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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.

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Presentation on theme: "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."— Presentation transcript:

1 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 YEARApplicable Dollar Amount 2014Penalty is $95 per adult and $47.50 per child (up to $285 for a family) or 1.0% of family income, whichever is greater 2015Penalty is $325 per adult and $162 per child (up to $975 for a family) or 2.0% of family income, whichever is greater. 2016Penalty 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 Income Level in terms of FPL Max % of Income Paid for Insurance Income Level in terms of FPL Cost sharing Limit Up to 133%2%150 – 200%6% 133 – 150%3 – 4%200 – 250%13% 150 – 200%4 – 6.3%250 – 300%27% 200 – 250%6.3 – 8.05%300 – 400%30% 250 – 300%8.05 – 9.5%Income Level in terms of FPL Out-of-pocket Spending Limits 300 – 400%9.5%100 – 200%$2,016(I)/$4,03 3(F) 200 – 300%$3,025(I)/$6,05 0(F) 300 – 400%$4,033(I)/$8,06 7(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 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 Example Percentage of Ownership MemberA CorpB LLCEffective A80%20% B10%50%10% C5%15%5% D 15%5% Total100% 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 – 2015 $11.3 billion – 2016 $11.3 billion – 2017 $13.9 billion – 2018 $14.3 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


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