Affordable Care Act: Employer Shared Responsibility. Reed Nunnelee Christopher Fontan Brunini, Grantham, Grower & Hewes, PLLC

Transcription

1 Affordable Care Act: Employer Shared Responsibility Reed Nunnelee Christopher Fontan Brunini, Grantham, Grower & Hewes, PLLC

2 Employer Mandate Requires: Applicable large employers ( ALEs ) to offer affordable health coverage that provides minimum value to all full-time employees (and their dependents) or pay a penalty* *penalty not automatic

3

4 Employer Mandate Delay Originally scheduled effective January 1, July Obama announces delay until January 1, 2015 February Final regulations delay mandate further for employers with full-time employees

5

6 Applicable Large Employers (ALEs)

7 ALEs Am I an ALE? Look at last year s employment data ALEs are those that employed an average of at least 50 full-time employees during the preceding calendar year (including FTEs).

8 ALEs Am I an ALE? Average at least 30 hours per week (or 130 hours per month) Look at last year s employment data ALEs are those that employed an average of at least 50 full-time employees during the preceding calendar year (including FTEs).

9 ALEs Am I an ALE? Average at least 30 hours per week (or 130 hours per month) Look at last year s employment data ALEs are those that employed an average of at least 50 full-time employees during the preceding calendar year (including FTEs). Full Time Equivalents

10 ALEs Example: In preceding year, King James, LLC had 40 employees working 40 hours per week and 20 employees working 15 hours per week.

11 ALEs Example: In preceding year, King James, LLC had 40 employees working 40 hours per week and 20 employees working 15 hours per week. 40 full time employees

12 ALEs Example: In preceding year, King James, LLC had 40 employees working 40 hours per week and 20 employees working 15 hours per week. 40 full time employees + 10 FTEs

13 ALEs Example: In preceding year, King James, LLC had 40 employees working 40 hours per week and 20 employees working 15 hours per week. 40 full time employees + 10 FTEs = 50 (TOTAL)

14 ALEs Example: In preceding year, King James, LLC had 40 employees working 40 hours per week and 20 employees working 15 hours per week. 40 full time employees + 10 FTEs = 50 (TOTAL) King James, LLC is an ALE

15

16 ALEs: Seasonal Worker Exemption 120 days or fewer

17 ALEs and Aggregation Employer mandate applies to applicable large employers But what is an employer? Sometimes, legally distinct organizations are grouped together as a single employer for purposes of determining ALE status!

18 ALEs and Aggregation 35 employees X, Inc. 20 employees Y, LLC 15 employees Z, LLP.

19 ALEs and Aggregation X, Inc. Y, LLC ALE 70 employees Z, LLP

20

21 ALEs and Aggregation Most commonly aggregated groups: Parent-Subsidiary Brother-Sister Affiliated Service Group Organizations in these relationships will be treated as a single employer for purposes of determining ALE status.

22 ALEs and Aggregation: Parent-Sub One organization owns at least 80% of another ABC Partnership (40 full-time employees) Random Guy 80% 20% S Corporation (20 full-time employees)

23 ALEs and Aggregation: Brother-Sister Organizations largely owned by the same small group of people ( Reed s definition ) Exist when (i) the same five or fewer people own 80% or more in each organization, and (ii) those same people are in effective control of each organization

24 ALEs and Aggregation: Brother-Sister Fish Restaurant, LLC Peter 60% Thomas 30% Philip 10%

25 ALEs and Aggregation: Brother-Sister Fish Restaurant, LLC Fig Merchants Partnership Peter 60% 25% Thomas 30% 70% Philip 10% 5%

26 ALEs and Aggregation: Brother-Sister Fish Restaurant, LLC Fig Merchants Partnership Holy Land Tours, Inc. Peter 60% 25% 40% Thomas 30% 70% 40% Philip 10% 5% 10% Matthew %

27 ALEs and Aggregation: Brother-Sister Fish Restaurant, LLC (40 full-time employees) Fig Merchants Partnership (10 full-time employees) Holy Land Tours, Inc. (15 full-time employees) Peter 60% 25% 40% Thomas 30% 70% 40% Philip 10% 5% 10% Matthew %

28 ALEs and Aggregation: Affiliated Service Groups Generally, two or more organizations that have a service relationship and, in some cases, an ownership relationship Affiliated Service Groups exist in many forms Here, we only discuss one type of affiliated service group ( A-Organization group )

29 ALEs and Aggregation: Affiliated Service Groups The A-Organization Group consists of both: Service Organization A organization

30 ALEs and Aggregation: Affiliated Service Groups The A-Organization Group consists of both: Service Organization A organization

31 ALEs and Aggregation: Affiliated Service Groups The A-Organization Group consists of both: Service Organization A organization Ownership Test- owns some Service Org (however small); & Working Relationship Test- regularly performs services for the Service Org, or regularly performs services with the Service Org for third parties

32 5% owner in Butler ALEs and Aggregation: Affiliated Service Group Harry Hackman, PLLC (A Org) Butler Surgical Group (Service Org)

33 ALEs: Attribution Attribution is the concept of treating a person as owning an interest in a business that is not actually owned by that person. E.g., The ownership interests of a minor child (under age 21) are attributed to his/her parent.

34 ALEs: Attribution Mayberry Partnership

35 ALEs: Attribution Mayberry Partnership

36 ALEs: Attribution When ownership percentages are being analyzed, you must study attribution rules Many attribution rules, which can dramatically affect your legal obligations

37 Affordable

38 Affordable Employee contribution cannot exceed 9.56% of his household income But, three safe harbors: W-2 Wages Rate of Pay Federal Poverty Level

39 Minimum Value

40 All (full-time employees)

41 Full-Time Employee

42 Full-Time Employees How do I determine who is a full-time employee? Two choices: Monthly measurement method Look-Back measurement method Measurement period Administrative period Stability period

43 Monthly Measurement Method Employer identifies full-time employees based on hours of service for each month. Problematic

44 Monthly Measurement Method June 1 Harper (full-time) requests less hours Employer schedules for 25 hours/wk beginning July 1 Employer terminates coverage effective July 1. 7/1-9/30 Harper works part-time October Harper works 135 hours November 1 Employer offers coverage effective immediately

45 Look-Back Measurement Method Allows employers to determine, before a month begins, who their full-time employees will be in the upcoming month.

46 Ongoing Employees Rules Standard Measurement Period Purpose: measure which employees average 30 hours of service/week 3-12 consecutive months Administrative Period Purpose: determine which employees are full-time (and therefore available for coverage), answer employee questions, collect employee files, and notify and enroll employees who elect coverage (if offered). Cannot exceed 90 days Stability Period Purpose: Employees averaging at least 30 hours of service per week (i.e. full time employees) during the measurement period must be treated as full-time employees during the stability period, regardless of their hours of service during the stability period. For full-time employees, the stability period must be at least six months and cannot be shorter than the standard measurement period. For part-time employees, the stability period cannot be longer than the standard measurement period

47 New Variable-Hour/New Seasonal/ New Part-Time Employee Rules Initial Measurement Period Purpose: same 3-12 consecutive months Administrative Period Purpose: same Cannot exceed 90 days Together with Initial Measurement Period, cannot extend beyond the last day of the first calendar month beginning on or after the first anniversary of the employee s start date Stability Period Purpose: same Must be the same length as the stability period for ongoing employees. For employees determined to be full-time, the initial stability period must be at least six months and cannot be shorter than the initial measurement period. For employees determined to be not full-time, the initial stability period must not be more than one month longer than the initial measurement period and must not exceed the remainder of first entire standard measurement period (plus any associated administrative period) for which non-full-time employee has been employed.

48 Penalty

49 Penalty Assessment Annual No Coverage Penalty: $2,000 x (full-time employees - 30) Ex. Employer with 75 full-time employees owes $90,000. $2, $90,000

50 Penalty Assessment Employer penalty not automatic Background ACA establishes exchanges ACA gives federal tax credit to low & middle income individuals Employer penalty only if employee gets tax credit

51 But...

52 King v. Burwell

53 King v. Burwell 1311 requires states to establish exchange 1312 allows states to elect not to establish exchange and let federal gov t operate such exchange in the state Tax credits calculated based on the months when taxpayer is enrolled in a health plan through an Exchange established by the State under section 1311.

54 King v. Burwell

55 2015 Transition Rules

56 2015 Transition Rules Mandate won t apply in 2015 if Less than 100 full-time employees. Not reduced workforce (except for bona fide business reasons) Maintain previous health coverage - employer must certify on Form 1094-C that it did not eliminate or materially reduce the health coverage it offered (if any) as of Feb. 9, 2014 No Coverage Penalty minus 80 (not 30). All = 70% (not 95%)

57 Employment Issues & the ACA

58 Definition of Full-Time Employee Example: Regular Full-Time Employees: Employed on a full-time basis at least 37.5 hours per week No set limit for length of employment with the company Eligible for all standard employee benefits subject to tenure requirement associated with each benefit

59 Definition of Other Workers Examples: Part-Time Regular Employees: Employed on a regular basis for less than 37.5 hours per week May be exempt or non-exempt as defined below

60 Definition of Other Workers Examples: Temporary Employees: Classified as Temporary Works on a full-time or part-time basis with understanding employment will be for limited duration Employment is not guaranteed for the duration of the assignment or assignments

61 But Remember.

62 Full-Time Employee: FTEs: sss Recommendation: ALEs An employee who is employed on average at least 30 hours per week (or 130 hours per month) Combined part-time employees Clear Distinction; or Revise for Consistency

63 FTEs Two employees Total hours worked for the two employees is at least 30 hours

64 Wage & Payment Issues Federal Garnishment Law - Generally 25% of Disposable Income/Earnings; or The amount by which disposable earnings exceed 30 times the minimum wage, multiplied by the number of weeks or fraction thereof (di - (30x min $)) x weeks

65 Wage & Payment Issues Federal Garnishment Law - Exceptions: Support Payments = 50%-60% of Disposable Income Additional amount for any arrears

66 Example: Regular Paystub Weekly Earnings $ Required Deductions Taxes, Etc. -$ Disposable Income $ Voluntary Deductions Health Insurance Premiums, 401(K) Contributions, etc. -$ Net Income $122.00

67 Example: Reg. Paystub w/garnishment Weekly Earnings $ Required Deductions Taxes, Etc. -$ Disposable Income $ Garnishment 25% of Disposable Income $ Remaining Disp. Income $ Voluntary Deductions Health Insurance Premiums, 401(K) Contributions, etc. -$ Net Income $30.00

68 New Question for ACA That part of earnings of any individual remaining after the deduction from those earnings of any amounts required by law to be withheld.

69 New Question for ACA Post-ACA: Are health insurance contributions: A required deduction (i.e., a tax); or A voluntary deduction/assignment

70 Thank you!

71 Disclaimer IRS Circular 230 Notice To ensure compliance with requirements imposed by the IRS, we inform you that, unless specifically indicated otherwise, any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any taxrelated matter addressed herein. This presentation is not designed or intended to provide legal or professional advice, as any such advice requires the consideration of the facts of the specific situation.