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For a copy of the following presentation, please visit our website at www.UBAbenefits.com. Go to the Wisdom tab and then to the HR webinar series page.This UBA Employer Webinar Series is brought to you by United Benefit Advisorsin conjunction with Jackson Lewis

2Recent Developments with PPACAPresented by:Joy Napier-Joyce (Baltimore)Randy Limbeck (Omaha)

July 9, 20132About the FirmRepresents management exclusively in every aspect of employment, benefits, labor, and immigration law and related litigationOver 750 attorneys in 53 locations nationwideCurrent caseload of over 5,000 litigations and approximately 300 class actionsFounding member of L&E Global

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DisclaimerThis presentation provides general information regarding its subject and explicitly may not be construed as providing any individualized advice concerning particular circumstances. Persons needing advice concerning particular circumstances must consult counsel concerning those circumstances. Indeed, health care reform law is highly complicated and it supplements and amends an existing expansive and interconnected body of statutory and case law and regulations (e.g., ERISA, IRC, PHS, COBRA, HIPAA, etc.). The solutions to any given businesss health care reform compliance and design issues depend on too many varied factors to list, including but not limited to, the size of the employer (which depends on complex business ownership and employee counting rules), whether the employer has a fully-insured or self-funded group health plan, whether its employees work full time or part time, the importance of group health coverage to the employers recruitment and retention goals, whether the employer has a collectively-bargained workforce, whether the employer has leased employees, the cost of the current group health coverage and extent to which employees must pay that cost, where the employer/employees are located, whether the employer is a religious organization, what the current plan covers and whether that coverage meets minimum requirements, and many other factors. IRS Circular 230 disclosure: Any tax advice contained in this communication (including any attachments or enclosures) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication. (The foregoing disclaimer has been affixed pursuant to U.S. Treasury regulations governing tax practitioners.)

4One Year Extension of ACA PenaltiesJuly 2, 2013 Treasury Department released a 6 paragraph blogExtends to 2015 (from 2014) the ACA requirement that employers provide health coverage to employees or pay the penalties (employer shared responsibilities penalties)Why extend? Per IRSComplexity of requirements and employers need for more time to implementIRS to consider ways to simplify the requirements (reporting requirements)Provide time to adapt coverage and reporting systems (IRS? Employers? Both?)5One Year Extension of ACA Penalties (cont.)What does the extension do?No penalties for 2014 ($2,000/$3,000)Major effectsAffordability not an issue in 2014Minimum value not an issue in 2014Full-time vs. part-time vs. seasonal not an issue in 2014 (i.e., who to cover)Large employer status not an issue in 2014Caveat many unknowns6One Year Extension of ACA Penalties (cont.)What does the extension not do?Basically all other PPACA rules still applyIndividual mandate and related penalty on individuals for failure to attain coveragePlan provisions, e.g., annual and lifetime limits, preexisting conditions, waiting periodsPCORI and reinsurance feesExchanges supposedly will be ready for 2014 (???)Does not eliminate availability of premium tax credit (subsidy) for qualifying individuals who use the ExchangeNotice to Employees of Coverage Options/May Change Content of Notice

7One Year Extension of ACA Penalties (cont.)Whats next?Within the next week (?), the IRS will issue formal guidance regarding the transitionIRS expects to publish proposed rules implementing these provisions this summerIRS will dialogue with stakeholders prior to issuing proposed rulesIRS objective minimize the reporting consistent with effective implementation of the law8Topics for DiscussionNotice to Employees of Coverage OptionsPPACA Effects on COBRA Notice and Certificate of Creditable CoverageWellness Incentives, Affordability and Minimum ValueEligibility Waiting PeriodsCost Sharing LimitsSummary of Benefits and CoveragePCORI FeeHRAs and HSAs and Minimum ValueMinimum Value Safe Harbor Plan DesignsAffordability Safe Harbors Which to Use

9Notice to Employees of Coverage OptionsPPACA requires employers to provide employees with written notice of availability of the Exchanges and related information (Amendment to Federal Labor Standards Act (FLSA))PPACA required the Notice be provided by March 1, 2013. In January 2013 the DOL extended the deadline until further guidance was providedOn May 8, 2013, DOL issued Technical Release 2013-02Notice must be provided by October 1, 2013Two Model Notices: One for employers who offer health coverage; one for employers who do not offer health coverageTemporary Guidance remains in effect until DOL issues regulations or additional guidancewww.dol.gov/ebsa10Notice to Employees of Coverage Options (cont.)WHO MUST PROVIDE THE NOTICE? All employers that are subject to FLSAGenerally, the FLSA applies to employers who are engaged in interstate commerce and have gross annual sales of $500,000 or moreEngage in interstate commerce is any regular contact with interstate, no matter how small. Activity must solely be local activity to avoid engaging in interstate commerce.DOL provided tool to determine FLSA applicability: www.dol.gov/elaws/esa/flsa/scope/screen24.asp11Notice to Employees of Coverage Options (cont.)Hospitals, non-acute care and residential facilities, schools and institutions of higher learningFederal, state and local governmentsSize does not matter, i.e., regardless of whether an applicable large employer or not, the Notice must be provided if the employer is in one of the above categories12Notice to Employees of Coverage Options (cont.)WHO MUST RECEIVE THE NOTICE? All employeesFull-time and part-time employeesEmployees covered by employer health plan/employees not covered by employer health planNo separate Notice required to dependents and spousesNot required to provide Notice to retirees13Notice to Employees of Coverage Options (cont.)WHAT INFORMATION MUST BE INCLUDED IN THE NOTICE? Employees must be:Informed of the existence of the ExchangesGiven a description of the services provided by the ExchangeTold how to contact the ExchangeInformed whether employees may be eligible for a subsidy if they purchase insurance through the ExchangeInformed they may lose employer contributions if they purchase insurance through the ExchangeTold employer contributions to the employer health plan are excludable for federal income tax purposes14Notice to Employees of Coverage Options (cont.)SHOULD EMPLOYERS USE ONE OF THE TWO MODEL NOTICES? Each Model Notice has a Part A and a Part BPart A general Exchange, tax and economic informationPart B employer specific informationThe Model Notices are fairly good and certainly helpful. Generally recommend employers use the Model NoticeModel Notices may be modified, e.g., may want to adjust for employers workforce

15Notice to Employees of Coverage Options (cont.)Model Notice for employers without health planVery simple to use, employer merely needs to add an employer contact name, phone number and emailModel Notice for employer with health plan Part B requires more employer specific informationHealth plan information about who is covered, dependent coverage, wellness coverage (premium impact) If plan meets the minimum value standardWhether the employer intends the coverage to be affordable based upon the wages of the recipientOptional section that mirrors the Exchange Employer Coverage Tool to assist employees to understand their coverage choices

16Notice to Employees of Coverage Options (cont.)Add? If the employee actually enrolls in the eligible employer plan, the premium tax credit is not available even if the employer plan does not meet the affordability and minimum value conditions17Notice to Employees of Coverage Options (cont.)WHEN MUST THE NOTICE BE PROVIDED? Current employees no later than October 1, 2013New hires within 14 days of date of hireOne-time NoticeDELIVERY OF NOTICE First class mailElectronically if the requirements of DOLs electronic safe harbor are metThe Notice may be sent with other materials, e.g., new hire enrollment packets or other communications18PPACA Effect on COBRA NoticeDOL has issued a revised Model COBRA Election NoticeUse of the Model Notice is considered by the DOL to be good faith compliance with the election notice content requirements of COBRAPPACA does not require any specific changes to the COBRA election notice, but employers should revise their Notices to reflect PPACA19PPACA Effect on COBRA Notice (cont.)The updated Model Notice does the following:Provide information regarding the coverage alternatives through the ExchangeProvide information on the tax credit for insurance purchased through the ExchangeProvide information regarding possible special enrollment rights in plan of the employer of the spouseEliminate provisions regarding preexisting condition limitations Some clean-upNo specific deadlines for use of updated Notice. Probably should begin to use in late 201320PPACA and Certificates of Creditable CoveragePPACA prohibition against preexisting condition exclusions supersedes the rules for providing certificates of creditable coverage (HIPAA certificate)Effective for plan years beginning after 2013The IRS, DOL and HHS have proposed to eliminate the HIPAA certificate requirement effective December 31, 2014Why December 31, 2014? Employees may need HIPAA certificate for fiscal year plans21Wellness Incentives, Affordability and Minimum ValueMay 3, 2013, the IRS published regulations providing guidance on the treatment of wellness program incentives in determining affordability and minimum valueWellness programs are divided in to two categoriesPrograms that relate to tobacco use i.e., designed to prevent or reduce tobacco use (tobacco cessation program)All other wellness programs

22Wellness Incentives, Affordability and Minimum Value (cont.)For tobacco cessation programs, the incentives can be used to determine affordability and minimum valueBoth affordability and minimum value are determined assuming the employee earns the incentiveFor all other wellness programs, affordability and minimum value will be determined assuming each employee fails to satisfy the requirements of the wellness programWhy? Preamble to the proposed regulations state: despite the safeguards of the regulations governing wellness incentives, certain individuals inevitably will face barriers to participation and fail to qualify for awards.23Wellness Incentives, Affordability and Minimum Value (cont.)Transition relief for plan years beginning before January 1, 2015Employer can assume that each employee satisfies any wellness program requirements for determining affordability and minimum valueOnly applies if wellness program terms and incentives in effect as of May 3, 2013, andOnly applies to categories of employees eligible for the program on May 3, 2013 (regardless of when the employee is hired)Only affects the shared responsibility requirement (i.e., $3,000 penalty); does not affect an employees eligibility for the federal premium subsidy24Eligibility Waiting PeriodsFor plan years beginning on or after January 1, 2014, a plan cannot have a waiting period that exceeds 90 days. First of the month following 90 days of employment is no longer allowed.Three-month waiting period cannot be substituted for the 90-day period.Hours-of-Service RequirementsAn employer can require up to 1,200 hours to be worked, with a 90-day waiting period beginning after the hours requirement has been satisfied. An employer can subject a full-time employee to this type of requirement, but only once at time of hire, not every year.

25Eligibility Waiting Periods (cont.)Employers have the option of permitting employees to make a self-payment (or buy-in) to satisfy any hours-of-service requirement.Union PlansUnion plans may still impose eligibility provisions such as residuals, formulas for earnings, and hours banks.

26Cost-Sharing LimitsAnnual DeductibleFor plan years beginning in 2014, the annual deductible for a health plan in the small group market may not exceed $2,000 for self-only coverage and $4,000 for family coverage (adjusted annually).Out-of-pocket MaximumThe OOP limit for 2014 is $6,350 for single coverage, and $12,700 for family coverage.Cost-sharing includes any expenditure with respect to essential health benefits (deductibles, co-payments, co-insurance). Cost-sharing excludes premiums and spending for non-covered services.

27Cost-Sharing Limits (cont.)Out-of-pocket MaximumFor plans using provider networks, an enrollees cost-sharing for out-of-network benefits does not count towards the cost-sharing limit.If a plan applies different OOP maximums to different benefits (e.g., major medical and prescription drug), for the first plan year beginning on or after January 1, 2014, the plan may apply a separate OOP maximum as long as neither limit, considered separately, exceeds the permitted maximum.

28Summary of Plan Benefits and Coverage (SBC)Group health plans required to distribute to participants for open enrollments that begin on or after September 23, 2012.Applies to both self-insured plans and insurers.New FAQs issued by DOL on April 23, 2013, applicable to SBCs issued after 1/1/14 (second year of applicability).SBCs must answer whether the plan provides minimum essential benefits and minimum value. No additional coverage examples.FAQs emphasize DOLs approach to assisting employers with compliance, over enforcement.

29Summary of Plan Benefits and Coverage (SBC) (cont.)BackgroundInsurers must automatically provide the SBC to the plan sponsor prior to renewal and upon request.Must be provided:at initial enrollment, open enrollment, upon request, and when there is a material modification.as soon as possible after a request, (including a request for special enrollment) but no later than 7 days after the request.at least 30 days prior to renewal/open enrollment if coverage continued automatically.at least 60 days prior to any mid-year change taking effect.30Summary of Plan Benefits and Coverage (SBC) (cont.)At reenrollment, only the summary of the benefit package in which the participant is enrolled must be provided.Not required for Retiree-only, Medicare, and stand-alone dental and vision plans.Can be provided in paper form or electronically if ERISA requirements for electronic disclosure are met.Separate tax penalties and civil fines under ERISA.Templates available at: http://www.cms.gov/cciio/Resources/forms-reports-and-other-resources/index.html

31Patient-Centered Outcomes Research Trust Fund Fee Patient Centered Outcomes Trust Fund Fees Plans have to pay an annual fee to fund research by the Patient-Centered Outcomes Research Institute (PCORI) to determine effectiveness of various forms of medical treatment.The fee applies to health insurance policies and self-insured health plans with policy or plan years ending after September 30, 2012, and before October 1, 2019.Due July 31st of the calendar year immediately following the last day of the plan or policy year (7/31/13 for first filings).

32Patient-Centered Outcomes Research Trust Fund Fee (cont.)The fee is imposed on an issuer of a health insurance policy or a plan sponsor of a self-insured health plan based on the average number of lives covered under the policy for the policy year or the plan for the plan year. The amount of the fee is equal to the average number of lives covered during the policy year or plan year multiplied by the applicable dollar amount for the year.For policy and plan years ending after September 30, 2012, and before October 1, 2013, the applicable dollar amount is $1, scheduled to increase annually.

33Patient-Centered Outcomes Research Trust Fund Fee (cont.)Includes retiree only coverage and COBRAThe following types of plans are not subject to the PCORI fee:Excepted benefits, such as standalone vision, dental and most health FSAsPlans and policies designed primarily to cover employees outside the U.S.Stop-loss and reinsurance policiesEAPs, disease management or wellness programsExempt government programs (Medicare, Medicaid, CHIP or TRICARE)34Patient-Centered Outcomes Research Trust Fund Fee (cont.) Fully-insured Plans - fee is imposed on policy issuer Self-insured Plans fee is imposed on plan sponsorSelf-funded plans may determine the average number of covered lives by using any of three methods:Actual Count;Snapshot; orForm 5500.Plan sponsor must use the same method consistently for the duration of any year and the same method for all policies subject to the fee.

35Patient-Centered Outcomes Research Trust Fund Fee (cont.)Actual Count MethodCount the total covered lives for each day of the plan year and divide by the number of days in the plan year.Snapshot MethodCount the total number of covered lives on a selected day (or days) in a quarter and divide the total by the number of dates on which a count was made. (The dates must be the same for each quarter, e.g., first day of quarter, first day of month). Number of lives on a date is equal to either (1) the actual number of lives covered on the designated date or (2) the number of participants with self-only coverage, and the number of participants with other than self-only coverage multiplied by 2.35.

36Patient-Centered Outcomes Research Trust Fund Fee (cont.)Form 5500For plans with self-only coverage, determine the average number of participants by combining the total number of participants at the beginning of the plan year with the total number of participants at the end of the plan year as reported on the Form 5500 and divide by 2. For plans with self-only and other coverage (e.g., plus one, family), the average number of total lives is the sum of total participants covered at the beginning and the end of the plan year, as reported on the Form 5500.All individuals who are covered during the plan year must be counted. Employee and dependent child counted as two separate covered lives unless the plan is an HRA or FSA. Includes retirees and former employees on COBRA

37Patient-Centered Outcomes Research Trust Fund Fee (cont.)Form 720 was revised to provide for reporting and payment of fee (http://www.irs.gov/pub/irs-pdf/f720.pdf). The Form 720 will be due on July 31 of the year following the last day of the policy year or plan year. Electronic filing is available but not required. Payment will be due at the time the Form 720 is due. Deposits are not required for the PCORI fee.PCORI Fee is a deductible business expense

38Minimum ValueThe Plan must pay for at least 60% of total allowed costs for benefits covered under the Plan.No penalty for a plan that does not provide minimum value until 2015 pursuant to transition rule discussed earlier.HHS has published an MV calculator that looks at certain plan information, i.e., deductibles, co-pays, and types of coverage to determine whether the plan provides minimum value. (http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/)

39Minimum Value Safe Harbor Plan DesignsPlan designs meeting the following specifications are proposed as safe harbors for determining minimum value if the plans cover all of the benefits included in the MV Calculator: (a) a plan with a $3,500 integrated medical and drug deductible, 80% plan cost-sharing, and a $6,000 maximum out-of-pocket limit for employee cost-sharing; (b) a plan with a $4,500 integrated medical and drug deductible, 70% plan cost-sharing, a $6,400 maximum out-of-pocket limit, and a $500 employer contribution to an HSA; or (c) a plan with a $3,500 medical deductible, $0 drug deductible, 60% plan medical expense cost-sharing, 75% plan drug cost-sharing, a $6,400 maximum out-of-pocket limit, and drug co-pays of $10/$20/$50 for the first, second, and third prescription drug tiers, with 75% coinsurance for specialty drugs.

40HRAs and HSAs and Minimum ValueHSA ContributionsEmployer contributions to HSAs are taken into account when determining a health plans minimum value (and cost sharing).HRA Contributions Amounts newly made available under an integrated HRA are taken into account in determining minimum value if dollars may only be used for cost-sharing.

41Affordability Safe HarborsNo penalty for a plan that does not offer affordable coverage until 2015 pursuant to transition rule discussed earlier.Employees premium for the lowest-cost, self-only coverage may not exceed 9.5% of the household income for the taxable year income determined pursuant to 1 of 3 safe harbors (W-2, Box 1, Rate of Pay, or federal poverty line).

42Affordability Safe Harbors (cont.)HSA ContributionsEmployer contributions to HSAs do not affect affordability.HRA ContributionsAmounts newly made available under an integrated HRA are taken into account in determining affordability if dollars may only be used for premiums or participant may choose to use the amounts for either premiums or cost-sharing.

43ANY QUESTIONS?Joy Napier-Joycenapierj@jacksonlewis.com

Randy Limbeck limbeckr@jacksonlewis.com

For a copy of the presentation, please visit our website at www.UBAbenefits.com. Go to the Wisdom tab and then to the HR webinar series page.Thank you for your participation in the UBA Employer Webinar Series. If your question was not answered during the webinar or if you have a follow-up question, you can email the presenters today or tomorrow at UBAWebinars@jacksonlewis.com