1. For a copy of the following presentation, please visit our website at www.UBAbenefits.com. Go to the Wisdom tab and then to the HR webinar series page.

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3. 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, 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. IRS Circular 230 disclosure: Any tax advice contained in this communication (including any attachments or enclosures) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication. (The foregoing disclaimer has been affixed pursuant to U.S. Treasury regulations governing tax practitioners.) 3

4. Leah Bifulco, CPA; Tax & Accounting team member of Casey Peterson & Associates, Ltd. o Over 10 years of combined experience in private and public accounting. o Performed financial statement audits for various governmental, non-profit, and for-profit entities for over 8 years. o Provides consulting to entities on payroll items, accounting issues, and software as well as identifying efficiencies in processes and procedures. Kathleen Barrow, Shareholder, Jackson Lewis, P.C. o Over 20-years experience in ERISA employee benefit, executive compensation and employment-related tax matters o Practice focuses on employer and plan defense of IRS and DOL audits of plans, payroll and compensation systems o Over 10-years experience litigating employee plan and compensation-related tax issues before the United States Tax Court, US District Courts and Courts of Appeal o Has trained over 5000 employers nationwide on issues arising under the Affordable Care Act 4

5. The Patient Protection and Affordable Care Act (“ACA”) requires: Individuals to maintain minimum essential coverage (subject to certain exemptions); and Applicable Large Employers to offer full-time employees and their dependents minimum essential, affordable coverage with minimum value. In order to assess penalties for failing to comply, the ACA mandates the certain reports be published to covered persons and submitted to the IRS 5

6. Reports are due from applicable large employers (“ALE”) whether or not they had 99 or less full-time + full-time equivalent employees and are entitled to transition relief Reports are due from non-ALEs if they have self-funded health plans ALEs must report on offers of coverage for all full-time employees and for certain non-full time employees o New employees in initial measurement period o Variable employee in standard measurement period o Full-time employees in 90-day waiting period o COBRA coverage recipients if they accepted offer o All covered persons if the ALE’s plan is self-funded 6

7. Code section 6055 mandates that “any person” who provides minimum essential coverage to an individual during a calendar year must report to the IRS and the individual Applies to health insurance carriers and Healthcare Exchanges o Applies to self-funded employer health plans (small and large employer plans) o Reporting must include Name, address, TIN of primary insured, spouse and dependents covered Dates of coverage Information regarding the minimum essential coverage plan 7

8. Code section 6056 mandates ALEs make reports to the IRS regarding their full-time employees and health plans o Employer information o Whether minimum essential coverage, affordable and minimum value plan is offered to full-time employees o Certification as to certain plan design features: Length of waiting period Months plan was available Lowest cost, coverage premium in each enrollment category Employer’s share of total allocated costs under plan Number of full-time employees per month Identifying information for each covered employee Safe harbors relied upon for “affordability” analysis 8

9. Code section 6056 also mandates ALEs report to their full-time employees: o Report must include name and address of the employer, and the phone number of the employer o Other information required of the individual return is established by Regulation—and shown by the Form 1095-C and its instructions o Reports due to employees by February 1, 2016 this year and by January 31 st in subsequent years. 9

10. 1095-A: The Health Insurance Marketplace Report—this is the report that the Exchange will send to the IRS disclosing who is covered by the Exchange, what plan is purchased, etc. This report will be used by the IRS to determine who is entitled to a tax credit or subsidy and whether employers should be assessed the affordability penalty 1095-B: This is the report sent by insurance companies and self-funded plans sponsored by non-ALEs to participants 1094-B: This is the report from the insurance companies and small employer self- funded plans to the IRS reporting who is covered by the insurance/plans 1095-C: This is the report from the ALE to each full-time employee that is covered by the employer’s plan, whether or not the ALE’s plan is fully-insured (self-funded plans must complete part III of Form 1095-C) 1094-C: This is the report from the ALE to the IRS disclosing who was offered coverage by the ALE’s plan, and various other information concerning coverage and price of the plan, whether or not the ALE’s plan is fully-insured 10

11. LETS LOOK AT THE ACTUAL FORMS 11

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13. Who is your dependent? Changes in Income? o Distributions from pension plans or IRAs o Sale of investments o Other unexpected income o Alteration of insurance premium pricing 13

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15. Small employer with self-funded plan, must report ALEs report on Form 1094-C, not 1094-B, regardless whether self-funded For Supplemental Coverage Situations: o An ALE that has an insured group health plan and an HRA will report the group health plan coverage on form 1094-C and 1095-C (the insurance carrier will report on the 1094-B and 1095-B) and then will report the HRA on the 1094-B and 1094-B. o A non-ALE that has a self-funded health plan and an HRA will report the health plan coverage on 1094-B and 1095-B. o An ALE that has a self-funded group health plan and an HRA will report on 1094-C and 1095- C. Small employer self-funded plan must meet “minimum essential coverage requirements or employees may be subject to individual penalty for failing to maintain minimum essential coverage (also minimum value rules) o IRS says “skinny plans” do not satisfy the minimum value rules 15

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17. The IRS will assess individual penalties based upon the information received from the plan provider or insurance company o Individuals with employer-provided coverage may find the insurance reporting does not jive with what the employer reports and this may lead to a penalty assessment o Individuals may have up to 90 days in a year without coverage and not be assessed a penalty o Coverage for an entire month will be credited if it exists for one day of a month. o Small employer, self-funded plans must report ALL covered individuals, whether or not they are employees. 17

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19. Controlled and affiliated service groups o Each entity must report for its own employees, one form for each employee reporting by month o Special reporting for employees that work for more than one entity Employee working hours in same week—the entity with the greater number of hours worked reports for both entities Employee working partial year—the both entities report for the particular months they offered coverage Non-employees (COBRA/Retired/Directors) o ALEs with self-funded plans must report (Part III) o ALEs with fully insured plans must report only current year offers to retirees and COBRA recipients when they accept coverage and may report non-employee retirees and COBRA recipients on on-going basis Divisions of single employer (division of company or unit of governmental employer) must also be reported in aggregate by designated governmental entity or at employer level on 1094-C Loss of Transition Relief for small ALEs may lead unexpectedly to exposure to ACA penalties. o Change of plan year after December 27, 2012 o Substantially modified plan, eligibility or pricing after February 9, 2014 19

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21. Offer of coverage must be documented (burden of proof on the employer) o Boxes also have alternative designations for spouse and dependent coverage o Boxes allow employer to designate waiting period months o Boxes allow employer to designate non-employment months Codes must be completed for plan design and pricing o Boxes 1B-1I specify the plan design and report whether coverage was affordable and provided minimum value Potential relief for employers as to multiemployer plans 21

22. The employer, not the union or its administrator, is responsible for the 1095-C and 1094-C reporting The challenge is getting the information from the union plan administrator to the employer so reports can be completed Draft IRS Instructions to the Draft Form 1094-C and 1095-C provides special instructions in accordance with transitional relief to employers so they do not need to show they offered minimum essential coverage to union employees for whom they make a contribution to a union health plan. 22

23. Entities that are members of a controlled or affiliated service group as described by Code section 414 must each report on their own 1094-Cs and 1095-C The authoritative transmittal will allow the IRS to determine whether hours worked by one employee for two controlled group members are aggregated to determine “full-time” status Note: Members of a controlled or affiliated service group are treated as one employer for group health plans—so service of an employee for one organization is treated as service for all organizations in eligibility determinations. 23

24. Non-Profit Entities, including Church organizations are also subject to the controlled and affiliated service group rules and ACA reporting obligations Governmental entities must report for their own employees on Form 1094-C and 1095-C, but the “DGE” or Designated Governmental Entity must also report coverage on a 1094-C for all employees of all entities, agencies or divisions Treasury Regulations give Non-profit and governmental entities some discretion to determine related entity and method of reporting issues 24

25. Parent/Subsidiary: 80% of the voting power of one entity is held by the other entity Brother/Sister: 80% of the voting power of the entities is held by 5 or fewer persons and more than 50% of the voting power is held by the same persons Effective Control: The same persons, directors, etc. effectively control the organizations at issue Affiliated Service/Management Organizations: Professional organizations or management companies where the highly compensated employees are effectively carved out into a separate organization from the rank-n-file employees—but both organizations work together to provide the same services or products 25

26. Employee statements are due THIS YEAR on February 1, 2016 IRS transmittals are due February 28, 2016 (March 31, 2016 if filed electronically) COBRA offers of coverage and coverage are reported only for those employees who take such coverage. Current COBRA recipients may be reported by the ALE, and must be reported if ALE is self- funded Penalties are $250 for each required report, up to $3 million cap— subject to good faith/reasonable cause defense—IRS has announced it will not impose penalties for simple errors on a report Willful disregard of reporting is $500 per form an there is no “cap” 26

27. Expect penalty assessments under 4980H and failures to report to come in a similar manner to assessments for payroll tax IRS will give “reasonable cause/good faith” waivers of penalties for errors on the reports—but likely not for FAILURES to report. Generally speaking—unless guidance as to appeals procedures is issued--relief will likely come through collection due process appeals due to collection folks being over-burdened and having little discretion or power to change tax and penalty assessments Uncertainty exists whether IRS will initially rely upon insurance company or employer reporting where a conflict exists (but we “bet” that insurance company report rules over employer report) 27

28. For more information about certification or recertification, please visit the HR Certification Institute website at www.hrci.org.

29. To obtain a recording of this presentation, or to register for future presentations, contact your local UBA Partner Firm. Thank you for your participation in the UBA Employer Webinar Series If your question was not answered during the webinar or if you have a follow-up question, you can email the presenters today or tomorrow at: UBAwebinars@jacksonlewis.com www.UBAbenefits.com www.jacksonlewis.com

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