Learn how the choices you make could affect your organization. Now that the Affordable Care Act is here to stay, many employers are asking, "What do I have to do to avoid penalties and minimize costs?" Register for this complimentary webinar featuring expert advice from Monique Warren, partner at Jackson Lewis LLP, to learn how you can avoid being blind-sided by unanticipated costs in 2014. Employers that have not already done so must put a strategy in place and develop tools and processes to comply before the 2014 deadline. In this webinar you will learn how the penalties can be triggered in 2014, their potential financial impact, and how alternatives to avoid these penalties may affect your organization. Sponsored by Kronos. You will learn: How the penalties can be triggered in 2014. The potential financial impact of penalties. How alternatives to avoid these penalties may affect your organization. How a workforce management solution can help you cope with ACA compliance.

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2. Speaker: Monique Warren
Partner
Jackson Lewis LLP
Moderator: Todd Black
Product Marketing Manager
Kronos
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6. Navigating the Affordable
Care Act: Avoiding Penalties
& Minimizing Costs
Monique Warren Todd Black
Partner, Jackson Lewis LLP Product Marketing
Manager, Kronos Incorporated
© KRONOS INCORPORATED March 13, 2013 6

7. © KRONOS INCORPORATED March 13, 2013 7

8. Today’s Guest Speaker
Monique Warren
Partner,
Jackson Lewis LLP
Monique Warren is a Partner in the White Plains, New York office of Jackson
Lewis LLP. Ms. Warren is a member of the Employee Benefits Counseling
and Litigation group.
Ms. Warren counsels employers on employee benefits compliance and
administrative matters, drafts plan documents and employee communication
materials, and represents employers to government agencies and in
employee benefit litigation. Her expertise includes health and welfare plans
as well as retirement plans.
© KRONOS INCORPORATED March 13, 2013 8

9. Health Care Reform:
Employer “Shared
Responsibility” Penalty
Monique Warren
Partner, Jackson Lewis LLP
© KRONOS INCORPORATED March 13, 2013 9

10. Health Care Reform:
Employer “Shared Responsibility”
Penalty
© 2012 Jackson Lewis LLP
This 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.
IRS Circular 230 disclosure: Any tax advice contained in this
communication (including any attachments or enclosures) is not
warrenm@jacksonlewis.com
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.)

11. Market
Reforms and
Mandates
Insurance
Exchanges
Shared Medicaid
Responsibility Expansion

12. US Supreme Court upheld constitutionality in
2012
Individual must have minimum essential coverage
(employer-sponsored, Medicare, Medicaid,
exchange, etc.) or pay tax penalty for periods
without coverage that’s greater of –
o 1% AGI or $95 for 2014
o 2% AGI or $325 for 2015
o 2.5% AGI or $695 for 2016

13. Internal Revenue Code § 4980H
Employer Shared Responsibility
aka “Pay or Play” penalty
Nondeductible penalty applies to employers with
50 or more fulltime employees
“Assessable penalty” - generally are assessed
and collected in the same manner as taxes
Guidance so far: Notice 2011-36, Notice 2012-
58, Proposed Regulations

14. “Applicable Large Employer”
“Large” means the employer had an average of 50 or more
fulltime employees on business days in prior calendar year
Employer status is determined on controlled group basis
(aggregation, like for retirement plan); different EIN ≠ different
employer
Special rules for predecessor employers and new employers
Common-law employment principles apply when determining
employment relationship
Anti-abuse rules

15. Parent-subsidiary group – an entity has an 80% or more controlling
interest in another entity
Brother-sister group – same 5 or fewer people (or trusts/estates)
together own at least 80% of each entity and, taking into account the
ownership interest of each owner only to the extent identical with
respect to each entity, the owners hold more than 50% of each entity
Affiliated service group – service organizations (e.g., medical practice,
architectural firm) where one performs services for the other or
management function group
Attribution rules apply, too
15

16. P owns 100 percent of S-1 and S-2
For all of 2013, P has 10 fulltime employees, S-1 has 40
fulltime employees and S-2 has 60 fulltime employees
P, S-1, and S-2, collectively, are an applicable large employer
and each one is an applicable large employer member for
2014

17. Owner Axel Corp Bearing Identical
Corp Ownership
William 80% 20% 20%
Xavier 10% 50% 10%
Yolanda 5% 15% 5%
Zoe 5% 15% 5%
Total 100% 100% 40%
17

18. NewCo is incorporated on January 1, 2015 and on that day
NewCo has just three employees. However, prior to
incorporation, NewCo's owners bought a factory they
intended to open within two months of incorporation and
they intended to employ 100 employees. By March 15,
2015, NewCo has over 75 fulltime employees
Because NewCo can reasonably be expected to employ on
average at least 50 fulltime employees on business days
during 2015, and actually does, NewCo is an applicable
large employer

19. Employee/Employer relationship determined based on common law
principles
o Subject to the company’s will and control not only as to what but also how
o Facts and circumstances, not necessarily contract language
o Revenue Ruling 1970-630
Independent contractors are not employees (but be certain they’re
independent contractors!)
Non-employee directors, sole proprietors, partners, 2-percent or more
shareholders in an S corporations and leased employees (if they’re not
your common law employees) are not treated as employees.

20. Fulltime = employed on average for 30 hours of service per week (130
hours per month)
o Hourly – count actual hours
o Non-hourly – count actual hours or use equivalency rules
(8hrs=1day, 40hrs=1week)
• Okay to use different methods for different groups
• Use reasonable method for commission-only
Service includes hours paid for performance of duties, vacation, sick,
jury duty, layoff, military service, holiday, incapacity (e.g., disability)
Service does not include work performed outside the US
For 2014, may use any 6-month period in 2013 (instead of all of 2013)
to determine average

21. 1) Count your fulltime employees (including seasonal) for each month in
2013
2) Count your fulltime equivalents (including seasonal) for each month
in 2013
a) Add total hrs for non-fulltime employees but count no more than
120/mo for any one non-fulltime employee
b) Divide # obtained in substep a) by 120; the result is the number of
fulltime-equivalents for that month
3) Add the two #s obtained in steps 1) and 2) above for each month
4) Add the twelve sums obtained in step 3) and divide the total by 12;
the result is the average number of fulltime employees/equivalents
5) If the # in step 4) is at least 50, determine whether seasonal
employee exception applies

22. Seasonal employee exception
After determining that your company had at least 50 fulltime
employees/equivalents on average for 2013, determine whether –
o the number exceeded 50 for only 120 days/4 months (or fewer)
and
o the number in excess of 50 were seasonal employees
Seasonal = seasonal retail, agricultural and others included under
good faith reasonable interpretation
If the number of fulltime employees exceeded 50 for no more than
120 days/4 months and the excess employees were seasonal, your
company is not a large employer for 2014

23. Elves Inc has 40 fulltime non-seasonal employees for the full 2015
calendar year, Elves also has 80 seasonal fulltime workers who pack
and ship toys from September through December. Elves has no part-
time employees
Before applying the exception, Elves Inc has 40 fulltime employees for
8 months of 2015 and 120 fulltime employees for 4 months of 2015,
resulting in an average of 66 employees for the year
But, since Elves’ workforce equaled or exceeded 50 fulltime
employees for no more than 4 months and the number of fulltime
employees would be less than 50 in those months if seasonal elves
were disregarded, it’s not an applicable large employer for 2016

24. o Play or Pay (4980H(a)): If minimum essential coverage is not
offered to “all” fulltime employees and dependents and one or
more fulltimer obtains subsidized Exchange
coverage, employer must pay (annualized) penalty of $2,000 x
(#fulltimers - 30)
o Play and Pay (4980H(b)): If minimum essential coverage is
offered but one or more fulltimer obtains subsidized Exchange
coverage, employer must pay (annualized) penalty equal to
lesser of –
• $3,000 x #fulltimers who decline employer coverage and
receive subsidized Exchange coverage or
• $2,000 x (#fulltimers - 30)

25. Control group and common law employer concepts apply
Works at least 30 hours per week with respect to a given month
(non-fulltime employees do not trigger penalty)
Since monthly determination is administratively burdensome,
IRS offers safe harbor “measurement/stability” method
o Count hours during a look-back measurement period of 3-12
months to determine fulltime/non-fulltime status;
o Treat as fulltime/non-fulltime for stability period, depending
on status determined under measurement period

26. For ongoing employees (i.e., employed for at least as long as the
measurement period you use) count actual hours for a look-
back measurement period
o If employee averages 30 hrs/wk in measurement period,
treat as fulltime for a stability period of at least 6 months
and no shorter than measurement period, regardless of
actual hours worked during that stability period
o If the employee average less than 30 hrs/wk in
measurement period, he or she is treated as non-fulltime for
a stability period no longer than the measurement period

27. safe harbor – ongoing employees
o 3-12month measurement period
o Different measurement and stability periods may be used for
categories of employees: union/nonunion, different bargaining
agreements, salaried/hourly, different states
o May change length of periods each year but not with respect to an
employee who’s measurement period has begun **
o May use “administrative period” of up to 90 days between
measurement and stability periods but it cannot reduce or
lengthen the measurement or stability period
o For 2014 only can use 6-mo look-back with 12-mo stability

28. Your company is an applicable large employer that offers
coverage only to fulltime employees and chooses to use:
o a 12-month stability period that begins January 1
o a 12-month standard measurement period that begins
October 15; and
o an administrative period between the end of the
standard measurement period (October 14) and the
beginning of the stability period (January 1) to
determine which employees were employed on average
30 hours per week during the measurement period

29. Al was employed on average 30 hours per week during the standard
measurement period 10/15/2015 – 10/14/2016 and for the prior
measurement period
o Because Al was employed for the entire standard measurement period, Al
is an ongoing employee with respect to the stability period 1/1/2017 –
12/31/2017
o Because Al was employed on average 30 hours per week during that
standard measurement period, Al is offered coverage for the entire 2017
stability period (including the administrative period 10/15/2017 –
12/31/2017)
o Because Al was employed on average 30 hours per week during the prior
standard measurement period, he’s offered coverage for the entire 2016
stability period and, if enrolled, coverage would continue during the
administrative period 10/15/2016 – 12/31/2016

30. Bob also was employed on average 30 hours per week for all prior standard
measurement periods, but is not a fulltime employee during the standard
measurement period 10/15/2015 - 10/14/2016
o Because Bob was employed for the entire standard measurement period
10/15/2015 – 10/14/2016, Bob is an ongoing employee with respect to
the stability period in 2017
o Because Bob did not work full-time during this standard measurement
period, you don’t offer Bob coverage for the stability period in 2017
(including the administrative period from 10/15/2017 – 12/31/2017)
o However, because Bob was employed on average 30 hours per week
during the prior standard measurement period, Bob was offered coverage
through the end of the 2016 stability period and, if enrolled, would
continue such coverage during the administrative period from
10/15/2016 through 12/31/2016

31. For new employees (i.e., employed for less than one measurement period),
determine if –
o Fulltime: reasonably expected to be employed on average at least 30
hours per week, non-seasonal; or
o Variable-hour/Seasonal: unable to determine at start date whether he or
she will be fulltime
• For 2014 only, employer may take into account an anticipated
termination date (after 2014, employers must assume that an
employee will be employed for the entire measurement period)
• Apply look-back measurement/stability safe harbor method and
there’s no penalty with respect to a new employee during
measurement
o If status changes during measurement period (reasonably expected to be
fulltime), treat as fulltime starting on first day of 4th month after status
change or, if earlier, first day of month after measurement period

32. Safe Harbor General Rules
Rehired employees (and employees returning from unpaid leave) are
treated as new hires if the period of no service was at least 26
consecutive weeks
o As alternative can use parity rule for shorter periods of pre-break
employment
o If treated as new, restart measurement period
o If not treated as new, the rehired/resuming employee is treated as
“continuing” for purposes of measurement/stability period
If using safe harbor, careful recordkeeping is essential (not just hours
– measurement/stability periods, start dates, termination dates, leave
dates, job category, coverage eligibility, coverage offers, enrollments,
etc.)

33. An employee’s child under age 26
o Child for federal tax purposes (§ 152(f)(1)) – son,
daughter, stepchild, adopted child, child placed for
adoption, foster child
o May rely on employee’s representation
An employee’s spouse is not a dependent
For 2014 only, an employer not currently offering
dependent coverage will not be liable for a penalty solely
for failure to offer dependent coverage as long as it takes
steps in 2014 to begin offering dependent coverage

34. Remember, a fulltime employee must obtain subsidized
Exchange coverage (§ 36B) to trigger a penalty
No subsidy unless –
o Household income between 100% and 400% federal
poverty line (currently, $11,170 for a single person)
o Not offered minimum essential coverage
o Buys Exchange coverage

35. Employee must have effective opportunity to accept coverage at
least once per year
If coverage is not affordable or does not meet minimum value,
employee must also have had effective opportunity to decline
coverage (i.e., mandatory or automatic coverage that’s not
affordable or of minimum value will not prevent employee from
obtaining subsidized Exchange coverage and triggering penalty)
Offer is effective for a given month only if coverage is effective
for full month if employee accepts offer
Offer not negated by employer dropping employee’s coverage
for nonpayment of premium

36. Coverage under a grandfathered plan, an eligible employer
sponsored plan, an individual plan, Medicare, Medicaid, CHIP,
TRICARE etc.
Special rule: for employer-sponsored coverage to be minimum
essential coverage, it must meet –
o Affordability test: self-only coverage costs no more than 9.5%
of income (income safe harbors: W-2 wages, rate of pay,
federal poverty level for single person)
o Minimum value test: plan’s share of total allowed cost of
benefits must be at least 60% of covered costs (HHS-IRS
calculator, other safe harbors?)

37. Multiemployer plans
•Through 2014, an employer that makes contributions to a
multiemployer plan will be treated as having satisfied 4980H if (i) it
contributes to the plan pursuant to a collective bargaining agreement,
(ii) the coverage is offered to fulltime employees and dependents, and
(iii) the coverage is affordable and provides minimum value
Non-calendar year plans
•Delayed effective date – first day of 2014 plan year if non-calendar
year plan was in effect as of 12/27/2012 and offers affordable
minimum value coverage no later than first day of 2014 plan year

38. Shrink/Don’t grow your business and remain below “large”
employer threshold– really?!
Don’t let employees who’re ineligible for health coverage work
more than 30 hours per week?
Provide health coverage (with at least 60% value) for all
employees working at least 30 hours per week and their
children under age 26 and don’t make any of those employees
pay more than 9.5% of compensation for single coverage?
o Don’t have to subsidize dependent coverage
o Can use alternate safe harbor to meet affordability test

39. How important is health coverage to recruitment and retention
of employees?
o What’s common in industry/geographic area?
o What does your company currently offer?
How important is health coverage to other business
considerations (e.g., union avoidance, public relations)?
If unionized, what does the collective bargaining agreement
say?
If status quo, how much would it cost to avoid estimated
penalties compared with the cost of paying estimated
penalties?

40. Jackson Lewis Health Care Reform Resource Center
http://www.jacksonlewis.com/healthcare/index.php
Jackson Lewis Benefits Law Advisor Blog
http://www.benefitslawadvisor.com/
Jackson Lewis e-mail updates
http://jlmarketing.jacksonlewis.com/reaction/RSGenPage.asp?RSID=
k5_c7IHYHsVmAKIhyttfRpWKlZt0NCGFtjTqbXpTSKk
IRS website: http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions

41. The Reliable Data You Need
to Make the Right Decisions
© KRONOS INCORPORATED March 13, 2013 41

42. Savvy Organizations Are Using Workforce
Management to…
Minimize Drive Foster
Control Labor Improve
Compliance Operational Continuous
Cost Productivity
Risk Excellence Improvement
Save payroll expense Reduce overtime
Eliminate administrative waste Improve service
Avoid lawsuits, penalties and settlements Consolidate acquisitions
Reduce absenteeism Standardize and control expansion
Improve sales Find growth using ―Big Data‖
Streamline hiring and reduce turnover Allocate labor costs to grants & programs
© KRONOS INCORPORATED March 13, 2013 42

43. Benefits of Automated and Integrated
Workforce Management Processes
Minimize
Control Improve
Compliance
Costs Productivity
Risk
• Eliminate redundant • Establish single • Gain control of
data entry source for all employee
• Lower total cost of employee processes and
ownership information performance
• Gain better visibility • Monitor and • Empower
to information for enforce employees and
better decision compliance managers with
making automation
© KRONOS INCORPORATED March 13, 2013 43

44. A workforce management solution can
help you cope with ACA compliance by…
• Providing accurate information about average
hours worked by full-time and part-time employees to
comply
• Delivering timely analysis of employee benefit
eligibility, thus improving compliance and reducing
financial penalties
• Monitoring your workforce by analyzing
schedules, time records, and benefits enrollment in
real time
• Notifying the appropriate agencies of ACA
compliance through auditing and reports built into our
solution
© KRONOS INCORPORATED March 13, 2013 44

45. Automated Workforce Management Helps you
to Cope with the Affordable Care Act
Ability Change Enroll Work
Monitor
Status & Electronically Through Report to
to do Workforce
Provide with Self Stability IRS
Look-Back On-Going
Benefits Service Period
     
© KRONOS INCORPORATED March 13, 2013 45

46. Summary
• Control labor costs
– Manage part-time hours
– Prevent overtime
– Optimize scheduling and staffing
• Ensure employee satisfaction
– Provide stable schedules
– Deliver timely benefits eligibility information
• Support ACA compliance
– Monitor time worked
– Monitor benefits enrollment
– Provide necessary audits and reports
© KRONOS INCORPORATED March 13, 2013 46

47. Thank you for joining us!
QA & Q&A
© KRONOS INCORPORATED March 13, 2013 47

48. About Kronos
Kronos is the global leader in delivering workforce management
solutions in the cloud. Tens of thousands of organizations in more than
100 countries — including more than half of the Fortune 1000® — use
Kronos to control labor costs, minimize compliance risk, and improve
workforce productivity. Learn more about Kronos industry-specific time
and attendance, scheduling, absence management, HR and
payroll, hiring, and labor analytics applications at www.kronos.com.
Kronos: Workforce Innovation That Works™.
For more information contact your Kronos
representative, call (800) 225-1561 or visit
www.kronos.com.
© KRONOS INCORPORATED March 13, 2013 48

49. Monique Warren
Partner
Jackson Lewis LLP
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50. Join Our Next Workforce Webinar
The Innovative Workforce
Wednesday, March 27, 2013
Workforce Webinars start at 2 p.m. Eastern / 11 a.m.
Pacific
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