September 2015 DEPARTMENT OF ADMINISTRATIVE SERVICES Human Resources Administration Division & STATE ACCOUNTING OFFICE State Accounting Office Fiscal Leadership for Georgia AFFORDABLE CARE ACT (ACA) UPDATE

ACA: What Has Changed? 2 BEFOREAFTER Employers defined “full-time”ACA defines full-time 30 hours/week on average in any one month Health benefit eligibility based on hours worked AND duration / type of employment (e.g. 30 or 35 hours for 9 months) Health benefit eligibility based on hours worked Exception: 3 months or less; seasonal Employer discretion to offer healthcare as an employment benefit Mandatory offer subject to penalties Failure to offer: $2,000 per FTE Failure to offer affordable coverage: Lesser of $2,000 per FTE or $3,000 per employee that receives federal subsidy IRS Reporting (filing) of employment taxesAdditional IRS Reporting (filing) of ACA taxes W-2 employee statements for income tax reporting W-3 employer IRS filing 1095-C employee statement for income tax reporting 1094-C employer IRS filing Fines for each inaccurate or untimely statement or IRS filing, with mitigation opportunities Additional fine of $250 for each inaccurate, incomplete, or untimely ACA statement or IRS filing, capped at $3m with mitigation opportunities (Eff for 2016 )

IRS Centralized Reporting for ACA WHY?  Facilitate risk management  Reduce administrative burden on state employers  Evolving nature of law and requirements  Fractured sources of data  Complexities, e.g. dual employment  Enterprise cost management  Technology  Staffing  Employee inquiries 3

IRS Centralized Reporting RFP  NOIA to EY Issued Sept 4,  In Scope entities: Peoplesoft HCM and participating in SHBP, including DFACS  Out of Scope entities:  Board of Regents, Colleges, Universities  Local Education Authorities  CSBs  County Public Health Offices  Some Authorities  Initial Term: 2 Years with 8 renewal options 4

IRS Centralized Reporting Functional Management:  Implementation  multi-agency engagement  Ongoing Operation and contract managed by SAO Cost Management:  Cost neutral for in-scope entities (core services)  Option for Out-of-Scope entities to piggyback  Option for entities to purchase additional analytical services 5

IRS Centralized Reporting WHAT’S IN IT FOR YOU?  IRS reporting for active and non-active employees  Employee statements created and printed for your distribution  Call Center to manage employee inquiries  Some analytics included in core services: ACA readiness assessment On-going monitoring of employee status changes Facilitated strategy sessions during implementation to review processes/controls in place for special workforces: pilots, adjunct professors, interns, rehired retirees, etc. On-line, monthly compliance status dashboards 6

IRS Centralized Reporting What’s not covered?  Healthcare eligibility determination  IRS 1094-C reporting for fully-insured plans (e.g., Kaiser)  IRS 1095-B reporting (Medicaid, PeachCare)  Consent forms for electronic issuance of employee statements What’s not covered that you can buy on a fee added basis?  Full-time / Part-time / Variable / Seasonal classifications  Management of employee eligibility appeals  Advisory services on avoidable penalties  General ACA consultative, education, or research services 7

EMPLOYER ACA RISK MANAGEMENT RESPONSIBILITIES  Proper identification of “employee” and “independent contractor”  Proper identification of full-time, part-time, variable hour or seasonal employees to determine healthcare eligibility at time of hire  Proper identification of returning employees as rehires or new hires  Careful management of rehired retirees  Proper application of state’s lookback, administrative, stability periods  Fair Labor Standards Act notification to new hires  Timely administration of leave  Timely action based on monthly ACA dashboards  Ensuring 70% of eligible workforce offered healthcare insurance in 2015 / 95% in 2016  Management of fees paid for healthcare-eligible workers and non-eligible workers assigned by staffing firms 8

STAFFING FIRMS & ACA State employers will most likely be deemed the common law employer of workers assigned to state employers, unless the worker meets the IRS independent contractor test  IRS definition of “employer”  “Employer of record” versus “common law employer”  Common Law Employer responsible for ACA compliance  All Common Law Employees must be counted in agency FTE count for ACA applicability purposes  Staffing Firm may offer healthcare coverage on behalf of state employers: ONLY IF the fee paid to the staffing firm for assigned individuals eligible for healthcare is higher than the fee the employer would pay to the staffing firm if the same individual did not enroll in the staffing firm’s healthcare coverage  DOAS is currently negotiating increased fees with admin staffing firms  Covendis contract presents unique complexities  Admin temp staffing & Covendis contracts will be rebid in 2016; ACA compliance will be a business requirement 9

September 2015 DEPARTMENT OF ADMINISTRATIVE SERVICES Human Resources Administration Division State Accounting Office Fiscal Leadership for Georgia FAIR LABOR STANDARDS ACT

U.S. DOL issued proposed changes to certain Fair Labor Standards Act regulations Final regulations and effective date pending These changes MAY impact your budgets 11

FAIR LABOR STANDARDS ACT WHAT IS IT? Federal legislation that governs  Minimum wage  Overtime pay  Equal pay  Recordkeeping  Child Labor 12

FAIR LABOR STANDARDS ACT  Salary threshold for classifying someone exempt from minimum wage and overtime At least $455 week/$23,660 annually  $970 week/$50,440 annually At least $100,000 annually for highly compensated  $122,148 annually  Job duties test Potential restriction of the percentage of time exempt employees spend on non-exempt job duties  Automatic, annual salary level updates Based on CPI-U or 40th percentile of all full-time salaried employees nationwide 13 WHAT COULD CHANGE?

14 Not CoveredExemptNonexemptSpecial Categories Elected OfficialsProfessionalHourlyPolice Staff of Elected OfficialsAdministrativePieceworkFirefighters Policymaking ApptExecutiveSalaried that do not fall within an exception School Personnel Legislative employeesComputer WorkersHospital & Nursing Home Employees Certain Legal AdvisorsHighly CompensatedOther VolunteersRecreational Independent Contractors Outside Sales PrisonersSeasonal Certain Trainees FAIR LABOR STANDARDS ACT IMPACT? Contributing Source: Fair Labor Standards Act Handbook, Thompson Publishing

FAIR LABOR STANDARDS ACT IMPACT?  Roughly 14,000 executive branch positions  Timekeeping / Recordkeeping  Monitoring time spent on nonexempt duties for remaining exempt employees  Monitoring hours worked for overtime pay and comp time balances 15

 Identify positions that fail to meet anticipated salary threshold to be reclassified  Identify employees at or near threshold FLSA compensation time balances and determine action plan:  Monitor / prohibit overtime hours  Grant comp time now to work down balances  Pay down all/part of FLSA comp time balances within allocated budgets  Timekeeping and recordkeeping preparedness  Be ready to implement plans with short notice! 16 GETTING PREPARED

THANK YOU! 17