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