State of Oklahoma Office of Management and Enterprise Services Employer Shared Responsibility October 15, 2014

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ 2 Overview  Effective January 1, 2015, the State of Oklahoma, as a Large Employer with various agencies as components of the Large Employer, is required to redefine who is eligible for benefits to comply with key provisions of the Patient Protection Affordable Care Act. ‒ Current benefit eligible employees are unaffected. ‒ Those employees who are not benefit eligible may become benefit eligible if certain conditions are met.  Effective January 1, 2015 those that are not benefit eligible will need to be classified into the following categories in order to determine benefit eligibility: ‒ Variable hour employees, broadly defined as anyone who is not currently benefit eligible and is not considered a seasonal employee. Note that there are two types of variable hour employees: Employees who are hired to be regularly scheduled to work 30 hours or more per week for more than three months Employees who are hired with an irregular work schedule, and it is unknown if they will work on average more than 30 hours per week for more than three months ‒ Seasonal employees, defined under PPACA as employees who are employed during the same time of year each year, and for which the duration of the “season” is no greater than six months. (Note: a limited number of agencies may currently use the seasonal definition)

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ 3 Key Terms Offer coverage within 90 days or pay penalty Could potentially include any employee currently not eligible for benefit if regularly scheduled to work 30 hours or more per week for more than 3 months Full-Time Permanent Employee (30+ hpw) Don’t need to offer coverage, but will need to test each year (October) No penalty applies Statute is currently 20 hours Part-Time Permanent Employee (<30 hpw) Use a good faith definition of “seasonal employee” (less than 6 months) Don’t need to offer coverage Use measurement period to determine eligibility Seasonal Employee (currently available for limited agencies) Employed for less than 12 months as of ongoing variable employee measurement period Employee is not expected to regularly work 30 hours or more per week Use 12-month measurement period specific to the employee New Variable Employee (tested after the new employee has 12 months of employment) Employed for at least 12 months as of October 16, 2013 (1 st year) Use measurement period to determine eligibility Test annually in October Ongoing Variable Employee (tested in October to determine eligibility)

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ 4 Variable Hour Employees  For employees who are hired to be regularly scheduled to work 30 hours or more per week for more than three months (90 days): ‒ Agencies should identify these employees in September to ensure they are provided coverage effective January 1, ‒ Agencies will be required to submit the newly eligible form (currently called the new hire form) to trigger benefit eligibility. ‒ For new variable hour employees hired after the onset of the initial measurement period (hired after October 17, 2013), hiring managers must make the determination if the employee will be regularly scheduled to work 30 hours or more per week for more than three months (90 days) – if yes, the employee must be provided benefits in a manner consistent with current benefit eligible employees.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ 5 Variable Hour Employees  For employees who are hired with an irregular work schedule, and it is unknown if they will work on average more than 30 hours per week: ‒ OMES/ISD has developed a report to test each individual in order to validate if, over a 12 month period, that employee worked on average more than 30 hours per week. OMES/ISD will only be developing the reporting modules for those departments and agencies on PeopleSoft. Any agencies running proprietary time and attendance systems will be responsible for generating the necessary reports for testing.  Note: OMES/ISD will be available to meet with you to answer questions and help in any way possible. –Agencies will be responsible for testing their employees: Once in October for ongoing variable hour employees Monthly for new variable hour employees Agencies will be responsible for Federal assessments, if any, due to inaccurate reporting

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ 6 Seasonal Employees  Although the federal definition of a seasonal employee is more broadly defined, statute states that only a limited number of agencies may employ the use of seasonal employees until State law is modified.  A seasonal employee, as federally defined, is generally an employee/class of employees that are working a given (specifically defined) season (generally the same time each year), such as: ‒ The mowing season ‒ The pool/aquatic season ‒ The legislative season

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ 7 Key Testing Terms Fixed measurement period (State has chosen 12 months) Allows employers an opportunity to look back at the hours worked by a variable hour employee to determine benefit eligibility Measurement Period (testing period) Period used by the employer to perform administrative duties related to counting hours, and if applicable, make an offer of coverage to an employee Administrative Period (option period) The period following a measurement period (and administrative period) during which variable hour employees determined to be eligible (those that worked on average of more than 30 hours period week) are offered coverage (12 months) Stability Period (coverage period)  The State, as a large employer, has elected the longest look back period possible – 12 months.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ 8 Variable Hour Employee Regularly scheduled to work 30 hours per week? Yes? Provide coverage Test employees to see if they worked 30 hours per week No? No action–test again next measurement period Yes?

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ 9 Testing Cycles  If the above testing proves that a variable hour employee has worked on average more than 30 hours per week, then that employee will need to be eligible to enroll in the same benefits as regular full-time employees (with the same benefit allowance).

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ 10 Special Rules for Testing  Any compensable hour should be counted as an hour worked. This will include the following: –Regular/overtime pay, military leave pay, call pay, workers compensation pay, vacation pay, jury duty pay, sick/enforced leave pay, administrative leave pay, holiday pay, etc.  Certain hours that are non-compensable hours will be counted as if they were compensable hours, so that they do not count against the employee. This will include the following: ‒ FMLA and USERRA (unpaid military leave)  If an employee has a break in service longer than 13 weeks, that employee should be considered as a new hire. –If the break in services is shorter than 13 weeks, that employee will be treated as if they had not left the State with no compensable hours during that period, provided the employee’s length of employment was greater than 13 weeks. If the employee’s break in service was longer than the employee’s length of employment, that employee would be treated as a new employee.

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ 11 Work Plan P LANNING C ALENDAR ActivityWhoTarget Date(s) Workgroup & planning with agenciesCarrie ToweryOngoing Train agency and departmentsOMES/HCMAug. 25 Benefit coordinator meeting – to discuss role-out strategy All agenciesSept Reconcile current enrollees to determine who should be offered coverage because they are regularly scheduled to work 30 hours per week All agenciesSept Oct. 15 Testing of current ongoing variable hour employees to determine who, on average, is working more than 30 hours per week All agenciesOct Notify newly eligible employees that they are benefit eligible All agenciesNov. 1 Enrollment period for newly eligible employees OMES HCM-EBDNov Testing of new variable hour employeesAll agenciesNovember, and each subsequent month

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ 12 Questions  All questions should be directed to the Human Capital Management Division of OMES –(405) or  To subscribe to receive updates about the PPACA in your and/or text, go to * No Legal Advice Intended: The information presented by Arthur J. Gallagher & Co. and Human Capital Management is not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. You should contact your own legal counsel for advice on specific legal problems concerning the Patient Protection and Affordable Care Act.