Skip Murray, A. J. Gallagher April 2015 Accountable Care and Local Governments

PPACA Definitions – MEC Minimum Essential Coverage – MV Minimum Value Plan – FTE Full Time Equivalent Employee – QHP Qualified Health Plan – 4980h The PPACA name for health plan – Carrier or Plan Sponsor reporting – 6056 Employer reporting 2

Affordable Care Act The Solution? Quality Affordable Healthcare for all Americans Better the health for individuals and populations Bending the healthcare cost curve 3

4 Key ACA Provisions Timeline

Shared Responsibility for Employers IRC 4980H 5

Large Employer Defined 6

7

The Result 8

Special Classes of Employees 9

Aggregation Rules 10 Other arrangements IRC 414o

Affordability Safe Harbors 9.56% for If an employer offers multiple healthcare coverage options, the affordability test applies to the lowest-cost self-only option available to the employee that also meets the minimum value requirement

Calculating the Shared Responsibility Payment 12 95% Rule in 2016 (70% in 2015) Do you offer Health insurance to at least 95% of employees? Affordability Test Safe Harbor EE payment for self only doesn’t exceed 9.56% of EE income Minimum Value Requirement Does the health plan meet the minimum value requirement? No penalty Your plan meets the Affordability Test and the Minimum Value requirement. $2,000 Penalty $167/Month Per full-time employee in excess of 30 (80 in 2015) if any employee goes to the Exchange and qualifies for a credit. $3,000 Penalty $250/Month Per full-time employee who goes to the Exchange and qualifies for a credit. $3,000 Penalty $250/Month Per full-time employee who goes to the Exchange and qualifies for a credit. YES NO YES

Minimal Essential Coverage Defined 13

Employer Shared Responsibility © 2014 GALLAGHER BENEFIT SERVICES, INC. Offer affordable, minimum value employee + dependent child coverage Offer coverage within 90 days or pay penalty Full-Time Permanent Employee (30+ hpw) Don’t need to offer coverage No penalty applies Part-Time Permanent Employee (<30 hpw) Use of reasonable, good faith definition of “seasonal employee” expired on months or less can be a seasonal employee! Use measurement/lookback period to determine eligibility Offer coverage no later than 13 ½ months from hire date or pay penalty Seasonal Employee (30+ hpw) Can’t be determined that the employee is reasonably expected to work 30 hpw Use measurement/lookback period to determine eligibility Offer coverage no later than 13 ½ months from hire date or pay penalty New Variable Employee (30+ hpw) Use measurement/lookback period to determine eligibility (no longer than 12 months) Offer coverage at end of admin period or pay penalty Ongoing Variable Employee (30+ hpw) 14

Proof of Coverage Elsewhere Municipal Plans Townships may offer affordable coverage to their Employees with essential benefits Employees applying for the government tax credit will not qualify because Township offers a health plan that meets the minimum value standard Municipal Plans Townships may offer affordable coverage to their Employees with essential benefits Employees applying for the government tax credit will not qualify because Township offers a health plan that meets the minimum value standard © 2014 GALLAGHER BENEFIT SERVICES, INC. If Employee is Waiving Medical Coverage Employee is required to complete the Medical Waiver Form, and indicate/proove that he/she has coverage elsewhere. Medical Waiver form must be signed and return to the HR office. If Employee is Waiving Medical Coverage Employee is required to complete the Medical Waiver Form, and indicate/proove that he/she has coverage elsewhere. Medical Waiver form must be signed and return to the HR office. 15

Reporting of Health Coverage 16

Employers Reporting 17

18 Used by non ALE employers – ALE Applicable Large Employer 50 or more FTE Form 1095-B Health Coverage

19 Used by ALE (Applicable Large Employers) Final Form released Instructions reduced from 34 pages Form 1095-C Employer-Provided Health Insurance Offer and Coverage

© 2014 GALLAGHER BENEFIT SERVICES, INC. 20 What if we don’t comply? Fines mirror those of payroll/W2 filings and apply to each EIN required to file:  Failure to file timely and correct returns $100 for each return, not to exceed $1.5M per year  Failure to furnish timely and correct statements $100 for each statement, not to exceed $1.5M per year  Township must comply with the Employer Shared Responsibility of PPACA: Minimum Essential Coverage (MEC) and Affordability  Failure to comply could lead to other compliance issues. Potential additional penalties could exceed $3 million HIGHER PENALTIES FOR “INTENTIONAL DISREGARD”

© 2014 GALLAGHER BENEFIT SERVICES, INC. 21 Added complications if failed to comply? If the IRS concludes “intentional disregard” because you fail to track hours, fail to test across locations or fail to address improperly classified 1099 workers, expect the IRS to contact the DOL for an audit. DOL corrective actions include: Fines and penalties Payment of back pay, OT, taxes and benefits to the impacted employees Payroll administration fees to reprocess the back payrolls and tax filings Consulting and legal fees to assist you in making the corrections COST OF NOT COMPLYING CAN BE IN THE MILLIONS

Who Reports What??? Employer reporting required: IRS Section 6055 if your medical benefits are self funded. IRS Section 6056 if you are an Applicable Large Employer (ALE). Plus the 6056 employee statements. Information filings are due January & March 2016 for 2015 data. 22

© 2014 GALLAGHER BENEFIT SERVICES, INC. 23 What are 6056 employee statements? Like a W2, 6056 statements tell your employees what you told the government about the benefits you provided them. Section 6056 statements tell the employee whether they might qualify for a government subsidy if they bought medical insurance through the government exchange. More importantly, they provide your employee with proof of qualifying medical coverage. Data required Name, address and EIN of the ALE member All information about the member that was reported in the 6056 filing Deadline for providing statements is February 1 st each year with the first employee statements due February 1, 2016 for the 2015 tax year.

Transitional Relief 24

– Effective in 2018 – Purpose Reduce aggregate demand for medical services Subsidize coverage for the currently uninsured Address perceived tax “inequities” caused by the deductibility of benefits – 40% employer tax on the cost of plans in excess of $10,200 for single plans $27,500 for family plans (including “couple” and “parent child(ren)” plans – Applies to the combined cost of medical and Rx coverage – Includes aggregate cost including flexible spending accounts, health savings accounts, and health reimbursement accounts 25 Preliminary Briefing on the ACA Cadillac Tax

– Adjustments may be made available for Plans with pre-Medicare retirees age 55 and older Plans with a high risk employees (police, fire, EMS, and possibly DPW) – $11,850 single – $30,950 family Increases in the cost of the Federal Health Benefits Plan (FHBP) (appears unlikely), but not NJ SHBP. An adjustment is also possible to reflect age-gender differences between the FHBP and the general population. Indices rise by CPI +1% in 2019 and 2020, and by CPI thereafter Unless medical inflation drops to the CPI, the impact of the tax will grow year by year. (CBO estimates that, nationwide, 16% of all plans will be impacted in 2018 with 75% impacted within 10 years) 26

Cadillac Tax Worksheet Current Public Sector client 2014 rates Single $1,029.04, Family $2, years of 7.5% increase means – Single $1,374.25, Family $2, – Annual = Single $16,491, Family $34,631 Projected Tax = difference is $6,291 and $7, singles and 70 families means a non- deductible tax of $325,500. (Ongoing & growing) 27

Thank You! Francis Murray, Area VP Gallagher Bollinger 101 JFK Parkway Short Hills, NJ