Ppaca update admin days 2014

An Obamacare Update You’ll Care About Karen Haase Bobby Truhe (402) 434-3000 H & S School Law @KarenHaase @btruhe schoollaw@hslegalfirm.com

PPACA

Transition Relief Announced  What is transition relief?  Planning ahead • Schools that do NOT qualify for transition relief, could pay additional taxes 1/1/15 • With transition relief, most Nebraska schools won’t be taxed until 9/1/16

Tax Penalties under PPACA  Penalty A (“death penalty”) • Offer no insurance • pay $2000 times total staff (less 30 after ‘15)

 Penalty B (“Unaffordable Penalty”) • Offer insurance, but it isn’t affordable to everyone • 9.5% = affordable* • Pay $3,000 for each staff member who ‒ Doesn’t take school’s insurance ‒ Obtains insurance on the exchange ‒ Receives a subsidy

Tax Penalty A  95% rule: must offer insurance to all but 5% of FT EEs  Takes one FT EE to obtain premium credit AND insurance on exchange  Tax is (FT – 30) x $2,000 • Example: 137 FT – 30 = 107 x $2,000 = $214,000 • (-80 for 2015)

Premium Credit  Qualifications: • AGI less than 400% of poverty • No Medicaid or CHIP • Non-complying employer plan

Persons in household

2014 Poverty guideline

1

$11,670

2

15,730

3

19,790

4

23,850

5

27,910

6

31,970

7

36,030

8

40,090

Tax Penalty B  95% rule applies  EE can’t pay more than 9.5% of household income on single only plan • W2 and hourly rate safe harbors

 Tax is $3,000 x each EE who gets • (1) insurance on exchange, AND • (2) a premium credit

Margin of Error  District has approximately 15 nonoffered employees and 50 offered employees who will be “full-time” under PPACA  95% of 65 full-time employees is 61.75  Margin of error of 3 (3.25) employees  Staff survey

3 Types of Transition Relief 1. Schools with less than 50 employees 2. Schools with between 50-99 employees 3. Schools with more than 100 employees

Calculating Your Large Employer Number  Full-Time Employees ‒ 120 hours in the month ‒ Count as “1” no matter how many hours over 120

• Full-Time Equivalent Employees ‒ Fewer than 120 hours in the month ‒ Add up all hours of the month and divide by 120

 “Hour of service” means paid or entitled to payment (vacation, holiday)  All calculated by the calendar month

1) Less than 50 employees

The Bottom Line  If less than 50 FT+FTE employees, your district does not have to comply with the employer mandate  Will have recordkeeping and filing requirements even if you’re a “Small Employer”  Will have to make the “Large Employer” calculation every year

2) 50-99 employees

No Mandate until 9/1/16 if:  50-99 employees • Use counting rules above • Can use 6 month period for 2014-15*

 Don’t cut hours to get to 99  Don’t eliminate or reduce insurance coverage already offered*  File yearly forms with IRS beginning in 2015

3) 100 or more employees

Limited Transition Relief  If coverage offered to at least 70% of full-time (30 hours per/week) employees, district will only have to pay Penalty B ($3k per individual) if any of the plans are “unaffordable”  Penalty B (“Death penalty”) calculated by total employees less 80 (not 30) for 2015

Options

Option #1  Option #1: offer affordable insurance • $750 deductible costs $6,003.72 ‒ $6,003.72 x 37 = $216,133.92

• $4,000 deductible costs $4,739.76 ‒ $4,739.76 x 37 = $170,631.36

• EHA has a variety of new plans • EEs ineligible for premium credit on exchange and some gov. benefits

Option #1  Option #1: offer affordable insurance • May require 9.5% contribution (household, but W2 or pay rate safe harbor) ‒ $10,000 x 9.5% = $950 ‒ $14,500 x 9.5% = $1,377.50 ‒ Average: $1,163.75

• New Totals for $4,000 and $750 deductible ‒ $4,739.76 - $1,163.75 = $3,576.01 x 15 = $53,640.15 ‒ $6,003.72 - $1,163.75 = $4,839.97 x 15 = $72,599.55

Option #2  Option #2: offer unaffordable ins.

• Subject to tax assessment of $3,000 per employee who (1) obtains insurance and (2) a credit on the exchange • EHA minimum of 50% of the single premium • 5% surcharge determined separately for each EHA subgroup

Option #2  Option #2: offer unaffordable ins.

• Offer 50% of $4,000 plan ‒ $4,739.76 x 50% = $2,369.88 x 15 = $35,548.20

• Offer 50% of $750 deductible plan ‒ $6,003.72 x 50% = $3,001.86 x 37 = $45,027.90

• Tax per employee going to exchange ‒ $3,000 x 15 = $45,000

• EEs remain eligible for premium credits and gov. benefits

Option #3  Option #3: “Death penalty” or reduce employee hours • “Death Penalty” ‒ $2,000 x (all FT EEs – 30) ‒ $2,000 x (65 – 30) = $70,000 ‒ $2,000 x (65 – 80) = $-30,000 (haha, yeah right) ‒ Only one employee needs to go to the exchange and obtain premium credit to trigger

• Reduce Hours ‒ Reduce to < 30 hour per week average

After transition relief…  June 2, 2015 to June 1, 2016: lookback  Spring 2016: form new subgroups  June 2, 2016 to August 31, 2016 : • “Administrative Period” • Make “offers” (can make them earlier)

 July 1, 2016: EHA app deadline  Sept. 1, 2016: taxes kick in and new insurance begins

What you NEED to do NOW  If you’re not tracking hours, START • Consider having all staff track, at least in specific months

 If you don’t qualify for any of the relief listed here, other options may be available – contact your attorney  Make your PPACA database  Do NOT make major changes now.

An Obamacare Update Youâ&#x20AC;&#x2122;ll Care About Karen Haase Bobby Truhe (402) 434-3000 H & S School Law @KarenHaase @btruhe schoollaw@hslegalfirm.com