1. Surviving in a Variable Hours Environment

2. Reid Wagner Senior Consultant at Trion Product Consultant Introduction Overview Live Demo Data Transfer Introduction Matt S. Rick B. Aurico FAQs

3. Affected Employers Large Employers 100 or more full-time equivalent employees in 2015 50 or more full-time equivalent employees in 2016 Control groups For a group of organizations with common ownership or control, the determination of large employer status is made based on the IRS controlled group rules (IRC §§414(b), (c), (m), and (o)) – In other words, if the group meets the IRS criteria for a controlled group and together the organizations have 50 or more full-time employees (100 or more for 2015 only), employer shared responsibility applies to all of the organizations, regardless of their individual size.

4. Knee Jerk Reaction Just Pay the Penalty Penalty per FT employee:$2,000 Non-deductibility impact:34% Revenue impact:$3,030 Total FT employees:1,000 Total impact:$3,030,000 Add a Basic Plan Cost for single coverage:$6,000 (60% plan) Permitted EE contribution:$2,375 ($25,000 salary) Net ER cost:$3,625 Total FT employees:1,000 Expected participation: 60% Total impact: $2,175,000

5. The Three Keys to Success 1 1 A good benefit plan design. 2 2 Eligibility provisions that are consistent with the budgetary, operational and strategic goals of the organization. 3 3 The systems to manage the eligibility provisions.

6. BENEFIT CONSIDERATIONS

7. Which Do You Choose? Play…. Altering the benefit structures Altering employee hours worked (20% of retail and hospitality employers will adopt this*) Altering the commitment to dependent coverage Defined contribution strategies Private exchangesPublic exchanges Combinations of the various tactics * Mercer’s National Survey of Employer-Sponsored Health Plans 2012

8. Recently Adopted “Play” Strategies Restructuring workforce and employment of Full-Time (FT) Employees. – Almost all retail and food service companies. – 37 Colleges and Universities reducing hours for Adjunct Professors. Taking advantage of the public exchange. – Trader Joes, Starbucks and Target dropped health plans for Part-Time (PT) employees. Private exchanges. – Sears implemented for all employees. Leveraging health benefits as a competitive advantage for recruiting/retention. – Costco offering a “competitive” benefits package to newly-eligible FT employees. – Cumberland Farms reclassifying 1,500 PT employees as FT employees. Modifying current plans just to comply. – Employers with “competitive” plans @ 70-80% value reduced to a 60% minimum value plan. – Employers offer plan value options, but company subsidy based only on 60% value plan. – Benefits reduced for dependents and company subsidy focused on employees. – Minimum Essential Coverage (MEC) plan offered to satisfy Individual Mandate.

9. Medical Care Benefit Plan Options MEC Skinny BronzeBronzeCatalyst Typical Deductible $0 individual/$0 family$3,000 individual/$9,000 family Co-Pays Employee co-pays range from $15 to $400 depending on the service. Employee co-pays range from $15 to $250 depending on the service. Co-Insurance All other medical expenses during the year are paid by the employee Employee pays additional costs for the initial services plus the costs for all other services, up to $1,850 individual/$12,700 family Employee pays 40% of additional costs up to $6,350 individual/$12,700 family 0% for the first $2,000 in expenses then 40% up to the out-of-pocket-maximum. It is a donut hole. Expenses Paid by Plan for Specific Services 63 preventive services Immunizations Outpatient services after co- pays. Excludes all hospital and surgical expenses. MEC services are covered Full Medical Services After Deductibles and co-pays First $2,000 in expenses then deductible then full medical services Sample Prices $60$200$400$500

10. MANAGING ELIGIBILITY

11. Hours worked determines who is and who is not eligible; employee designation and look back periods determine when they are eligible. Make sure the products chosen have achievable participation requirements Be sure to consider ERISA 510 Understanding the rules of the Affordable Care Act (ACA) is crucial and how they interact with the insurance marketplace Today’s Focus: Managing Employee Eligibility “The greatest cost control mechanism is to have employees who are not eligible, or choose not to participate in, full medical plans without triggering penalties.”

12. Measuring Full-Time Status Employer Shared Responsibility regulations define full-time employee to mean, with respect to any month, an employee who is employed on average at least 30 hours per week. For the purpose of determining full-time status, 130 hours of service in a calendar month is treated as the monthly equivalent of 30 hours per week. The final regulations provide two methods for determining full-time employee status: – Look-back measurement method. – Monthly measurement method.

13. Variable Hour Employees A variable hour employee is one for whom, based on the facts and circumstances at the start date, it cannot be determined that the employee is reasonably expected to be employed on average at least 30 hours per week. Factors to consider include, but are not limited to: – Whether the employee is replacing an employee who was or was not a FT employee. – The extent to which employees in the same or comparable positions are or are not FT employees. – Whether the job was advertised, or otherwise communicated to the new hire or otherwise documented, as requiring hours of service that would average 30 (or more) hours of service per week or less than 30 hours of service per week. – The employer may not take into account the likelihood that the employee may terminate employment before the end of the initial measurement period. A new employee initially expected to work full-time may be treated as a variable hour employee if the employer reasonably expects that the employee’s full-time schedule will be of limited duration, and the employee may not average 30 hours per week over the initial measurement period.

14. Offering Benefits Full-time employees Once an employee meets a plan’s substantive eligibility conditions, an employer offering benefits cannot apply a benefit waiting period of more than 90 days. Employer will be in violation of waiting period rule if coverage is not offered within 90 days of employee meeting plan’s substantive eligibility conditions (penalty is $100 per day of non- compliance per affected individual). A calendar month orientation period can precede the 90 day benefit waiting period. This means employees can work up to 121 days before they are covered under the group health plan without incurring a penalty under the waiting period rule. Counting the orientation and waiting periods includes weekends and holidays. Part-time employees An employer is not required to offer coverage to employees averaging less than 30 hrs/week; however, if it does, the 90-day waiting period and orientation period limits apply

15. Orientation Period A period of one month less one day during which an employee and the employer can determine if the employment is mutually satisfactory (and is not a mere subterfuge for the passage of time). In theory, this means between the orientation period and the waiting period, the employee could work up to 121 days before coverage becomes effective. A conflict exists between the waiting period and employer mandate rules, as an employer must offer coverage by the first day of the fourth full calendar month of employment in order to avoid potential penalties under the employer mandate. If the objective is to stretch out eligibility to the maximum limit allowable under each rule, each employee’s initial start date has to be looked at individually. The most effective way to satisfy the employer mandate coverage provision and maximize the allowed orientation and waiting period durations is to have coverage begin on the 1st day of the month that begins on or after 60 days from the end of a 1-month orientation period.

16. Calendar Year Analysis Hire Date1-Month Orientation End60th Day Post-Orientation Coverage Effective Date (1 st of Month Coinciding With/Following 60 Days & 1 st of 4 th Calendar Month) Days With No Coverage 1/1/141/31/144/1/144/1/201490 1/2/142/1/144/2/145/1/2014119 1/3/142/2/144/3/145/1/2014118 1/4/142/3/144/4/145/1/2014117 1/5/142/4/144/5/145/1/2014116 1/6/142/5/144/6/145/1/2014115 1/7/142/6/144/7/145/1/2014114 1/8/142/7/144/8/145/1/2014113 1/9/142/8/144/9/145/1/2014112 1/10/142/9/144/10/145/1/2014111 1/11/142/10/144/11/145/1/2014110 1/12/142/11/144/12/145/1/2014109 1/13/142/12/144/13/145/1/2014108 1/14/142/13/144/14/145/1/2014107 1/15/142/14/144/15/145/1/2014106 1/16/142/15/144/16/145/1/2014105 1/17/142/16/144/17/145/1/2014104 1/18/142/17/144/18/145/1/2014103 1/19/142/18/144/19/145/1/2014102 1/20/142/19/144/20/145/1/2014101 1/21/142/20/144/21/145/1/2014100 1/22/142/21/144/22/145/1/201499 1/23/142/22/144/23/145/1/201498 1/24/142/23/144/24/145/1/201497 1/25/142/24/144/25/145/1/201496 1/26/142/25/144/26/145/1/201495 1/27/142/26/144/27/145/1/201494 1/28/142/27/144/28/145/1/201493 1/29/142/28/144/29/145/1/201492 1/30/142/28/144/29/145/1/201491 1/31/142/28/144/29/145/1/201490

17. MEASUREMENT PERIODS

18. Look-Back Measurement Method An employer may determine full-time/part-time status by looking back at a defined period of time (measurement period) to determine whether an employee averaged at least 30 hours of work per week during that period and then applying that status to the employee throughout a subsequent defined period of time (stability period), regardless of the number of hours the employee actually works during the stability period (provided he/she remains employed). Employers may opt to use a limited administrative period between the measurement and stability periods to perform measurement calculations and conduct enrollment for those who are benefit eligible (the period cannot exceed 90 days and does not reduce or increase the length of the measurement or stability periods). Employers may apply periods of different lengths or with different begin/end dates only for certain employee distinctions: – Collectively bargained vs. non-collectively bargained employees. – Employee groups covered under different collective bargaining agreements. – Salary vs. hourly employees. – Employees in different states.

19. Measurement periods may be 3 to 12 months in duration, at employer’s discretion. – For ongoing employees, period is called “Standard” Measurement Period. – For new variable/seasonal/part-time employees, period is called “Initial” Measurement Period – employer cannot be subject to shared responsibility penalties for not offering coverage to variable/seasonal/part-time employees during the initial measurement period, even if employees work 30+ hours/week during the measurement period. Stability periods must at least 6 months but no shorter than the standard measurement period*. – For ongoing employees, period is called “Standard” Stability Period. – For new variable/seasonal/part-time employees, period is called “Initial” Stability Period. – Employer cannot be subject to shared responsibility penalties for not offering coverage to employees deemed not full-time during a stability period, even if the employee works 30+ hours/week during the stability period. – Employer can be subject to shared responsibility penalties for not offering coverage to employees deemed full-time during a stability period, even if the employee works less than 30 hours/week during the stability period. Administrative periods may last up to 90 days. – Cannot reduce or increase the length of the measurement or stability periods. – For new variable/seasonal/part-time employees, employer cannot be subject to shared responsibility penalties for not offering coverage during the initial administrative period, even if employees work 30+ hours/week. *Initial measurement periods may be up to 1 month shorter than initial stability period. Look-Back Measurement Method

20. Additional Considerations While applying this process to regular full-time employees may seem unnecessary, it becomes relevant if a full-time employee moves to a variable hour, part-time or seasonal position. Employers may adjust the begin/end dates of the standard measurement period to avoid splitting pay periods. – Example: an employer using the calendar year as a measurement period could exclude the entire payroll period that included January 1 if it included the entire payroll period that included December 31, or, alternatively, could exclude the entire payroll period that included December 31 of a calendar year if it included the entire payroll period that included January 1 of that calendar year. After the first cycle, administrative periods must overlap the prior stability period to prevent any gaps in coverage between stability periods. Employers planning to use a standard measurement period of longer than 6 months may use a shorter period for just 2015 – no less than 6 months, beginning no later than 7/1/14 and ending no earlier than 90 days before the first day of the 2015 plan year.

21. 201420152016 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Initial Stability PT INELIGIBLE Initial Stability PT INELIGIBLE 201420152016 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 201420152016 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Look-Back Method AP Standard Stability FT ELIGIBLE Standard Stability FT ELIGIBLE Standard Measurement 30+ HOURS/WEEK Standard Measurement 30+ HOURS/WEEK AP Initial Stability FT ELIGIBLE Initial Stability FT ELIGIBLE Initial Measurement 30+ HOURS/WEEK Initial Measurement 30+ HOURS/WEEK Standard Stability PT INELIGIBLE Standard Stability PT INELIGIBLE Standard Measurement <30 HOURS/WEEK Standard Measurement <30 HOURS/WEEK AP Initial Stability FT ELIGIBLE Initial Stability FT ELIGIBLE Initial Measurement 30+ HOURS/WEEK Initial Measurement 30+ HOURS/WEEK AP Standard Stability FT ELIGIBLE Standard Stability FT ELIGIBLE Standard Measurement 30+ HOURS/WEEK Standard Measurement 30+ HOURS/WEEK AP Initial Measurement <30 HOURS/WEEK Initial Measurement <30 HOURS/WEEK Employee averages 30+ hrs/week in both initial measurement pd. and overlapping standard measurement period. Employee averages 30+ hrs/week in initial measurement pd. but <30 hrs/week in overlapping standard measurement period. Employee averages <30 hrs/week in initial measurement pd. but 30+ hrs/week in overlapping standard measurement period. Initial and standard stability pds. blend seamlessly (same is true if <30 hrs for both measurement periods.) Employee must be considered FT until end of the full initial stability pd., regardless of overlapping standard stability period. Initial stability pd. can last no longer than the beginning of the overlapping standard stability period. Initial To Standard Stability Period Transitions

22. Breaks In Service Break in service: period of at least 4 consecutive weeks during which no service is credited (excluding special unpaid leave, i.e. FMLA, USERRA, or jury duty). If period during which no hours of service are credited is 13 1 or more consecutive weeks, employee may be considered a new hire and a new waiting period or initial measurement period applied. If period of no service is at least 4 weeks but less than 13 1, employer may apply “rule of parity”: if break is longer than period of service immediately preceding break in service, employee may be considered a new hire. If neither of the above is true and employer is using the look-back method: – Employee must be considered a continuing employee and retain the status the employee had with respect to application of any stability period and, if eligible, must be offered coverage as of the first day service resumes (or as soon as administratively practicable). – Employee does not begin a new initial measurement period and is credited with 0 hours of service during the break in service. Standard Stability Jan 1 – Dec 31 Standard Stability Jan 1 – Dec 31 AP Standard Stability Jan 1 – Dec 31 Standard Stability Jan 1 – Dec 31 Standard Measurement Oct 16 – Oct 15 Standard Measurement Oct 16 – Oct 15 EE treated as FT during current stability pd. terms 3/15 EE returns 5/15, is treated as FT for duration of stability period EE is credited with 0 hours service during break in service. 1 Break in service threshold for educational organizations is 26 weeks rather than 13. AP Standard Measurement Oct 16 – Oct 15 Standard Measurement Oct 16 – Oct 15

23. Change in Status If a variable/seasonal/part-time employee moves into a full-time position, required treatment varies based on timing of the status change If employee is a new employee that has not completed a full initial measurement period when the change in status occurs, employee must be treated as FT: a)As of the 1st day of the 4th month following the status change b)Or, if earlier and the employee averaged 30+ hour/week during the initial measurement period, the date the initial stability period would have begun If employee has completed a measurement period when the change in status occurs, the change in status does not change the employee’s FT/non-FT treatment until the end of the stability period that corresponds to the prior applicable measurement period 2013201420152016 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec APAP APAP Initial Stability 5/1 – 4/30 Initial Measurement 4/1 – 3/31 DOH 4/1/14 Scenario 1: EE moves into FT position 7/1/14; EE is eligible 10/1/14 based on provision a) above Scenario 2: EE moves into FT position 3/1/15 and averaged 30+ hrs/week from 4/1/14 – 3/31/15; EE is eligible as of 5/1/15 based on provision b) above 2013201420152016 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec APAP APAP Standard Stability 1/1 – 12/31 Standard Measure 10/16 – 10/15 EE did not average 30+ hours in prior measurement period and is not eligible for coverage during current stability period. EE moves into FT position 3/1/15; however, EE’s non-eligible status does not change during 2015 stability period Variable Hour/Seasonal/Part-Time to Full-Time Position

24. Change in Status Full-Time To Variable/Seasonal/Part-Time Position If the change in status occurs within the first 90 days of employment, the employee may be treated as a new variable hour employee retroactive to the employee’s original date of hire. If the change in status occurs after the first 90 days of employment but before the employee is an ongoing employee (an employee that has been employed a full standard measurement period), status will continue to be determined based on the monthly measurement method. If the change in status occurs after the employee has become an ongoing employee that change will be captured in a subsequent stability period. 2013201420152016 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec APAP APAP Standard Stability 1/1 – 12/31 Standard Measure 10/16 – 10/15 EE was FT (non-variable/seasonal/part-time) in prior measurement period. On 3/1/15, EE moves into a variable hour position averaging 20 hours/week. Under look-back method, EE’s eligible status does not change during 2015 stability period because average hours during look-back period were 30+. APAP APAP Standard Stability 1/1 – 12/31 Standard Measure 10/16 – 10/15 During the subsequent measurement period, EE averaged 28 hours/week. EE becomes ineligible as of stability period beginning 1/1/2016. Alternative: If employee averages less than 30 hours/week each of the 3 months following the status change (and the employer has offered the employee minimum value coverage continuously since at least the first day of the 4 th full calendar month of employment), the employer is permitted to change the measurement method for this employee to the monthly measurement method starting with the 1 st day of the 4 th full calendar month after the status change and may continue to apply the monthly measurement method through the end of the first full measurement period that would have applied had the employee remained under the applicable look- back measurement method.

25. TOOLS FOR MANAGING ACA REQUIREMENTS

26. ACA Dashboard

27. Configurable Measurement Periods & Reports

29. Federal Reporting Requirements IRS Section 6056 requires large employers to file aggregate reports to the IRS (Forms 1094-C) and individual statements to each FTE about their health coverage (Form 1095-C) beginning with the 2015 calendar year. Form 1095 will contain two parts: – Part A will contain information provided to the employee concerning the employer mandate, including the employer offering coverage, the number of FTE’s covered each month including dates of coverage, information about the minimum value offered to the FTE for each month, including the lowest employee cost for self-only coverage offered. – Part B will contain information about the individual enrolled (employee and dependents) in the MEC plan and the months they are covered. – More information about the required information will be available when draft Forms are issued. While employers will not provide forms to the IRS and to employees until early 2016, they will need to be collecting information monthly to complete the filing requirements.

30. ROADMAP FOR MANAGING YOUR WORKFORCE UNDER ACA GUIDELINES

31. ACA Strategy Benefit Costs Understand your plan values, determine your options. Determine if a Minimum Essential plan makes sense for you. Build a contribution strategy that takes appropriate risks in regard to the 9.5% affordability provision. Make sure you can obtain the products you require. Eligibility Strategies Calculate the impact of various lookback periods and determine which one works best for you. Examine if any positions in your company could be sufficiently staffed by part time or variable hour employees. Should you consider FT and PT headcounts? Understand your hiring and training costs and the cost of turnover. Would offering benefits improve your turnover? Is your business better off with more FT employees that are seasoned, trained and loyal, and require benefits? What is the cost benefit analysis? More sales, reduced expenses. The donut hole strategy: identify your good PT people and give them more hours. As the labor force tightens, this strategy could be more viable. Make sure you have the administrative systems in place to manage your strategy. Be mindful of ERISA 510 which prohibit employers from cutting hours to keep an employee from earning benefits under a retirement plan.

32. Questions