ACA - EMPLOYER SHARED RESPONSIBILITY MOASBO FALL CONFERENCE Not Peer Reviewed October 20, 2014 Joel Cracchiolo Sharon Sander Meramec Valley School District Mercer November 13, 2018

THE 30-HOUR RULE

What Is the “30-Hour Rule?” Employer shared responsibility (ESR) payments potentially apply when employers don’t offer minimum essential health coverage (or offer coverage that doesn’t meet minimum value (MV) and affordability standards) to full-time employees (and their children to age 26). The ACA defines full-time employees as an employee averaging at least 30 hours of service per week (or 130 hours or more per calendar month). IRS rules provide two methods employers may use to measure whether an employee qualifies as a full-time employee for purposes of ESR compliance (Monthly or Look Back Method) Most employers must identify and report their full-time employees Only exception is if employer satisfies all conditions for special 98% offer rule: 98% of ALL employees and their biological/adopted children are offered MV coverage with a self-only contribution within an affordability safe harbor. Employer’s eligibility standard may or may not match the 30-hour rule. If an employer doesn’t offer coverage to all of the full-time employees identified under 30-hour rule, need to look at risk of ESR payments.

30-Hour Rule Monthly Method Employers determine whether an employee is a full-time employee in “real time.” Count hours of service each month – Employee with 130 hours is a full-time employee for that month. 120 hours for four week month. 150 hours for five week month. Some relief from ESR payments during the waiting period of an otherwise-eligible employee subsequently offered coverage.

30-Hour Rule Look-Back Method Employer determines a standard measurement period (3 to 12 months) to look back at “hours of service”, as defined by the rules. Employees determined to work 30+ hours per week over measurement period are full time. Hours measured determines full-time/part-time status in a stability period – generally same length as measurement period. Exception: if measurement period < 6 months, stability period must be at least 6 months for employees measuring full time. Employer can use an administrative period (up to 90 days) between the standard measurement period and stability period. Employer uses an initial measurement period for new employees properly classified as variable hour, part-time or seasonal employees. 4 4

School District Considerations The 30-Hour Rule How do you handle breaks in service: Jury Duty, Military Leave, FMLA Christmas, Spring, Summer and Fall breaks Final Rules allow 2 ways to measure: Reduce length of measurement period Credit hours of service at a rate equal to the average weekly rate Returning employees Educational organizations can count as new hire after 26 consecutive weeks without credited service hours

MEASUREMENT EXAMPLES

Look-back Method Example Ongoing Employee and Calendar-year Plan Ongoing Employee Timeline Standard Measurement Period 1 Admin. Period 1 Stability Period 1 CYCLE 1 Timed with OE 12 month look-back to determine 30+ hrs/week average Same length as measurement period 1 (12 months) Oct. 15 Oct. 15 Jan.1 Jan. 1 Oct. 15 Jan. 1 Standard Measurement Period 2 Admin. Period 2 Stability Period 2 CYCLE 2  Employer offers affordable, minimum-value coverage for all of 2014 to ongoing employee who meets full-time status during Cycle 1’s standard measurement period and/or for all of 2015 to ongoing employee who meets that status during Cycle 2’s standard measurement period. 12 month look-back to determine 30+ hrs/week average Timeline represents Standard Measurement and Administrative Periods coordinated with OE

Look-back Method Example New Variable-hour Employee and Calendar-year Plan Look-back Method Transition from New Variable Hour to Ongoing Employee Timeline New EE Hire Date Employee’s Initial Measurement Period Initial Stability Period Admin. Period Employee’s Initial CYCLE Admin. Period Feb. 15 Mar. 1 Mar. 1 Apr. 1 Apr. 1 Oct. 15 Oct. 15 Jan. 1 Dec. 31 Begin measuring employee’s hours with first standard measurement period occurring after his start date. Standard Measurement Period Standard Stability Period Admin. Period Employer’s Standard CYCLE  Employer offers affordable, minimum-value coverage for all of 2014 to ongoing employee who meets full-time status during Cycle 1’s standard measurement period and/or for all of 2015 to ongoing employee who meets that status during Cycle 2’s standard measurement period. Timeline shows initial and first standard measurement, administrative and stability periods.

ACA REPORTING

ACA Reporting Begins in 2016 (For 2015 Data) Purpose and Types of Reporting Employer mandate: Did the employer offer the requisite coverage to avoid assessments? Individual mandate: Did the taxpayer have the requisite coverage? Public exchange premium subsidies: Should IRS claw back any premium subsidy taxpayer got last year? May taxpayer claim premium subsidy for any months of last year? Minimum Essential Coverage* (§6055) IRS Filing Include all covered individuals enrolled in MEC. Individual Statements to each “responsible individual” who enrolls self or others in MEC. Employer Shared Responsibility (§6056) IRS Filing Include each full-time employee. Individual Statements to each employee who was full time for at least 1 month during reporting year. * No small employer exemption.

How To Report (MEC and ESR) 1094-C Transmittal Form 1095-C Employee Statement Employer IRS Information Return Self-Insured Employers Employer reports both MEC (6055) and ESR (6056) information on a single employee statement 1095-C. 1094-B Transmittal Form 1095-B Employee Statement Insurer IRS Information Return Fully-Insured Employers Insurer will provide MEC (6055) information on Form 1095-B. 1094-C Transmittal Form 1095-C Employee Statement Employer IRS Information Return Employer will provide ESR (6056) information on Form 1095-C.

COMPLIANCE CONSIDERATIONS

Employer Considerations MEC and ESR Reporting Question Considerations Notes Where are our employment and benefits data located? How will we integrate the data from different sources? How will we capture corrected data and handle corrected reporting? How will we distribute employee statements? Affirmative consent is required. The statement must reference Form 1095-C. Prior W-2 consent forms can’t be used. Which plans are subject to reporting? MEC is virtually any employer-sponsored group health plan, excluding HIPAA-excepted benefits. Who reports? Insurer for insured benefits. Employer sponsoring self-funded plans. (Confirm if other parties are responsible.) How will we collect TINs? Must make a “reasonable effort” to obtain TIN for all covered individuals. Do we need a process in place for 2015 open enrollment?

Employer Considerations ESR Reporting Question Considerations Notes Who is an employee? Have we reviewed and confirmed decisions on identifying common law employees? How will we measure hours for full-time status? Monthly method. Look-back method. What data is required? Do we need to implement systems and processes to record data in way accessible for reporting? Do we need to coordinate with other parties? Multiemployer plans. TPAs. Others? Can we use alternative reporting methods? MEC offered to ≥ 98% of employees. Qualifying offer of affordable, minimum value coverage offered to employee and MEC offered to spouses and dependents. Qualifying offer to ≥ 95% of FT employees (2015 only).

WHERE’S YOUR DATA? This chart on the following pages lists required data elements in the draft ESR and MEC reporting forms. “Employer” means an “applicable large employer (ALE) member” subject to ESR reporting. Under current guidance, ALE members with self-funded plans will report MEC for employees and nonemployees (such as retirees) on Forms 1094-C and 1095-C — the same forms used for ESR purposes. Small employers exempt from ESR reporting that have self-funded plans will use the same forms as insurers — Forms 1094-B and 1095-B — to report MEC.

Data Elements in IRS Draft ESR and MEC Reporting Forms Employer ESR and self-funded plan MEC reporting Insurer/other coverage provider MEC reporting Data Source Data requirements Form 1094-C to IRS Form 1095-C to individual and IRS Form 1094-B to IRS Form 1095-B to individual and IRS Organization-specific information: Large employer or self-funded plan sponsor identifying and filing information Name, address, employer identification number (EIN) X Contact name Contact phone number If governmental entity, identify designated entity (if any) responsible for reporting: Name, address, EIN Total number individual statements submitted with transmittal form: Whether this form is authoritative transmittal Total # of individual statements filed with IRS by employer or on its behalf

Data Elements in IRS Draft ESR and MEC Reporting Forms Employer ESR and self-funded plan MEC reporting Insurer/other coverage provider MEC reporting Data Source Data requirements Form 1094-C to IRS Form 1095-C to individual and IRS Form 1094-B to IRS Form 1095-B to individual and IRS Organization-specific information: Large employer or self-funded plan sponsor identifying and filing information Indicate whether part of a controlled group member; if so, identify: Name and EIN of other controlled-group members with employees X Certify use of alternative reporting methods or transition relief, if any For each month, give employer’s: Total full-time employees Total employees For each month, indicate by code whether employer: Offered MEC Was part of a controlled group Relied on any transition relief

Data Elements in IRS Draft ESR and MEC Reporting Forms Employer ESR and self-funded plan MEC reporting Insurer/other coverage provider MEC reporting Data Source Data requirements Form 1094-C to IRS Form 1095-C to individual and IRS Form 1094-B to IRS Form 1095-B to individual and IRS Organization-specific information: Insurer/other coverage provider information Name, address, and EIN X Contact name Contact phone number If employer-sponsored coverage: Employer’s name, EIN, and address Total # of individual statements submitted with transmittal form Individual data For each employee who was full-time for at least one month during the year: Name, address, and Social Security number (or other TIN)

Data Elements in IRS Draft ESR and MEC Reporting Forms Employer ESR and self-funded plan MEC reporting Insurer/other coverage provider MEC reporting Data Source Data requirements Form 1094-C to IRS Form 1095-C to individual and IRS Form 1094-B to IRS Form 1095-B to individual and IRS Individual data For each month, indicate by code the type of coverage offered (or use checkbox if all 12 months are the same): Minimum-value MEC meeting mainland affordability safe harbor offered employee; MEC offered spouse and dependents Minimum-value MEC offered employee only Minimum-value MEC offered employee; MEC offered dependents Minimum-value MEC offered employee; MEC offered spouse Minimum-value MEC offered employee; MEC offered spouse and dependents (Continued on next slide) X

Data Elements in IRS Draft ESR and MEC Reporting Forms Employer ESR and self-funded plan MEC reporting Insurer/other coverage provider MEC reporting Data Source Data requirements Form 1094-C to IRS Form 1095-C to individual and IRS Form 1094-B to IRS Form 1095-B to individual and IRS Individual data (Continued from previous slide) For each month, indicate by code the type of coverage offered (or use checkbox if all 12 months are the same): MEC lacking minimum value offered (i) employee; (ii) employee and spouse or dependents; or (iii) employee, spouse, and dependents No MEC offered Qualifying offer transition relief for 2015 X For each month, employee’s share of lowest-cost monthly premium for self-only, minimum-value coverage, if any offered to employee

Data Elements in IRS Draft ESR and MEC Reporting Forms Employer ESR and self-funded plan MEC reporting Insurer/other coverage provider MEC reporting Data Source Data requirements Form 1094-C to IRS Form 1095-C to individual and IRS Form 1094-B to IRS Form 1095-B to individual and IRS Individual data For each month, indicate by code whether safe harbors or transitional relief limit employer’s risk of shared- responsibility assessments related to the employee: Applicable affordability safe harbor (rate of pay, W-2, or federal poverty level) Employee not employed during month Employee not full-time Employee enrolled in coverage offered Employee in nonassessment period Multiemployer interim rule relief applies Noncalendar-year plan transition relief applies X

Data Elements in IRS Draft ESR and MEC Reporting Forms Employer ESR and self-funded plan MEC reporting Insurer/other coverage provider MEC reporting Data Source Data requirements Form 1094-C to IRS Form 1095-C to individual and IRS Form 1094-B to IRS Form 1095-B to individual and IRS Individual data: Responsible individual information Name, address, and Social Security number (TIN) or date of birth if SSN unavailable X Code identifying origin of policy, if applicable SHOP Marketplace identifier, if applicable Individual data: Individual coverage information (includes all persons covered by plan) Name and Social Security number (TIN) or date of birth if SSN unavailable Months of coverage

APPENDIX

Final Employer IRS Reporting IRS Filing and Employee Notice Requirements Minimum Essential Coverage Employer Shared Responsibility Purpose Administer individual mandate penalties. Administer shared responsibility penalties. Assist with reviewing eligibility for exchange income-based subsidies. Who reports? All entities providing MEC, including: Employers sponsoring self-funded plans (each controlled group member reports separately). Issuers covering employer group plans. Large employers (≥50 FTEs). Each controlled group member reports separately. No transition relief for employers with non-calendar year plans or for employers with between 50 and 99 full-time employees otherwise exempt from employer shared responsibility requirements in 2014. Who receives the reports? Annual reports to IRS. Annual information statements to responsible individuals (e.g., employee if also enrolling family members). Annual information statements to full-time employees (≥30 hours/week). Effective date Information statement: Feb 1, 2016 for 2015 coverage year (annually on Jan 31 thereafter). IRS: Annually by Mar. 31 for e-filers or Feb. 28 for paper filers (Monday, Feb. 29, 2016 for 2015 coverage year for paper filers).

Final Employer IRS Reporting IRS Filing and Employee Notice Requirements Minimum Essential Coverage Employer Shared Responsibility Key requirements IRS reporting: Information on entity providing MEC. Information on employer sponsoring the plan. Name, address, and TIN (DOB if TIN not available) of responsible individual. Name and TIN (DOB if TIN not available) of all covered individuals. Months enrolled in MEC. Information statements: Providing entity contact information. IRS reporting specific to that individual. Name, address, and EIN of employer. Name and phone number for contact at employer. Monthly certification – MEC offered to FTEs and dependents; FTE count. Each FTE’s name, address, TIN. Months coverage available. Monthly employee cost for lowest cost, self-only, minimum value coverage. Months covered under a plan. Name, address, and EIN. IRS reporting specific to that FTE. All information reported on a calendar year basis, regardless of plan year Forms IRS/Individual Statement – Form 1095-B IRS Transmittal Form – Form 1094-B IRS/Employee Statement – Form 1095-C IRS Transmittal Form – Form 1094-C Large, self-funded employers will file a combined report