1. It’s Hurricane Season Again for HCR: New “Final” PPACA Regulations Final Pay or Play & 90-Day Waiting Period Provisions Florida Educational Negotiators, May 15, 2014 This material and any accompanying remarks are provided for informational purposes only and nothing contained in either should be taken as a legal opinion or as legal advice Copyright 2014 All rights reserved

2. 1 Final Pay or Play Provisions

3. 2 Final Employer Pay or Play Provisions Final Pay or Play Provisions issued February 10, 2014 implement the employer shared responsibility regulations under PPACA  Final regulations adopt many of the proposed rules, as well as add many new changes Highlights of new guidance include:  Delayed employer mandate for some employers;  Change in percentage of covered employees;  Coverage of dependents;  Effective date for non-calendar year plans;  Look-Back measurement period; and  Determination of full-time status for certain employees

4. 3 Final Employer Pay or Play Provisions Delay final pay or play provisions until 2016 for – 50 to 99 FTEs  Use any 6 consecutive month period in 2014 as reference Must also certify on a prescribed form that:  No reduction of workforce or overall hours of service to meet transition relief February 9, 2014 – December 31, 2014 and  No elimination or material reduction of health coverage offered as of February 9, 2014, during February 9, 2014 – December 31, 2015 (for non-calendar year plans the last day of the employer’s 2015 plan year) Large employers continue to be subject to the final pay or play rules beginning in 2015

5. 4 Final Employer Pay or Play Provisions New transition rules include:  Large employers (100 or more FTEs) in 2015 subject to pay or play mandate required to provide MEC for at least 70% of full- time employees (30 or more hours per week) rather than 95% ‒ This does NOT affect MV and Affordability requirements ‒ Back to 95% in 2016  Relief for dependent coverage ‒ Requirement to ADD children up to age 26 delayed until 2016 ‒ Applies only to employers not currently offering dependent coverage, or offering to some dependents but not all, or is not MEC ‒ Children no longer includes stepchildren or foster children

6. 5 Final Employer Pay or Play Provisions Retains prior transition rules including:  Look-back measurement period ‒ 2015 - variable hour employees’ full-time status may be determined based on 6 month look-back measurement period ‒ 6 month look-back may be used even if stability period is 12 months ‒ For 2015 the optional transition rule applies – use of the measurement period of at least 6 months but less than 12 months even if the employer’s stability period was 12 months ‒ Ongoing final pay or play rules require that the stability period be the longer of 6 months or the length of the measurement period for the first year that pay or play originally in effect ‒ Non-calendar year plan effective dates and requirements

7. 6 Final Employer Pay or Play Provisions Permits a non-calendar year plan to begin meeting its shared responsibility requirements on the first day of the plan’s 2015 calendar year rather than January 1, 2015 and avoid the penalty if:  Employer maintains an unmodified non-calendar year plan  Complies with one of the three transition rules ‒ Pre-2015 Eligibility Transition Rule ‒ Significant Percentage Transition Guidance (All Employees Rule) ‒ Significant Percentage Transition Guidance (Full-Time Employees Rule)  Meets the coverage rules, offering affordable coverage providing MV no later than the first day of 2015 plan year and the employee is not eligible for coverage under a calendar year group health plan  Modification of the percentage of covered employees

8. 7 Final Employer Pay or Play Provisions “Employee” categories not considered full-time employees  Volunteers ‒ Bona fide volunteers for a government or tax-exempt entity whose only compensation is reimbursement for reasonable expenses or reasonable benefits and nominal fees, customarily paid by similar entities  Seasonal employees ‒ Positions that have customary annual employment of 6 months or less and begin each calendar year in approximately the same part of the year, summer/winter  Student work-study programs ‒ All hours of service for which student is paid or entitled to payment are required to be counted, except under federal work-study or similar state or political subdivision programs

9. 8 Final Employer Pay or Play Provisions “Employee” categories not considered full-time employees  Educational employees ‒ Teachers are not treated as part-time based upon school’s schedule ‒ Use of the 12-month measurement period must consider employment break periods (e.g., summer break) of four or more consecutive weeks by either: ‒ Determining average hours of service per week, excluding employment break period; or ‒ Crediting hours of service for the employment break period at average weekly rate for non-employment break (but not more than 501 hours of service)

10. 9 Final Employer Pay or Play Provisions Example A – Determining average hours of service per week for the measurement period  Facts ‒ Steven Tyler is employed by Aerosmith U for 38 HOS per week from 9/7/14 – 5/23/15 ‒ Takes the summer off and resumes teaching 9/7/15  Conclusion ‒ The 15 week period 5/24/15 – 9/5/15 is not greater than 26 weeks/immediately preceding period of employment ‒ Steven is not treated as terminated and rehired ‒ Credited with average HOS per week of 38 during the 15 week period (during which he would otherwise not be credited with HOS) ‒ But not more than 501 HOS (15 X 38 = 570)

11. 10 Final Employer Pay or Play Provisions Example B – Determining average hours of service per week for the measurement period  Facts ‒ Same facts as example A, but Steven Tyler does not resume teaching at Aerosmith U until 12/5/15  Conclusion ‒ 5/24/15 – 12/31/15 exceeds 26 weeks and Steven is treated as terminated on 5/24/15 and rehired on 12/31/15 ‒ He is a new employee on 12/5/15, and both his HOS prior to termination and the period between termination and rehire (when no HOS credited) are not taken into account for the new measurement period after rehire ‒ Averaging does not apply b/c Steven is a new employee rather than a continuing one on 12/5/15

12. 11 Final Employer Pay or Play Provisions “Employee” categories not considered full-time employees  Adjunct faculty ‒ Reasonable and consistent method for crediting hours ‒ IRS safe harbor or 2 ¼ plus rule ‒ 2 ¼ times each hour of teaching or classroom time ‒ Including 1 ¼ for each hour spent preparing for class ‒ Plus any additional hours performing duties outside the classroom, i.e., office hours or staff meetings ‒ May rely on at least through 2015  Example: Professor Rock n Roll teaches a 3 hour class twice a week. In addition, he is required to provide 5 hours of office time for students and attend a 3 hour weekly staff meeting. Thus, a total of 21.5 hours (2 ¼ X 6 = 13.5 + 5 + 3)

13. 12 Final PPACA 90-Day Waiting Period Provisions

14. 13 In General No more than 90 day wait  Count all calendar days beginning on enrollment date including weekends and holidays Health coverage eligibility conditions based solely on the lapse of a time period are permissible for no more than 90 days Period before late or special enrollment is not waiting period

15. 14 No More than 90 Calendar Days Example A - No more than 90 calendar days beginning on enrollment date  Facts ‒ In 2015 Group Health Plan provides FT employees eligible for plan coverage ‒ Alice Cooper begins employment as FT employee on January 19, 2015. (February has 28 days in 2015.)  Conclusion ‒ Alice HAS to become eligible for coverage effective no later than April 19 ‒ Coverage under the plan must become effective no later than April 19 (the 91st day after employment starts) ‒ 1/19/15 – 4/18/15 (inclusive of 1/19 and 4/18) = 90 days = Waiting Period ‒ Coverage Begins no later than 4/19 – the 91st day of employment

16. 15 Period Before Eligibility Period Is NOT Part of “Waiting Period” Example B - Waiting Period starts once ELIGIBILITY starts  Facts ‒ Same Plan as A, but also must be a salaried employee to be eligible (assume meets PPACA and nondiscrimination requirements) ‒ Billy Squier begins employment as hourly employee on January 19, 2015 ‒ Billy is not eligible for coverage and does not become enrolled ‒ Billy is promoted on April 11 and becomes eligible for Plan  Conclusion ‒ January 19 through April 10 is not counted because he is not eligible for the Plan ‒ Billy would HAVE to become enrolled no later than July 10 ‒ Coverage has to be effective no later than the 91st day after enrollment ‒ 4/11/15 – 7/09/15 (inclusive of 4/11 and 7/09) = 90 days = Waiting Period ‒ Coverage Begins no later than 7/10– the 91st day of eligibility

17. 16 Delay Caused Solely by Employee Inaction Example C - Waiting Period starts once ELIGIBILITY starts but EE waits to submit enrollment packet  Facts ‒ Same Plan as A. Eligibility is effective first day of payroll period after employee submits completed enrollment forms which are distributed on first day of employment ‒ Chuck Berry begins employment on 10/31 ‒ Chuck submits forms on January 28, the 90th day after employment ‒ First payroll period after the submission begins on February 4, 7 days later  Conclusion ‒ Chuck’s coverage could have started on 1/29 but he was late ‒ Plan meets the requirement even though Chuck’s actual enrollment is after the 91st day ‒ Chuck’s coverage can start on February 4 because he COULD have sent in forms timely to meet the 90 day requirement

18. 17 Variable Hours or Specific Hour Requirement  If Plan conditions eligibility on full-time or specific hours of service and employer reasonably believes the EE will not be FT, Plan can use a measurement period to determine if condition is met if measurement period: ‒ does not exceed 12 months ‒ begins on any date between start date & first day of first calendar month following start date and ‒ coverage is effective no later than 13 months from start date, plus time remaining until first day of next calendar month  If Plan conditions eligibility on completion of a number of hours of service (not greater than 1,200 hours) ‒ Waiting period starts first day afterwards, cannot exceed 90 days ‒ Hours-of-service requirement can only be used once

19. 18 Reasonable to Assume EE may not be Full-Time Example D - Variable or not reasonable to assume FT  Facts ‒ Same Plan as A ‒ Dave Matthews begins work on 11/26/14 but with variable hours that will fluctuate depending on availability of work and Dave’s availability while he is not promoting his next album between 20 and 45 hours per week ‒ It cannot reasonably be determined how many hours he would work ‒ Plan uses 12 month measurement period ‒ Coverage is effective the first day of the calendar month following submission of completed enrollment forms ‒ On 11/25/15 it is determined that Dave did work enough hours to be FT and his coverage is elected and will start on 1- 1-16

20. 19 Reasonable to Assume EE may not be Full-Time (cont.) Example D - Variable or not reasonable to assume FT (cont.)  Conclusion – the measurement period is permissible ‒ Is not considered designed to avoid compliance with 90-day waiting period limitation ‒ Plan may use reasonable period of time to determine whether variable-hour EE is FT provided: ‒ period is no longer than 12 months ‒ period begins on date between employee’s start date and first day of next calendar month (inclusive) ‒ coverage is made effective no later than 13 months from Dave’s start date plus, if the employee’s start date is not the first day of a calendar month, the time remaining until the first day of the next calendar month and ‒ In addition to measurement period, no more than 90 days elapse prior to the employee’s eligibility for coverage

21. 20 Orientation Periods New “reasonable and bona fide employment-based orientation period" added in addition to 90-day waiting period requirement Can delay start of the waiting period until after orientation period is complete, if it does not exceed one month, to the safe harbor substantive eligibility conditions ‒ May add one calendar month after start date and subtract one calendar day, if orientation period ends on/before end of next calendar month ‒ If after adding a calendar month the orientation date does not end in the next calendar month following the month of the employee’s start date, the last day must be the last day of the next calendar month

22. 21 Rehire Rules Waiting periods for rehires  May require terminated employee rehired by same employer to meet the plan’s eligibility criteria again, if reasonable under circumstances and not subterfuge to avoid compliance with 90- day waiting period  Covers employee move from a job with health coverage to a job without health coverage and then move to an eligible job classification

23. 22 Rehire Rules Example E - Rehires  Facts ‒ Same Plan as A ‒ Eric Clapton retires after 30 years of service with Cream to start solo career ‒ It does not work out as a solo performer so Eric comes back to Cream after just three months and Cream tells him he has to wait 90 days to enroll in the Plan  Conclusion ‒ Plan meets requirements and can make Eric wait until 90 days after he returns to the band and treat him like a newly eligible employee despite being the best guitar player of all time

24. 23 Final PPACA 90-Day Waiting Period Provisions Effective dates  The 90-day waiting period requirement is effective as of the first plan year beginning 1/1/2014 but the regulations are effective as of the first plan year beginning on or after 1/1/2015  Proposed regulations open for comment and will not become final and effective prior to 1/1/2015

25. 24 Final PPACA Reporting Requirements Reporting requirements  Code Sec. 6055 – annual reporting of minimum essential coverage  Code Sec. 6056 – annual reporting for large employers under Pay or Play mandate Deadlines for reporting  Statements for individuals and FTEs – February 1, 2016  Reporting to the IRS – March 1, 2016 or March 31, 2016 (if electronically filed) Combined form reporting Simplified employer reporting for qualified offer

26. 25 Questions?

27. 26 Contact Information Jim Powell 813.490.8324 Tara Silver-Malyska 972.715.2177