1. Affordable Care Act: Large Employer Responsibilities August 6 2013 Dan Colacino Rose & Kiernan, Inc ROSE & KIERNAN

2. Guidance Pending  Non-discrimination Rules: Fully Insured Non-Grandfathered Plans  Differences from 105h rules 1.Applies only to group health plans so excludes retiree plans, excepted benefit plans 2.Penalties apply to employer including excise tax and potential civil actions; Excise tax is $100 per day with respect to EACH individual discriminated against  Make sure you look at your contribution and eligibility policies discROSE & KIERNAN

3. Guidance Pending  Automatic enrollment of new employees into health plans (employers of > 200 employees).  Will probably be after 2014  H.R. 1254 introduced March 2013 to repeal automatic enrollment ROSE & KIERNAN

4. Patient Centered Outcomes Research Institute  This first fee was due by July 31,2013 if your plan year ended on 10/31/ 11/30 or 12/31 2012  The fee is due by July 31,2014 for all other plan years  The fee is to be paid if;  Your plan is Self-funded,you have an HRA or self-funded Rx plan along with insured medical  You have an FSA that you, as the employer, contribute to  The fee to be paid in 2013 (for 2012) is $1 per member per year  The fee to be paid in 2014 is $2 per member per year  The fee applies through 2019  Use IRS Form 720; Report of Excise Taxes ROSE & KIERNAN

5. Notice to Employees of the Exchange  Now referred to as the Health Insurance Marketplace  Temporary guidance was issued on May 8 th 2013 in response to employer requests for a model notice  A notice has to be provided to all employees, regardless of whether they have coverage or are eligible for coverage http://www.dol.gov/ebsa/compliance_assistance.html  Electronic distribution follows regular DOL guidelines  All new employees get the notice within 14 days of hire  Current employees must get the notice prior to 10/1/2013 ROSE & KIERNAN

6. Revised COBRA Notice  Issued with DOL Technical Release 2013-02  Revises the Election Notice  Intent is to make qualified beneficiaries aware of other coverage options, such as the State Exchange  Briefly mentions availability of tax credits  No timing for the use of the new Notice but presumably after 10/12013 when Exchange is operational ROSE & KIERNAN

7. Employer Shared Responsibility Requirement Effective for plan years beginning on or after January 1, 2015 Applies to all employers with at least 50 Full Time Equivalent Employees (Applicable Large Employers) Employer must count all full-time employees and part-time employees – on a full-time equivalent basis – in determining if they have 50 or more FTE’s ROSE & KIERNAN

8.  Applicable Large Employers are subject to assessable penalties  Defined as an employer that employed an average of at least 50 Full Time Equivalent employees on business days during the preceding calendar year  Employee is an individual who is an employee under common law standards (right to control and direct, subject to the will and control of the employer, etc.)  All entities treated as a single employer under section 414 are treated as a single employer for purposes of this section ROSE & KIERNAN Determination if you are an Applicable Large Employer

9.  All employees who are not full time employees for any month in the preceding calendar year are included in the calculation  Calculation is done by month 1.Calculate the aggregate number of hours worked by non-full time employees in a month (but not more than 120 per employee) 2.Divide the total number of hours by 120 which gives the number of FTE’s for the month 3.Add up the FTE’s for each month, divide by 12 which determines if you are a large employer 4.Always round down (e.g., 49.9 FTE’s is 49) ROSE & KIERNAN Determination of Applicable Large Employer Status

10.  30 FT employees in each month working at least 30 hours per week  20 PT Employees in each month  January;  1,575 hours worked by the 20 PT employees  Divide by 120  Equals 13.125 FTE’s  Adding in 30 FT, January had 43.125 FTE’s  Same calculation each month for balance of the year  Add up the months, divide by 12 to determine if the employer exceeds 50  Seasonal workers are counted with a limited exception; if seasonal workers cause the employer to exceed 50 employees in 4 or fewer months, those seasonal workers are not counted ROSE & KIERNAN Example of Applicable Large Employer calculation

11. Definition of Employee for Purposes of the Employer Shared Responsibility Requirement The regulation uses the common law definition of employee “…employment relationship exists when the person for whom the services are performed has the right to control and direct the individual not only as to the result…but also the details and means…” “…if an employee is subject to the will and control of the employer not only as to what shall be done but how it shall be done.” Leased employees are considered employees of the leasing company ROSE & KIERNAN

12.  Employer Shared Responsibility Requirement refers to the Employer sharing the cost of providing health insurance with the Exchange  The incentive to provide insurance varies with the employer’s situation ROSE & KIERNAN Rules for Applicable Large Employers

13. Employer Shared Responsibility Requirement Scenario #1 If the Employer does not offer Minimum Essential Coverage to substantially all of their FT employees and dependents  A Penalty applies if at least one FT Employee buys subsidized coverage in the Health Exchange  Penalty is $2,000 ($166.67 per month) times the number of full- time employees minus 30  Substantially all is defined as 95% or more ROSE & KIERNAN

14. Employer Shared Responsibility Requirement Scenario #2 If the Employer provides Minimum Essential Coverage which does not provide Minimum Value  A Penalty applies if a FT Employee buys subsidized coverage in the Health Exchange (affordability test is not applicable)  Penalty is $3,000 ($250 per month) times the number of full- time employees who have purchased subsidized coverage ROSE & KIERNAN

15. Employer Shared Responsibility Requirement Scenario #3 If the Employer provides Minimum Essential Coverage to substantially all full time employees and dependents which does provide Minimum Value  A Penalty applies each month that a FT Employee buys subsidized coverage in the Health Exchange and the coverage is unaffordable  Penalty is $3,000 annually ($250 per month) times the number of full-time employees who have purchased subsidized coverage ROSE & KIERNAN

16. Employer Shared Responsibility Requirement Affordability of coverage 1.W-2 Income 1.Divide current monthly contribution by.095 2.Multiply by 12 to arrive at annual salary which qualifies as Unaffordable Example: Monthly contribution is $145.00 for single coverage $145.00 /.095 = $1,526.32 $1,526.32 X 12 = $18,315.84 Anyone making less than $18,315.84 may be eligible for an APTC ROSE & KIERNAN

17. Employer Shared Responsibility Requirement Affordability of coverage 2. Rate of Pay 1.Multiply hourly rate by 130 hours 2.Compare that result against the results in #1 Example: hourly rate of pay is $12.35 $12.35 X 130 hours = $1,605.50 $1,605.50 X 12 months = $19,266 This employee is over the minimum of $18,315.84. Coverage is considered affordable for this person. ROSE & KIERNAN

18. Employer Shared Responsibility Requirement Affordability of coverage 3. Federal Poverty Level 2012/2013 Federal Poverty Level is $11,170 9.5% X $11,170 = $1,061.15 $1,061.15/ 12 months = $88.43 per month Any employer with a monthly contribution of $88.43 or less has guaranteed affordability for all employees ROSE & KIERNAN

19. Determining Full-Time Employees for the Employer Shared Responsibility Requirement Measurement/Stability Period 1.Also referred to as Look Back Period a)Employer determines average hours worked by employee over the measurement period; 3 months to 12 months b)Applies to “ongoing employees”, those who have been employed for at least one standard measurement period. c)If employee averaged at least 30 hours per week, then employee is considered full time d)Employee is considered full time during the subsequent “stability period” ROSE & KIERNAN

20. Determining Full-Time Employees for the Employer Shared Responsibility Requirement 1. Stability Period a) For employees determined to be FT during the measurement period, they will be considered FT prospectively during the stability period. b)The stability period is a period at least 6 months in length and no shorter than the measurement period. c)The stability period begins after the measurement period and any applicable administrative period d)For employees not determined to be FT, they will be treated as not FT during the stability period that follows but not longer than the measurement period. The 6 month minimum does not apply ROSE & KIERNAN

21. Determining Full-Time Employees for the Employer Shared Responsibility Requirement 1.Administrative period a)The time after the measurement period which the employer uses to notify and enroll employees in the health insurance b)An administrative period can last up to 90 days. c)The administrative period will overlap with the prior stability period which will prevent gaps in coverage for ongoing employees ROSE & KIERNAN

22.  An employee’s hours of service include the following: 1.Each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer; and 2.Each hour for which an employee is paid, or entitled to payment by the employer on account of a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence ROSE & KIERNAN Hours of service definition

23. How the measurement/stability period works for ongoing employees ROSE & KIERNAN Employee who works an average of > 30 hours per week 1 st Measurement period 12 months 3 months 10/1/2013 9/30/20141/1/2015 Administrative period 12/31/2015 Stability period 9/30/2015 2 nd Measurement period Employee is considered FT

24. Transition Relief for 2014 only  Employers who want to use a 12 month measurement period can use a transition measurement period in 2013 of less than 12 months as long as 1.The measurement period is not less than 6 months 2.The measurement period begins no later than 7/1/2013 3.The measurement period ends no earlier than 90 days prior to the first day of the 2014 plan year Example; Employer with a calendar year plan could use a measurement period of April 15, 2013 through October 14, 2013 Note. The stability period would still be 1/1/2014 – 12/31/2014 Rose & Kiernan, Inc.

25. How the measurement/stability period works prospectively ROSE & KIERNAN New variable hour or seasonal employees Initial Measurement Period 12 months 53 Days 3/9/2014 3/8/2015 5/1/2015 Administrative period 4/30/2016 Stability period 12 months 9/30/2015 Initial Hire Date Anniv. Date of hire End of 1 st standard measurement period 1 st standard measurement period after date of hire 10/1/2014 12/31/2016 If determined FT during Std. measurement period 4/30/2015 ?

26. Hire/Rehire Rule  If an employee is terminated and rehired within 26 weeks, the employer may not treat them as a new hire when they return to work  Hours of service prior to the termination are taken into account for purposes of determining whether the employee is treated as a full time employee  For example, if the employee was treated as full time employee prior to termination, the employee is still considered full time until the end of the stability period Rose & Kiernan, Inc.

27. Special Periods of Unpaid Leave Rule  Refers to counting hours during unpaid leave due to:  Family and Medical Leave Act (FMLA)  Uniformed Services Employment and Reemployment Rights Act (USERRA)  Jury Duty Rose & Kiernan, Inc.

28. Special Rule for Employees on Special Unpaid Leave For purposes of determining the average hours of service, the employer may: 1.Apply the average hours worked during the active portion of the year prior to the employment break period or; 2.Use the average hours worked during the active portion as the average hours worked during the measurement period An employer may not credit the employee with a minimal number of hours during the employment break period for purposes of avoiding the employer rehire rules Rose & Kiernan, Inc.

29. How to deal with breaks in employment for employees on special unpaid leave ROSE & KIERNAN Employee works an average of 35 hours per week Period of employment 38 weeks Break in service Stability period Returns to work Hire date Measurement period 12 weeks Employee is credited with an average of 35 hours per week End of measurement period 2 week s Leaves on FMLA

30. Various Benefit Plan Provisions Beginning in 2014  *Coverage in Approved Clinical Trials cannot be denied if for “…cancer or other life threatening disease or condition…” and if participation is “appropriate”  90 Day maximum on Waiting Periods  No annual limit on Essential Health Benefits  No pre-existing condition exclusions  *Cost Sharing/Out-Of-Pocket Maximums $5950/$11,900  Note: out of pocket maximum includes all copays * Doesn’t apply to Grandfathered Plans ROSE & KIERNAN

31. Various Benefit Plan Provisions Beginning in 2014  Wellness incentives are allowed up to 30% of the cost of the plan. HHS allows up to a 50% incentive for tobacco related incentives  The plan must allot at least 20 percentage points of the reward to eliminating tobacco use ROSE & KIERNAN

32. New Fees in 2014 Individual Market Reinsurance Fee  Applies to health insurance issuers and TPA’s  Payable for 3 years; 2014-2016  Fee is based on the number of covered lives under the plan  Fee is $5.25 per member per month  ACA requires HHS to collect $10 billion in the first year Insurer Provider Fee  Applies to health insurance, dental insurance and vision insurance issuers  Payable annually with no end date  Fee is based on net written premiums  ACA requires HHS to collect $8 billion in 2014 rising to $14.3 billion in 2018.  Amount increases by the rate of premium growth ROSE & KIERNAN

33.  As stated in previous FAQs,(3) the Departments’ basic approach to ACA implementation is: “[to work] together with employers, issuers, States, providers and other stakeholders to help them come into compliance with the new law and [to work] with families and individuals to help them understand the new law and benefit from it, as intended. Compliance assistance is a high priority for the Departments. Our approach to implementation is and will continue to be marked by an emphasis on assisting (rather than imposing penalties on) plans, issuers and others that are working diligently and in good faith to understand and come into compliance with the new law.” Accordingly, consistent with this guidance, during this first year of applicability, the Departments will not impose penalties on plans and issuers that are working diligently and in good faith to comply. ROSE & KIERNAN Enforcement

34. Dan Colacino Rose and Kiernan, Inc 518-244-4334 dcolacino@rkinsurance.com ROSE & KIERNAN