Attorney Michael James spoke to a packed house yesterday for his presentation "Affordable Care Act in 2014 – Now What?". He was asked to present on the hot topic of health care for the Michigan Associations of CPAs in Ann Arbor for their annual CPE Mega Conference. The presentation covered the following topics: - How To Determine Your FTEs - Small Versus Large Employer Requirements - Upcoming Mandates and Changes - Reporting Requirements - Small Business Options and Credits - Impact of Recent Legal Challenges and Court Rulings To learn more, contact attorney Michael James at mjames@fraserlawfirm.com or 517-377-0823. Michael James is a senior attorney at Fraser Trebilcock, providing representation and counseling related to all facets of business enterprise and health care matters. NOTE: Information contained in this presentation is only current as of the blog publish date. For updated information, refer to the Fraser Trebilcock Health Care Reform blog: fraserlawfirm.com

1. AFFORDABLE CARE ACT IN 2014:
NOW WHAT?
© 2014 Fraser Trebilcock
Davis & Dunlap, P.C.
Michael P. James, JD, MBA, CSSGB
Phone: (517) 377-0823
(313) 237-7300
Email: mjames@fraserlawfirm.com
www.linkedin.com/in/MichaelJamesLaw

2. Introduction

3. Where Do We Go from Here?
 Are You a Large or Small Employer?
 Determine Full-Time Employees
 Employee Classifications
 2015 Transition Relief
 Pay or Play Mandate 2015
 Employer Reporting Requirements
 Group Health Plan Mandates
 Small Business Health Option Programs
 Recent Legal Decisions

4. Are You a Large
or Small Employer?
How do you Determine Your FTEs?
 Step 1: Evaluate employees’ monthly hours for each month:
 Number of full-time employees, with respect to a calendar month,
average 30 hours of service per week.
 Special optional methods exist:
 a monthly equivalency rule (130 hours per calendar month) or
 a weekly rule (120 hours for months with 4 weekly periods, 150
hours for months with 5 weekly periods).
 special rules apply.
 Total non-full-time hours in a month (but not more than 120 hours per
any employee) / 120.
 Add the number of full-time employees for the month and FTEs
for the month together to get the company's total count for the
month.

5. Are You a Large
or Small Employer?
How do you Determine Your FTEs?
 Step 2: Repeat this process for each month of the proceeding
calendar year.
 Step 3: Add the monthly calculations together.
 Step 4: Divide total monthly calculations by 12.
 Step 5: Round down to the nearest whole number.
The FTE is the average of each monthly calculation across the
preceding calendar year. The rules related to counting employee
hours are complex and different rules and guidelines exist for
different types and classifications of employees.

6. Are You a Large
or Small Employer?
Employees of Controlled / Affiliated Groups
 Employees of a controlled or affiliated group may be treated as the
employees of a single employer to determine whether an employer is
a large or small employer under the ACA.
 IRS: final controlled group rules do not apply to certain church
entities, a state or local government or a federal government entity.
 Until further guidance is issued, certain church entities and state or
local government public schools that sponsor section 403(b) plans
can continue to rely on a reasonable, good faith interpretation of the
common control rules to determine whether they are large employers
under the ACA.

7. Calculating Hours of Service:
Determine Full-Time
Employees
 Actual hours for which payment is made or due
 Days-worked equivalency option
 Weeks-worked equivalency option
Periods Used to Determine Full-Time Status:
 Monthly Measurement Method
 Count hours of service for each calendar month
 Weekly Period Alternative
 Special rules for:
 newly eligible employees, termination and rehire, resumption of services
after returning from a leave of absence, and international transfers.

8. Determine Full-Time
Employees
Periods Used to Determine Full-Time Status:
 Look-Back Measurement Method (not for determining large
employer status – only for Employer Shared Responsibility)
 On-Going Employees
 New Full-Time Employees
 New Variable Hours / New Seasonal / New Part-Time
 Special Rules for:
 Rehire & Termination or Absences
 International Transfers
 Changes in Employment Status
 Transition Relief for 2015: shorter measurement period

9. Determine Full-Time
Employees

10. Employee Classifications
Seasonal Employees
 Seasonal employees include:
 An employee in a position for which the customary annual employment is 6
months or less.
 What does “customary” mean?
 By the nature of the position an employee in the position typically works for a period
of 6 months or less; and
 That period should begin each calendar year in approximately the same part of the
year, such as summer or winter.
 Seasonal employment may be extended under certain circumstances.
 Seasonal employees are included in initial FTE calculation to determine
if an employer is a large or small employer.
 If an employer's workforce exceeds 50 FTEs for 120 days (four calendar
months) or fewer during a calendar year and the employees in excess of 50
FTEs who were employed during that period were seasonal employees, the
employer would not be an applicable large employer.
 The 4 calendar months / 120 days are not required to be consecutive.

11. Employee Classifications
Bona Fide Volunteers
 Government entities and 501(c) organizations with tax-exempt volunteers do
not need to count the hours of service provided by bona fide volunteers when
determining their status as a large or small employer under the ACA.
Work Study Program Student Employees
 Educational institutions do not need to count the hours worked by students that
are employed in positions subsidized through the federal work study program
or a substantially similar program at the State or local level in determining
whether they are a large or small employer under the ACA.
 However, the hours worked by students employed outside of these programs
must be counted by the educational institution to determine whether it is
subject to the shared responsibility requirements of the ACA.

12. Employee Classifications
Difficult to Identify/Track Employee Hours
 The IRS recognizes that certain categories of employees have
hours that are challenging to identify and track.
 Examples:
 Adjunct Faculty; Commissioned Salespeople; Airline Employees; On-
Call Medical Professionals.
 Issues:
 No time input/schedule; layover hours; wait times.
 Are required to use a “reasonable method” of crediting hours of
service for these employees.
 Not reasonable if method characterizes a full-time employee as non-full-time.
 Future regulations likely coming.

13. Under 50 FTEs
Small Employers:
No Requirements
 Employers do not have to offer insurance to employees.
 However, if health insurance is offered, it must meet the essential
health benefits, metal levels and be available to full-time
employees.

14. Large Employers:
Pay or Play Mandate
 The Pay or Play Mandate applies to large employers and imposes
Employer Shared Responsibility Requirements beginning in 2015.
 For purposes the Mandate, large employers are those employers
with 50 or more FT/FTEs.
 If a large employer either fails to offer health insurance to its full-time
employees (and dependents) or fails to offer those employees
affordable coverage that meets the required minimal value, that
large employer is subject to penalties if an employee receives a
tax credit/subsidy through the Exchange.
 In February 2014, key changes were made to the Pay or Play
Mandate – 2015 Transition Relief.

15. 2015 Transition Relief
 For 2015, timing to determine large employer status?
 For 2015 only, employer can determine large employer status by reference to a
period of at least six consecutive calendar months in the 2014 calendar year.
 For 2015, does employer have 50 FT/FTEs but less than 100 FT/FTEs? If so,
does employer meet the transition relief requirements?
1. Cannot reduce the size of workforce between February 9, 2014 and December 31,
2014.
2. Cannot eliminate or materially reduce the health coverage offered as of February
9, 2014 (including employer contributions).
3. Must certify (as part of the transmittal form require to be filed with the IRS under
Code section 6056 employer reporting requirements) that it meets the safe harbor.
4. Not available if employer modifies its plan year after February 9, 2014 to begin on
a later calendar date.
 Special rules exist for new employers, employers first becoming large
employers, employers part of a controlled group or affiliated service groups,
and other circumstances mentioned in regulations.

16. Pay or Play Mandate (2015)
No Coverage Penalty
 A large employer must pay a penalty for failing to provide minimal
essential coverage to its full-time employees.
 Effective:
 2015 for 100+ FTE Employers.
 2016 for 50-99 FTE Employers.
 Is triggered if an eligible employer does not offer coverage:
 2015:
 To at least 70% of its full-time employees and their dependents and a full-time
employee goes to the Marketplace and receives a tax credit or subsidy;
 100+ FTE Employers subject to this penalty must pay a $2,000 annual excise tax for
each full-time employee in excess of 80.
 2016:
 To at least 95% of its full-time employees and their dependents and a full-time
employee goes to the Marketplace and receives a tax credit or subsidy;
 All large employers subject to this penalty must pay a $2,000 annual excise tax for
each full-time employee in excess of 30.

17. Pay or Play Mandate (2015)
Unaffordable/Lack of Required Value Penalty
 Effective:
 2015 for 100+ FTE Employers.
 2016 for 50-99 FTE Employers.
 Is triggered if an eligible employer offers coverage that is either:
 (1) Unaffordable, or (2) does not provide a minimal value of
coverage; and
 A full-time employee goes to the Marketplace and receives a tax
credit or subsidy.
 The penalty is the lesser of:
 The “no coverage” penalty; or
 $3,000 for each full-time employee who enrolls in insurance through the
Marketplace and receives a tax credit or subsidy.
 Safe Harbors Exist for Affordability.

18. ACA Strategies
 Estimate potential penalties
 Potential restructuring of workforce
 Modify plan design to ensure minimal coverage and affordability
 Evaluate legal concerns
 Conduct an analysis of current employee population
 Estimate how many employees would likely qualify for tax credits / subsidies.
 Potentially adjust contributions and/or hours worked
 Evaluate Tax Impact
 Would the employer’s tax liability increase if it no longer sponsored a health
plan?
 Additional Compensation Analysis
 Would employer need to increase compensation without a health plan?
 Employee Morale, Attract and Retain Employees, Control over Health

19. Reporting Requirements
Who is Required to Report?
 Optional reporting in 2014.
 Required reporting starts in 2015.
 Under Section 6055, starting in 2015, if an employer provides
self-insured health coverage to its employees, it must file an
annual return reporting certain information for each employee
it covered.
 Under Section 6056, starting in 2015, a large employer must
file an annual return reporting whether and what health
insurance it offered to its employees.

20. Reporting Requirements
How do Applicable Employers Report?
 Under Section 6055, a non-large employer providing self-insured
health coverage must file an annual return (Form 1095-B) plus a
transmittal form (Form 1094-B) on or before February 28th
(March 31st if electronic filing) of the year following the calendar
year in which the minimum essential coverage was provided.
 Under Section 6056, a large employer must file an annual return
(Form 1095-C) plus a transmittal form (Form 1094-C) on or
before February 28th (March 31st if electronic filing) of the year
immediately following the calendar year to which the return
related.

21. Reporting Requirements
Simplified Alternatives May Be Available
 1) Simplified return if Employer certifies is made a "qualifying
offer" of coverage for all months an employee was a full-time
employee.
 Applies to employers that provide a “qualifying offer” to their full-time
employees.
 2) Further simplified return for 2015 only if employer certifies it
made "qualifying offer" to at least 95% of its full–time employees
and their spouses/dependents.
 3) Employers can avoid separately identifying their full-time
employees if they certify they offered minimum essential
coverage providing minimum value that's affordable under
Section 4980H to at least 98% of its employees (and dependents).

22. Reporting Requirements
Combined Reporting Under Section 6055 & 6056
 A large employer that provides self-insured coverage is subject to
Section 6055 and 6056 reporting. All large employers will file a
combined return.
 1) Large employers that self-insure will report on Form 1095-C,
completing both sections to report under sections 6055 and 6056.
 2) Large employers that fully-insure will report on Form 1095-C,
completing only the section to report under 6056.
 3) Non-large employer reporting entities (such as small employers
that self-insure) will report under Section 6055 on Form 1095-B.

23. Reporting Requirements
Statements Furnished to Individuals
 Under Section 6055, reporting entities must furnish statements to each
responsible individual (employee/former employee or other person
listed in regulation who enrolled one or more individuals in coverage)
by January 31st of year following calendar year in which minimal
essential coverage is provided.
 Under Section 6056, large employers must furnish statements to each
full-time employee by January 31st of year following calendar year for
which a 6056 IRS return was filed related to them.
 Under both Sections, first class mail to last known permanent address
discharges responsibility. Special rules for electronic statements exist.

24. Group Health Plan Mandates
 Prohibition on ExcessiveWaiting Periods
 Effective for plan years beginning on or after January 1, 2014.
 Group health plans and a health insurance issuer offering group or
individual health insurance coverage are prohibited from applying any
waiting period that exceeds 90 days.
 Waiting Period = the period that must pass before coverage begins for an employee
or dependent who is otherwise eligible to enroll under the terms of a group health
plan.
 Check your plan!
 Many are changing waiting period.

25. Group Health Plan Mandates
 Cost of Employer-Sponsored Health Coverage onW-2
 Report with Code DD in Box 12.
 Certain transition relief still available.
 Uniform Summary of Benefits and Coverage
 Group health plans must provide a summary of benefits and coverage that meets
requirements, including whether plan offers minimal coverage and minimal value.
 Make sure your SBC is updated. Special distribution and timing rules apply.
 Prohibition on Annual Benefit Limits
 Beginning in 2014, annual limits on the dollar value of benefits for any participant or
beneficiary will no longer be allowed. Lifetime limits previously prohibited.
 However, group health plans may still place annual or lifetime limits on specific
covered benefits that are not essential health benefits.

26. Group Health Plan Mandates
 Flexible Spending Account Limit to $2,550
 The flexible spending account limit on salary deferral was set at $2,500, adjusted in
future years for changes in the cost of living. 2015 cost of living adjustment to
$2,550.
 Applies to plan years effective on or after January 1, 2013.
 Health Insurance Marketplace Notice
 An employer is required to provide notice of the availability of the Exchange, informing
employees of:
 1) the existence of the Marketplace; 2) that employees may be eligible for a subsidy
under the Marketplace if the employer’s share of the aggregate cost of benefits is less
than 60%; and 3) that if the employee purchases a policy through the Marketplace,
he or she will lose the contribution to any health benefits offered by the employer.
 Notice must be provided to each employee now due at the time of hiring (within 14
days).

27. Group Health Plan Mandates
 PCORI Fee Payments
 The new Form 720, as well as the attached Form 720-V to submit payment, must
be used to report and pay the requisite PCORI fee to the IRS.
 Plan sponsors of applicable self-funded health plans are liable for this fee imposed
by Code section 4376.
 The first fee is $1.00 per covered life for plan years ending on or after October 1,
2012 and before October 1, 2013. The fee increases per year and concludes with
plan years ending on or after October 1, 2018 and before October 1, 2019.
 HRAs and health FSAs that are not excepted from reporting only must count the
covered participant and not the spouses and dependents.
 The fee is due no later than July 31 of the year following the last day of the plan
year.
 There are specific calculation methods to be used to configure the number of
covered lives and special rules may apply depending on the type of plan being
reported.

28. Group Health Plan Mandates
 Transitional Reinsurance Fees
 Section 1341 of the ACA provides for this transitional reinsurance program in
each State from 2014 to 2016.
 This fee for benefit year 2014 averages approximately $63.00 per covered life.
 Contributing entities must submit enrollment counts by November 15, 2014 to
HHS. The deadline has been extended until 11:59 pm on December 5, 2014.
 Exclusions.
 Automatic Enrollment for Large Employers Offering Coverage
 An employer with more than 200 full-time employees that offers employees
enrollment in one or more health benefits plans must automatically enroll new,
full-time employees in one of its plans and to continue the enrollment of
current employees in a health benefits plan offered through the employer.
(Subject to waiting period authorized by law)
 Requires adequate notice and the opportunity to opt out of coverage.
 Effective date is unclear; Department of Labor says regulations by 2014.

29. Small Business Health
Option Programs
Small Business Health Option Programs (SHOP)
 Open to all small businesses in 2014.
 Must have 50 FTEs or less.
 In 2014, employer chooses one insurance product for all employees.
 In 2015, employer picks the metal level, employees choose the
insurance product.
 In 2016, SHOP expands to businesses with up to 100 FTEs.
 In 2017+, States have option to expand SHOP eligibility to large
groups.

30. Small Business Tax Credits
Potential Tax Credits 2014 - 2016
For-Profit
Up to 50% of employer
contribution to
employees’ health
insurance premium
Non-Profit
Up to 35% of employer
contribution to
employees’ health
insurance premium

31. Small Business Tax Credits
Requirements
< 25
Employees
Average
Employee
Wages
< $50,000
Employer must
contribute at least
50% of premium
cost

32. Small Business Tax Credits
Requirements
Maximum credit available to employers with 10 or
fewer FTEs and average annual wages of $25,000 or
less.
 For each FTE above 10 FTEs, the credit is reduced by 1/15.
 For each $1,000 above $25,000 in average wages, the credit
is reduced by 1/25.

33. Small Business Tax Credits
Summary
1) Determine the employees who count toward the credit.
2) Calculate the hours of service for these employees.
3) Calculate the number of the employer’s FTEs
4) Calculate the average annual wages paid per FTE.
5) Calculate the relevant employer contributions.
Initial Amount of Credit (Contribution x Percentage)
- Reduction for FTE in excess of 10
- Reduction for avg. wages in excess of $25,000
Total Small Business Health Care Tax Credit

34. Recent Legal Decisions
Hobby Lobby
 Supreme Court ruled that closely-held, for-profit corporations
with religious owners cannot be required to pay for insurance
coverage of contraception.
 Proposed Regulations:
 Allow closely-held, for-profit corporations to not pay for
contraception.
 Employees get coverage through third-party.
 Employees pay for coverage.
 Implications:
 Do others try to implement?
 Human capital impact?

35. Recent Legal Decisions
Tax Subsidy Cases
 Are tax credits / subsidies permissible in states with a federally-facilitated
health insurance marketplace?
 July 22, 2014 - Court of Appeals in Washington D.C. -
subsidies may not be offered through Federal Marketplace.
 July 22, 2014, 4th Circuit ruled that the subsidies were valid.
 September 4, 2014, full D.C. Court of Appeals determined
that it will re-hear the case. 12/17/14.
 September 30th – Oklahoma Federal Court - No subsidies.
 November 7, 2014 – Supreme Court states it will hear case.
 More than half of states use a Federal Marketplace.
 Without subsidy, many could not afford insurance.

36. Health Care Reform
Checkup for Your Business
 Is your business compliant with all the current health care
regulations?
 Many regulations went into effect in 2012 and 2013. Some go
into effect in 2014. Have you made the necessary adjustments?

37. Develop a Compliance Plan

38. Fraser Trebilcock Davis & Dunlap, P.C.
124 W. Allegan Street, Suite 1000
Lansing, Michigan 48933
www.fraserlawfirm.com
Phone: (517) 482-5800
Fax: (517) 482-0887
Fraser Trebilcock Davis & Dunlap, P.C.
One Woodward Avenue, Suite 1550
Detroit, Michigan 48226
www.fraserlawfirm.com
Phone: (313) 237-7300
Fax: (313) 961-1651
© 2014 Fraser Trebilcock
Davis & Dunlap, P.C.
Fraser Trebilcock
Health Care Reform
www.mihealthcarelaws.com
Michael P. James, JD, MBA, CSSGB
Phone: (517) 377-0823
(313) 237-7300
Email: mjames@fraserlawfirm.com
www.linkedin.com/in/MichaelJamesLaw