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Represents management exclusively in every aspect of employment, benefits, labor, and immigration law and related litigation. 750 attorneys in 55 locations nationwide. Current caseload of over 6,500 litigations and approximately 415 class actions. Founding member of L&E Global. 3

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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. Indeed, health care reform law is highly complicated and it supplements and amends an existing expansive and interconnected body of statutory and case law and regulations (e.g., ERISA, IRC, PHS, COBRA, HIPAA, ADA, GINA, etc.). The solutions to any given business’s health care reform compliance and design issues depend on too many varied factors to list, including but not limited to, the size of the employer (which depends on complex business ownership and employee counting rules), whether the employer has a fully-insured or self-funded group health plan, whether its employees work full time or part time, the importance of group health coverage to the employer’s recruitment and retention goals, whether the employer has a collectively-bargained workforce, whether the employer has leased employees, the cost of the current group health coverage and extent to which employees must pay that cost, where the employer/employees are located, whether the employer is a religious organization, what the current plan covers and whether that coverage meets minimum requirements, and many other factors. 5

Review some key ACA issues Working with Forms 1094-B/1095-B and C/1095-C o The Why, When, What and How to file and furnish o Working with the Forms o Tasks for getting ready 6

Full-time = employed on average for 30 hours of service per week (130 hours per month) Calculation of “hours of service” o Hour of service: each hour employee is paid or entitled to payment o Includes hours for which no services are performed, but payment is owed by employer (i.e., on-call or paid leave time) Hourly – count actual hours Non-hourly – count actual hours or use equivalency rules o Daily – any time during a day equals 8 hours o Weekly – any time during a week equals 40 hours 7

Measurement period approach – look-back v. monthly measurement periods o On-going employees, new employees o Changes in employment status or position o Special leaves of absence – FMLA and USERRA o 13-week Break in Service o Special rules for education organizations 8

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 Reasonable, good faith interpretation by churches and governmental entities 9

EE must have effective opportunity to accept coverage at least once per year (offer of coverage by employer must be reasonable) If coverage is not affordable or does not meet minimum value, EE must also have had effective opportunity to decline coverage Offer is effective for a given month only if coverage is effective for full month if EE accepts offer Offers for “temporary” or “staffing” employees Offer not negated by EE waiver of coverage or employer dropping EE’s coverage for nonpayment of premium Documenting of waiver is not required, but good practice if practical 10

Why do we have to report? o Verify individuals met individual mandate through “minimum essential coverage” or “MEC” – Section 6055 o Enforce the employer shared responsibility under 4980H – Section 6056 o Confirm eligibility for premium tax credits – Section 6056 When do we have to start reporting? o Requirement begins for 2015; 2014 optional o Transition rules do not delay reporting for smaller ALEs – between 50 and 99 FT employees 11

When are the returns/statements due? o Returns: February 28 of the following year (March 31, if filed electronically) o Statements: January 31 of the following year (February 1, 2016) Can someone else do the filing for us? o Yes. A third party, including another ALE member of the same controlled group, may complete the filing o A name and telephone number needs to be provided for the agent of the ALE member doing the reporting o Special rules for governmental filers 12

Do we have to file electronically? o Yes, if you file 250 or more returns for during the calendar year, the returns have to be filed electronically o Statements may be furnished electronically under rules similar to those applicable to W2s presently. In general: Affirmative consent Change in hardware/software Required disclosure (prior to or at time of consent) Required format Rules for posting on website Required access period 13

What forms are used for reporting? o 1094-B/1095-B Used by providers of MEC – insurers, some employers, others 1094-B Transmittal – Identifies the filer 1095-B Report – Identifies responsible individual, type of coverage, employer sponsor of insured coverage, coverage provider, and enrollment of covered individuals 14

What forms are used for reporting? (ctd.) o 1094-C/1095-C – Applicable Large Employers (ALEs) 1094-C Transmittal –Cover page for 1095-Cs, which may be submitted in groups –But, must have one “Authoritative Transmittal” –Used to demonstrate ESR (4980H) compliance on aggregate basis –Covers application of certain transition rules –Controlled group participation 15

What forms are used for reporting? (ctd.) o 1094-C/1095-C – Applicable Large Employers (ALEs) 1095-C Report/Statement –Part I – Identifies common law employee of ALE –Part II – Confirms whether ALE met ESR with respect to employee in Part I – focuses on coverage offered. –Part III – Reporting for self insured coverage – will show whether employee and dependents had coverage for any day in each month. 16

Forms in practice 17 SituationEmployerInsurer FT employee covered by insured plan 1095-C – showing months coverage is offered 1095-B – showing months covered Non-FT employee covered by insured plan No reporting required1095-B – showing months of covered FT employee covered by self-insured plan 1095-C – showing months covered and offer of coverage N/A Non-FT employee covered by self-insured plan 1095-C – showing months covered, offer info not needed N/A

Forms in practice 18 SituationEmployerInsurer FT employee declines offer of insured coverage 1095-C – showing months coverage is offered N/A Non-FT employee declines offer of insured coverage No reporting requiredN/A FT employee declines offer of self-insured coverage 1095-C – showing months coverage is offered N/A Non-FT EE declines offer of self-insured coverage No reporting requiredN/A

Let’s take a look at Form 1094-C o Lines Col. (a) – MEC: Check yes or no; check yes if you meet the 70% transition rule. Col. (b) – # of FT EEs Col. (c) – # of all employees Col. (d) – Controlled group for the month Col. (e) – Application of certain transition rules 19

Let’s take a look at Form 1095-C – Part II o Line 14 – Offer of Coverage Use the appropriate indicator code from Code Series 1. See Instructions p. 7 o Line 15 – EE Share of Cost of Coverage Complete only if Code 1B, 1C, 1D or 1E entered on Line 14 (MEC is offered, but not Qualifying Offer) Enter the lowest, monthly, self-only premium, even if employee elected more expensive coverage o Line 16 – Safe Harbor/Relief Codes Use the appropriate indicator code from Code Series 2. See Instructions p

Let’s take a look at Form 1095-C – Part III o Complete only for self-insured coverage in which an individual is enrolled. o Include enrolled employees, whether FT or not FT. o Include family member, covered on same form as employee o Check box (d) for a line if the person was covered at least one day in every month in the year 21

The draft instructions said to report self- insured coverage for non-employees on Form 1095-B, is that still true? o No. The ALE member could report the non-employee covered under the self-insured plan on Form 1095-C. o “Non-employees” include – COBRA participants, non-employee directors, partners, and retirees. o Reporting is made in Part III for any non-employee that was not an employee for any calendar month in the year. Part II must be completed using Indicator Code “1G” for all 12 months. o All covered family members must be reported on same Form 1095-C, or 1095-B. 22

What if one of our ALE members has no EEs or EEs with no hours of service? o No reporting is necessary for that ALE member. We contribute to a multiemployer plan? o These ALE members will be deemed to satisfy the ESR mandate with respect to FT employees on whose behalf it is making contributions (even if EE is not eligible for the coverage), so long as the multiemployer plan is offering MV, affordable coverage. o ALE member enters Line 2E on Line 16, Form 1095-C; Fund sends Form 1095-B to employee. o ALE member and Fund have to coordinate about when coverage commences. 23

Do we have to report SSNs of our employees and their dependents? o Forms 1095-C furnished to employees may be truncated – only last 4 digits; not permitted for Forms filed with IRS o For self-insured plans, Part III requires SSNs of employee dependents, unless ALE either (i) exhausts reasonable collection efforts, (ii) or meet certain requirements for limited reporting. o ALE can use dependent’s date of birth, only if no SSN after “reasonable efforts”: no SSN after an initial attempt, and two subsequent attempts. o ALE should be taking steps during the year, and documenting those efforts. 24

What are the penalties if we fail to comply? o Section 6721 penalizes failure to (i) file timely information returns, (ii) include all the required information, and (iii) include correct information on the return. o Section 6722 penalizes failure to (i) timely furnish the statement, (ii) include all the required information, or (iii) include correct information on the statement. o $100 for each return with respect to which such a failure occurs, up to calendar year maximum - $1,500,000 o For 2015, IRS will not impose penalties under sections 6721 and 6722 on ALE members that can show that they have made good faith efforts to comply with the information reporting requirements. 25

Qualifying Offer Method. “Qualifying Offer”: o Offer the employee MEC providing minimum value at a self-only cost not in excess of 9.5% of the Federal Poverty Level, AND o Offer MEC to the employee’s family (spouse and children) ALE member that extends Qualifying Offer for a month need not include the cost of the least expensive option for MV coverage. ALE member that extends Qualifying Offer for all 12 months, ALE member need not furnish Form 1095-C to those who did not enroll, but must provide statement that employee received Qualifying Offer and is not eligible for premium subsidies. BUT must furnish 1095-C, Part III to those employees who enrolled in self insured coverage 26

Qualifying Offer Transition Relief for ALE member that extends Qualifying Offer for some but not all 12 months: o Still must furnish Form 1095-C unless ALE member satisfies conditions for Qualifying Offer Transition Relief for 2015 o Conditions for Qualifying Offer Transition Relief for 2015 are met if ALE member makes Qualifying Offer to at least 95% of FT employees for one or more months in o If satisfied: (i) Qualified Offer relief; (ii) for employee that does not receive a Qualifying Offer for the year, send statement to that employee (rather than 1095-C) stating that individual may qualify for premium tax credit. 27

98% Method. ALE member offers minimum value, affordable coverage for all months during the year to 98% of employees for whom it is filing 1095-C, including offering MEC to dependents: o Still must complete Form 1095-C for FT employees and PT employees with self insured coverage. o When completing 1094-C, ALE member need not report FT employee counts for each month of the year. 28

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