Used to mitigate pricing risk with movement to community rating
Limits insurers gains and losses
Modeled after Medicare Part D
Plans will set an income target, if income is within 3%, the plan keeps all; between 3-8% 50% to/from gov’t; over 8% 80% to/from gov’t

31. Notice of Exchange Options
All employers subject to FSLA must provide the notice to all employees by October 1
Provide to all new employees upon hire, within 14 days from date of hire will be deemed timely for 2014
Two versions of the notice
Notice for employers offering coverage
Notice for employers not offering coverage

32. Notice of Exchange Options
Employers offering coverage – page 3 is optional but matches Marketplace Employer Coverage Tool and should the employer mandate come into play in 2015 this will impact the penalty for affordability and MEC
Includes revised COBRA notice
May want to add to mini-COBRA notice
Electronic delivery of the notice must follow ERISA standards

33. Form 8928
Excise taxes for the failure to comply with group health plan mandates
Due date? Same as the employer’s income tax return without extension
How much? Varies with the mandate, but generally $100 per individual, per day
Exceptions? Yes, where exercising reasonable diligence or reasonable cause and it is timely corrected
Correction? Restoration to the extent that the failure had not occurred

34. Group Health Plan Mandates
COBRA – is the cafeteria plan FSA included in the notice?
HIPAA portability, access, renewability, nondiscrimination – this includes Special Enrollment Rights
CHIPRA notice
Genetic Information Nondiscrimination Act (GINA)
Mental Health Parity
Newborn’s and Mother’s Health Protection Act
Michelle’s Law – coverage of dependent students on medical leave for up to 12 months
Health Savings Account contribution comparability requirements – does not apply to employer contributions through a cafeteria plan
Archer MSA contribution comparability requirements

35. ACA adds §9815
Incorporates by reference a portion of the PHSA, for non-grandfathered plans:
Nondiscrimination
Summary of Benefits and Coverage
Appeals process
90 day waiting period
FT employees
Participation in clinical trials

36. SBC Provided to participant and beneficiaries
Due at open enrollment, special enrollment, and upon request within 7 business days
Needed for standalone HRAs and for EAPs
Can be used in connection with Summary of Material Modification due 60 days prior to change
Modified for 2014 to address whether minimal essential coverage and the minimum value standards are met

37. Nondiscrimination Does not apply to grandfathered plans
Compliance not required until regulations issued and time for compliance allowed
Imports definition of Highly Compensated Individuals applied to self-insured plans
The five highest paid officers; or
More than 10% owner; or
The highest paid 25% of all employees

38. Litigation Risks Thinking of workforce realignment?
Interference under ERISA §510 and/or ACA Whistleblower
Whistleblower – no adverse action against an employee for receiving a premium tax credit, this may include a reduction in hours
Complaint filed with OSHA under the Consumer Product Safety Improvement Act
Damages – reinstatement, back pay with interest and special damages for discharge or discrimination

39. ERISA §510 Unlawful to interfere with present and future entitlements
No adverse action for exercising rights available under the plan
No adverse action with the attainment of any right which may be come available
Limiting new hire hours may be viewed differently than cutting current employee hours
Business decision to limit ACA penalties should not infer intent to interfere

40. QUESTIONS?
Bill Potter Brandon Lagarde Steve Mehaffey