license no. 0451271 innovative solutions. enduring principles. bottom-up aca southern california...
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License No. 0451271 License No. 0451271
Innovative Solutions. Enduring Principles.
Bottom-Up ACA
Southern California ACSA Personnel Institute ConferenceThursday, October 9, 2014
License No. 0451271
Innovative Solutions. Enduring Principles.
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Goals
• Experience Real IRS Informational Reporting• Tax Form Melodrama – A Peek at the Future• Looking Forward to Looking Back - Evaluating
whether you need a look-back method• Understanding the need for an ACA
Whistleblower Policy• Assorted ACA Compliance Issues• Mental Health Parity Same-Sex Marriage
EEOC challenges to Wellness Programs
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Patrick James
INFORMATIONAL REPORTING TO IRS(turn on cell phone)
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Patrick James1. What are Patrick’s annual
wages from employment with Old Boulder?
2. What is Patrick’s Household Income?
3. Is the coverage offered to Patrick by Old Boulder affordable to Patrick?
4. Will Old Boulder pay a tax under IRC §4980H(b) in respect of Patrick’s Federal subsidy?
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Patrick James
5.Informational Reporting to the IRS is voluntary for 2014. Old Boulder believes it’s a good idea to try it out to see how difficult reporting is. How should Old Boulder report on Patrick on IRS Form 1095-C? A blank 1095-C is enclosed (See Exhibit 3).
6.IRS Form 1095-C must be submitted to the IRS for each reportable employee. It must be accompanied by IRS Form 1094-C (Exhibit 5).
7.Do you have the internal resources to complete these Forms?
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Tax Form Melodrama
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Tax Form Melodrama
• IRS Letter – CP161– Notice of Underpayment of Tax
• IRS Form 14950 – Premium Tax Credit Verification
• IRS Marketplace Notice• IRS is updating its Field Manual with New
Letters:– CP06 – Sent to employees with Form 14950– CP14H – Sent to employees to pay tax for not
having minimum essential coverage
• Prepare for Tax Notice and Letters – Who will be responsible?
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Look-Back MethodMonthly Measurement
MethodWhich way to go?
What are you trying to accomplish?
Overall ComparisonLook-Back Method• Analysis of up to 12
months of employee data enables precise management of risk (tax) exposure on a prospective basis
Monthly Method• Precise management
of risk exposure may prove challenging with only a monthly snapshot
• The more dynamic the workforce, the greater the challenge
Overall ComparisonLook-Back Method• Able to predict
maximum annual tax liability with accuracy
Monthly Method• Prediction of annual
tax liability is an estimate (liability is calculated when calendar month closes)
Overall ComparisonLook-Back Method• Produces an accurate
FTE workforce count for up to one year
Monthly Method• Prediction of annual
FTE workforce count is an estimate (count unknown until 12 calendar month close)
Overall ComparisonLook-Back Method• Designating
FTE/NFTE for up to a 12-month Stability Period simplifies informational reporting to IRS
Monthly Method• FTE status for some
employees may vary month-by-month and would cause greater variance in FTE reporting by month
Strategic PlanningLook-Back Method• Averaging of Hours of
Service over a measurement period creates bright line identification of FTE and NFTE, leading to more predictable outcomes of strategic decision-making
Monthly Method• Identification of FTE
and NFTE may vary by month. Strategic decision-making outcomes less predictable
Strategic PlanningLook-Back Method• Precise definitions of
Eligible Employee classifications can be created to limit tax exposure (on-call, adjuncts, substitutes and per-diem)
Monthly Method• Definition of Eligible
Employee by employee classification alone may not limit tax exposure to satisfactory degree
Strategic PlanningLook-Back Method• Supports defining
eligibility based on 130 Hours of Service per month
Monthly Method• Defining eligibility
based on 130 Hours of Service per month may not be practical
Impact on Plan and EmployerLook-Back Method
• Employees are categorized as either FTE or NFTE for up to 12 months
Monthly Method• Employees are
categorized as either FTE or NFTE for each calendar month
Impact on Plan and EmployerLook-Back Method
• Employer may delay offer of coverage for New Variable Hour Employees, New Part-Time Employees and New Seasonal Employees
Monthly Method• Delayed offer of
coverage for new employees whose status as FTE/NFTE is unknown may result in tax
Impact on Plan and EmployerLook-Back Method
• Plan eligibility rules may need to be amended so that new VH, PT and Seasonal employees are “otherwise eligible for coverage” and allowed to enroll during an Administrative Period
Monthly Method• No requirement to
change plan eligibility rules to make employees “otherwise eligible for coverage” and no Administrative Period permitted
Impact on Plan and EmployerLook-Back Method
• Exempt from tax if offering coverage to new FTEs by first day of the month following three full calendar months of employment following Start Date
Monthly Method• Exempt from tax if
offering coverage to new FTEs by first day of the month following three full calendar months of employment following Start Date
Impact on Plan and EmployerLook-Back Method
• Having FTE/NFTE designated by bargaining unit will improve the information available when negotiating with represented employees
Monthly Method• If eligibility rules do
not change, then no need to negotiate with represented employees
AdministrationLook-Back Method• Must categorize
employees as “Ongoing” and “New”
Monthly Method• No categorization of
employees other than FTE and NFTE
AdministrationLook-Back Method• Must differentiate
between “New” employees who are reasonably expected to be FT at Start Date and “New” Variable Hour, Part-Time and Seasonal
Monthly Method• No differentiation
among types of new employees
AdministrationLook-Back Method• Must track Ongoing
Employees during a Standard Measurement Period and average total Hours of Service to determine FT status for the related Stability Period
Monthly Method• Count Hours of
Service for all employees monthly (e.g. payroll stubs). No categorization other than FT and NFTE
AdministrationLook-Back Method• Must track “New”
Part-Time, “New” Variable Hour and “New” Seasonal during an Initial Measurement Period and overlapping Standard Measurement Period until transitioned to an Ongoing Employee
Monthly Method• Track all employees
on a month-by-month basis and total Hours of Service at the end of each month to determine FT status
AdministrationLook-Back Method• Exempt from IRC
§4980H liability for the length of the Initial Measurement Period for “New” employees who average at least 30 Hours of Service per week during IMP (provided that they are otherwise eligible for coverage)
Monthly Method• May use weekly
period to determine FT status for calendar months
AdministrationLook-Back Method• Exempt from IRC §4980H
for “New” Part-Time “New” Variable Hour and “New” Seasonal who change to FT position during IMP if affordable, MV coverage offered by first day of month following three full months following change in status or IMP if earlier
Monthly Method• Rehire and Breaks in
Service rules apply• Not required to
account for special unpaid LOA and employment breaks for educational organizations
AdministrationLook-Back Method• Extensive audit file
required
Monthly Method• Extensive audit file
not required – documents needed include payroll reports plus any reports showing application of rehire and breaks in service rules
IRS Informational ReportingLook-Back Method
• Reporting simplified because FT or NFTE status is locked in for entire Stability Period
Monthly Method• Reporting may be
challenging because employer must determine and record FT/NFTE status of employees for each month
Employee RelationsLook-Back Method• Employee
communication of Look-Back Method, new eligibility rules, and union negotiations may be challenging
Monthly Method• Employee
communication without the need to describe complex Look-Back rules should be much simpler
Employee RelationsLook-Back Method• For plans that base
eligibility on the outcome of the Look-Back Method, employees who change from FT to PT (or in an off-calendar year plan) may be unable to dis-enroll mid-year unless employer adopts IRS Notice 2014-55
Monthly Method• Mid-year enrollment
changes allowed based on actual eligibility and not characterization as FT or NFTE
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Look-Back v. Monthly Measurement Method• When do you have to choose which one?• IRS informal advice:
– Try several methods– Choose the one which works best for your
organization– Nothing is carved in stone unless and until the
Form 1094-C is signed
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ACA Whistleblower Policy
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Whistleblower Complaints
• ACA protects employees from retaliation for:–Reporting violations of the ACA; and
–Receiving a premium tax credit or cost sharing reduction with respect to a purchase of coverage from the Exchange (Marketplace).
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Whistleblower Complaints
• An employer may not discharge or in any manner retaliate against an employee because he or she:– Provided information relating to a violation of
ACA to his or her employer, Federal government or the attorney general of a state;
– Testified, assisted, or participated in a proceeding concerning a violation of the ACA or is about to do so;
– Objected to or refused to participate in any activity that he or she reasonably believed to be in violation of the ACA; and
– Received a premium tax credit or cost sharing reduction.
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Whistleblower Complaints• Employees who believe that they were the
subject of retaliation may file a complaint with the Occupational Safety and Health Administration (OSHA):– In person at an OSHA Office;– In writing; or– Visiting www.whistleblowers.gov.
• The employee must file a complaint within 180 days after the alleged violation.
• Employers should evaluate whether an employee’s protected activity was a contributing factor in the employer’s decision to take unfavorable employment action.
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• Firing or laying off• Demoting• Disciplining• Failure to hire or
rehire• Making threats• Reducing pay or
hours
• Blacklisting• Denying overtime or
promotion• Denying benefits• Intimidation• Reassignment
affecting prospects for promotion
Unfavorable Employment Actions
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Whistleblower Complaints
• OSHA will investigate an employee’s complaint– Employee must demonstrate (i) engaged in
protected activity; (ii) employer knew of such activity; (iii) adverse employment action; and (iv) create an inference that the protected activity was a contributing factor to the employment decision.
– Employer must demonstrate by “clear and convincing evidence” that it would have taken the employment action anyway.
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Whistleblower Complaint
• If no settlement can be reached with the employer, then within 60 days of the complaint, OSHA will issue an order requiring the employer, as appropriate, undo the action (i.e. pay back wages, and otherwise make the employee whole)
• Either party can appeal OSHA’s findings and request a hearing before an Administrative Law Judge.
• Ultimately, either party can appeal to the United States Court of Appeals
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Recommendations
• Control internal disclosure of employee information about premium tax credits and cost sharing to ensure that no adverse action is taken;
• Develop a mechanism for receiving, addressing and implementing corrections (if needed) regarding violations of the ACA;
• Revise employee handbook and anti-retaliation policy to include protected activity under the ACA; and
• Train supervisors and managers on the revised handbook and anti-retaliation policy.
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2015 Compliance
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2015 Compliance
• Preventive Services Mandate–Tobacco Use Cessation Safe-Harbor–Risk Reducing Medications for
Women with Primary Risk for Breast Cancer
• Out-of-Pocket Maximums–$6,600 for Self-Only–$13,200 for Other than Self-Only–Special rules Apply
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2015 Compliance• Waiting Period and New Orientation
Period–WP no greater than 90 days–Following a one month Orientation
Period–Provided coverage is offered by first
day of fourth calendar month following start date
• Rehired Employees–After 26 week absence, can impose
new waiting period
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2015 Compliance
• Cafeteria Plans–$500 carryover v. a Grace Period–$2,500 limit – adjusted for inflation
starting in 2015–Mid-Year Election Changes for
Marketplace Coverage• Reduction in Hours of Service below 30
• Special Enrollment Period in Marketplace
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Mental Health ParitySame-Sex Marriage
Wellness
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Mental Health Parity• Final regulations require increased parity between
mental health (MH)/substance use disorder (SUD) benefits on the one hand and medical/surgical on the other.– If MH/SUD benefits are offered in any one
classification, they must be offered in all• Example: Rx for depression. Result:
Depression benefits must be offered: in-network, out-patient; in-network, in-patient; out-of-network, out-patient; out-of-network, in-patient; and emergency.
• Lawsuits against carriers regarding autism and Applied Behavioral Therapy.
• More to follow
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Same-Sex Marriage• Supreme Court refused to hear State
appeals to reinstate ban on same-sex marriage
• Predict SS Marriage will be protected under Title VII of Civil Rights Act under “gender discrimination”
• Same-Sex Marriage– Reimbursement of tax paid on imputed income– Reimbursement of FICA– Refer employees to IRS Form 4852 (substitute
Form W-2) and IRS Form 843 Refund of Employment Taxes
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Wellness• Wellness
– Equal Employer Opportunity Commission is suing employers who place substantial penalties on employees
– Example:• Not eligible for medical plan if don’t
complete HRA• Negative job action for not
participating in wellness plan• Very high discounts on premiums for
participating
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Close• There are three things that must be done
for Health Care Reform: Preparation, Preparation, and Preparation– Are you HR systems ready to gather data?– Can you handle IRS informational reporting and
delivery of statements to employees on your own?
– Do you really need to the look-back method?– Do you have a policy and process to handle
whistleblower complaints?– Do you have a process for addressing IRS
requests?– Do you have a process for addressing IRS
Letters?– Are there compliance decisions that need to be
made for 2015?
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QUESTIONS?