Proposed Restructure of Payroll Department November 4, 2014 Prepared by: Tim Hern Maria Fong

Introduction The Affordable Care Act (ACA) was signed into law in 2010, and upheld by the US Supreme Court in June The main goal of the ACA is to give more Americans access to quality affordable health care insurance. The ACA created two mandates: Employer and Individual. These two mandates imposed significant tracking, monitoring and reporting requirements to the District. 1

Employer Mandate Delayed from January 1, 2014 to January 1, Per IRS Section 4980H, there are two “Pay or Play” penalties: ◦ Penalty A ◦ Penalty B 2

Penalty A If the District fails to offer minimum essential coverage to 95% of full-time employees and their dependents (70% for 2015) ◦ One or more employees purchase coverage on the Exchange and receive subsidy Penalty = $2,000 x (entire full-time workforce minus the first 30 employees) First 80 employees for 2015 District sponsored health plans through CalPERS meet the minimum coverage. District must track and document that coverage is offered to the required percentage of full-time employees. 3

Penalty B If we offer minimum essential coverage to 95% (70% for 2015) full-time employees and their dependent, BUT ◦ Fail to offer coverage to ALL full-time employees, OR ◦ Coverage does not either:  Provide minimum value  Be affordable, AND ◦ One or more employees get coverage on the Exchange and receive subsidy Penalty = $3,000 x number of full time employees purchasing subsidized coverage. District must track and document that all full-time employees are offered coverage. 4

Penalty B Full-time means an average of at least 30 hours per week or 130 hours per month. District will need to track: ◦ Part-time contracted employees working additional hours through timecards should they qualify as full- time. ◦ Non-contracted employees, i.e., substitutes that work sufficient hours to qualify as full-time. District will use one of the two measurement methods prescribed by IRS to determine full-time status and that these employees are offered minimum essential coverage. 5

Individual Mandate Beginning January 1, 2014 most individuals must have minimum essential coverage for themselves and their dependents. This mandate also adds significant new reporting requirements to the IRS on the district. IRS Section 6056 requires the District to report on our employer-sponsored coverage and to whom we offered. ◦ This entails comprehensive detailed data submission to the IRS This reporting is to help the IRS in enforcing the mandate and to facilitate the administration of the premium tax credit, i.e., the subsidy. 6

Proposed Reorganization Due to the added significant workload and burden, we propose to restructure the Payroll Department by: ◦ Changing the management position responsible for administering payroll and benefits to a Director III level.  This change will permanently eliminate the management position of Risk Manager that was cut in ◦ Adding a Senior Database Engineer position in Fiscal Year  This addition will allow the District to manage and maintain the required data to comply with ACA reporting. 7

Proposed Restructure The proposed restructure will allow the district to comply with ACA complex requirements in-house rather than contracting out with outside consultants to do the tracking, monitoring and reporting. ◦ Keeping the workload in-house will eliminate the need of outside consultants to perform annual tracking and reporting requirements. In addition, AB1522 (Chapter 217/2014), the Healthy Workplaces, Healthy Families Act of 2014, was recently enacted which provides sick leave to all employees that work 30 days or more per year. ◦ District will also need to track non-contracted employees (e.g., substitutes) to determine their sick leave eligibility and balances. 8