License No. 0451271 Innovative Solutions. Enduring Principles. Bottom-Up ACA Southern California ACSA Personnel Institute Conference Thursday, October

License No. 0451271 License No. 0451271

Innovative Solutions. Enduring Principles.

Bottom-Up ACA

Southern California ACSA Personnel Institute ConferenceThursday, October 9, 2014

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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


• 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


• 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


• 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


• 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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• 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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• 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?

Documents

License No. 0451271 Innovative Solutions. Enduring Principles. Bottom-Up ACA Southern California ACSA Personnel Institute Conference Thursday, October