Health Care Reform: Compliance Checklist
Nixon peabody LLP
September 16, 2014
Health Care Reform: Compliance Checklist By Kate Saracene
2013-2014 Health Reform Mandates:
Execute FSA amendments for $2,500 limit and $500 rollover (due December 31, 2014) Ensure PCORI tax was paid if applicable (due July 31 each year) Distribute Notice of Exchanges (beginning October 1, 2013 and within 14 days of hire) Use new SBC template at 2014 open enrollment and for special enrollment events Amend your policies so that no employee has a waiting period for health coverage in excess of 90 days (exception for bona fide orientation periods up to 30 days) Ensure plan design has been amended to comply with new 2014 plan design rules (covering all essential health benefits for small group policies, out-of-pocket maximums no greater than $6,350 single / $12,700 family, coverage for clinical trials, elimination of pre-existing condition exclusions, elimination of annual limits) Terminate standalone HRAs and amend existing HRAs to meet new integration rules Correct non-compliant FSAs that are not excepted benefits by reducing employer contribution to $500, restricting FSA eligibility to only those employees eligible for major medical plan benefits, and/or offering taxable cash alternative to employer flex credits that exceed $500 Ensure wellness programs comply with new wellness rules Determine whether you are a small employer eligible for tax credits (25 or fewer employees) and/or participation in the SHOP Exchanges (50 or fewer employees) Consider amending non-calendar year cafeteria plans to allow one-time election change for medical coverage in 2014 due to gaining Exchange coverage
This checklist is intended as an information source for the clients and friends of Nixon Peabody LLP. The content should not be construed as legal advice, and readers should not act upon information in the publication without professional counsel. This material may be considered advertising under certain rules of professional conduct. Copyright © 2014 Nixon Peabody LLP. All rights reserved.
2015-16 Health Reform Mandates: Determine whether you are a large employer (50+ FTEs) subject to the play-or-pay mandate • May have to count employees of related businesses, such as those with 80% common ownership, overlapping management, affiliated service groups, or those owned by spouse, children under age 21 or certain other family members • May be able to back seasonal employees out of the equation if they work less than 120 days/4 calendar months per year and they caused the average number of FTEs to exceed 50 for work less than 120 days/4 calendar months per year If you have 50-99 FTEs on average in 2014, determine whether you qualify for a delayed compliance date until the first day of your plan year in 2016 • You did not reduce the size of your workforce or the overall hours of service of your employees from 2/9/14 to 12/31/14 in order to satisfy the size condition above (i.e., reductions must be for other bona fide business reasons) • Your employer contribution toward the cost of employee-only coverage is either (1) at least 95% of the dollar amount you contributed on 2/9/14, or (2) is the same or higher percentage of the cost of coverage you subsidized on 2/9/14 • In the event you change benefits under the employee-only coverage offered, that coverage provides minimum value after the change • You do not alter the terms of your plan to narrow or reduce the class or classes of employees or dependents to whom coverage was offered on 2/9/14 • If you have a non-calendar year plan, you did not move your plan year/renewal date after 2/9/14 • You sign the required certification form If you do not qualify for the 50-99 transition rule, and you have a fiscal year plan, determine whether you qualify for a delayed compliance date until the first day of your plan year in 2015, rather than the first day of the calendar year • You maintained a non-calendar-year plan on 12/27/12, and have not moved your plan year to begin at a later calendar date since that time, and • With respect to employees who were eligible for coverage under the terms of the plan as it existed on 2/9/14, the employee is offered affordable minimum value coverage no later than the first day of the 2015 plan year; and • With respect to employees who were not eligible for coverage under the terms of the plan as it existed on 2/9/14, the employee is offered affordable minimum value coverage no later than the first day of the 2015 plan year, and one of the following is true: As of any date during the period from 2/10/13 through 2/9/14, at least ¼ of all of your common law employees (full-time, part-time, seasonal, etc.) were actually covered under the non-calendar-year plan, or At least 1/3 of all of your common law employees (full-time, part-time, seasonal, etc.) were offered coverage under the non-calendar-year plan during the open enrollment period that ended most recently before 2/9/14, or As of any date during the period from 2/10/13 through 2/9/14, at least 1/3 of your full-time employees (using the new 30-hour definition) were actually covered under your non-calendar-year plan, or At least ½ of your full-time employees (using the new 30-hour definition) were offered coverage under the non-calendar-year plan during the open enrollment period that ended most recently before 2/9/14, and • As of the first day of your 2015 plan year, you offer affordable minimum essential coverage to 70% of your full-time employees.
Determine which employees work 30 hours/week and must be offered coverage • Determine how you will track hours and measure them for this purpose (e.g. system provided by your payroll provider) • Determine how you will aggregate hours of affiliated employers if employee works for more than one member of a controlled group or affiliated service group • Determine whether you will use the monthly measurement method (each month at month-end to determine penalty payment) or a look-back measurement method (look-back to prior 6-12 months to determine future eligibility) • If you elect the monthly measurement method, determine whether you will use a calendar month measurement, or the optional pay period measurement method • If you elect the look-back measurement method, chose the length and dates of the measurement/stability/administrative periods for new employees, for ongoing employees, consider whether to use a shortened period under the special transition rules for the first year of applicability, and document those selections in a policy and/or as part of your plan document • Document eligibility policy for employees who have a change in status from fulltime to part-time during the plan year in accordance with look-back measurement period rules • Identify classifications of seasonal and variable-hour employees who may be subject to an initial 12-month measurement period before you are required to offer them coverage (note that there are special rules if you are a staffing agency) • Determine whether your rehires need to be treated as new employees or ongoing employees (treated as new employees if separated for 13 weeks/26 weeks if employed by an educational institution; shorter periods may be allowed where separation exceeded length of prior employment and was at least 4 weeks) • Determine rules regarding which employer will make an offer of coverage to an eligible employee if the employee works for more than one member of a controlled group or affiliated service group Determine how you will maintain records to demonstrate that employees were offered coverage (electronic offers of coverage are permitted) Revise Policies to Redefine Health Insurance Eligibility: • Include all common law employees averaging 30 hours of service per week (counting all paid time, such as vacation and disability, and give credit for special leaves like FMLA, USERRA, jury duty and school break periods > 4 weeks, on-call hours must be counted in some circumstances) • Consider if groups traditionally excluded from coverage must become eligible (e.g., coaches, substitute teachers, W-2 temporary employees, individuals classified as independent contractors, per diems, adjunct professors, student employees or interns who are not part of a work/study program, etc.) to pass 70% eligibility requirement in 2015, or 95% eligibility requirement in 2016 • Consider if hiring or retention standards need to be changed with respect to temporary hires and other groups that are not part of your stable workforce (e.g., if temporary assignments should be limited to 90 calendar days, or if part-time employee hours should be limited to less than 30/week) • Consult with staffing agencies to determine who is offering coverage to agency employees, determine whether agency employees are your common law employees, ensure that agency contracts include a premium charge for employees who enroll in health insurance if they are likely your common law employees
Test for affordability: • Choose a safe harbor method for the affordability test (W-2, current rate of pay, or federal poverty level); analyze whether different rules should be used for hourly vs. salaried employees • Review cost-sharing subsidies (and wellness credits) to ensure they will avoid affordability penalty Consider plan design and subsidy changes so that you can offer at least one affordable option Adopt a policy regarding termination of benefits due to late payment or nonpayment of premiums that complies with COBRA termination rules (i.e., 30-day grace period for late payments, and advance written notice warning of future date that coverage will be terminated for nonpayment) Ensure coverage offered provides 60% minimum value Ensure plan covers all biological and adopted children to the end of the month or calendar year in which the child turns age 26, regardless of child’s dependent or employment status (plan does not need to cover spouses, step-children or foster children, but if it does, it must cover such children to age 26) Consult with unions regarding necessary changes to CBAs and verify whether multiemployer plan coverage passes minimum value and affordability tests Start gathering information that will be required for IRS reporting • the months during the calendar year for which coverage under the plan was available to the employee • the employee’s share of the monthly premium for the lowest cost option providing Minimum Value for self-only coverage • the name, address, and SSN of each full-time employee during the calendar year • the months, if any, during which the employee was covered under the employer’s health plan • whether coverage offered to full-time employees and their dependents provides Minimum Value and whether the employee had the opportunity to enroll his or her spouse and/or dependents • the total number of employees, by calendar month • whether an employee’s effective date of coverage was affected by a permissible waiting period, by calendar month • whether the employer or controlled group member had no employees or otherwise credited any hours of service during any particular month, by calendar month • whether the employer is part of a controlled group and if applicable, the name and EIN of each employer member of the aggregated controlled group on any day of the calendar year for which information is reported • if the employer is a governmental employer, the name, address and identification number if its designated reporting agent (if applicable) • if an employer contributes to a multiemployer plan, whether, with respect to a fulltime employee, the employer is not subject to a penalty due to the employer’s contributions to the multiemployer plan • if a third party is reporting for an employer with respect to its full-time employees, the name, address and identification number of the third party • whether Minimum Essential Coverage and Minimum Value coverage was offered to the employee only, employee and children only, employee and spouse only, or employee plus spouse and children • whether coverage was not offered to the employee, and if not, whether the failure will not result in a penalty (e.g., because the employee was in a waiting period, the employee was not a full-time employee, the employee was not employed during the month, whether the employee was in an initial measurement period, or no other code or exception applies)
• • • •
whether coverage was offered to the employee although the employee was not a full-time employee for that month whether the employee was covered under the plan whether the employer met one of the affordability safe harbors, and which one the name and SSN of covered dependents
2018 Health Reform Mandates: Calculate value of health insurance, FSAs and HSA contributions for possible Cadillac tax consequences (whether amounts will exceed $10,200 for single coverage, or $27,500 for family) Keep a close watch for upcoming guidance regarding payment and calculation of Cadillac tax
For more information on the content of this checklist, please contact Kate Saracene at: — [email protected] or 585-263-1438
September 16, 2014
Health Care Reform: Compliance Checklist By Kate Saracene
2013-2014 Health Reform Mandates:
Execute FSA amendments for $2,500 limit and $500 rollover (due December 31, 2014) Ensure PCORI tax was paid if applicable (due July 31 each year) Distribute Notice of Exchanges (beginning October 1, 2013 and within 14 days of hire) Use new SBC template at 2014 open enrollment and for special enrollment events Amend your policies so that no employee has a waiting period for health coverage in excess of 90 days (exception for bona fide orientation periods up to 30 days) Ensure plan design has been amended to comply with new 2014 plan design rules (covering all essential health benefits for small group policies, out-of-pocket maximums no greater than $6,350 single / $12,700 family, coverage for clinical trials, elimination of pre-existing condition exclusions, elimination of annual limits) Terminate standalone HRAs and amend existing HRAs to meet new integration rules Correct non-compliant FSAs that are not excepted benefits by reducing employer contribution to $500, restricting FSA eligibility to only those employees eligible for major medical plan benefits, and/or offering taxable cash alternative to employer flex credits that exceed $500 Ensure wellness programs comply with new wellness rules Determine whether you are a small employer eligible for tax credits (25 or fewer employees) and/or participation in the SHOP Exchanges (50 or fewer employees) Consider amending non-calendar year cafeteria plans to allow one-time election change for medical coverage in 2014 due to gaining Exchange coverage
This checklist is intended as an information source for the clients and friends of Nixon Peabody LLP. The content should not be construed as legal advice, and readers should not act upon information in the publication without professional counsel. This material may be considered advertising under certain rules of professional conduct. Copyright © 2014 Nixon Peabody LLP. All rights reserved.
2015-16 Health Reform Mandates: Determine whether you are a large employer (50+ FTEs) subject to the play-or-pay mandate • May have to count employees of related businesses, such as those with 80% common ownership, overlapping management, affiliated service groups, or those owned by spouse, children under age 21 or certain other family members • May be able to back seasonal employees out of the equation if they work less than 120 days/4 calendar months per year and they caused the average number of FTEs to exceed 50 for work less than 120 days/4 calendar months per year If you have 50-99 FTEs on average in 2014, determine whether you qualify for a delayed compliance date until the first day of your plan year in 2016 • You did not reduce the size of your workforce or the overall hours of service of your employees from 2/9/14 to 12/31/14 in order to satisfy the size condition above (i.e., reductions must be for other bona fide business reasons) • Your employer contribution toward the cost of employee-only coverage is either (1) at least 95% of the dollar amount you contributed on 2/9/14, or (2) is the same or higher percentage of the cost of coverage you subsidized on 2/9/14 • In the event you change benefits under the employee-only coverage offered, that coverage provides minimum value after the change • You do not alter the terms of your plan to narrow or reduce the class or classes of employees or dependents to whom coverage was offered on 2/9/14 • If you have a non-calendar year plan, you did not move your plan year/renewal date after 2/9/14 • You sign the required certification form If you do not qualify for the 50-99 transition rule, and you have a fiscal year plan, determine whether you qualify for a delayed compliance date until the first day of your plan year in 2015, rather than the first day of the calendar year • You maintained a non-calendar-year plan on 12/27/12, and have not moved your plan year to begin at a later calendar date since that time, and • With respect to employees who were eligible for coverage under the terms of the plan as it existed on 2/9/14, the employee is offered affordable minimum value coverage no later than the first day of the 2015 plan year; and • With respect to employees who were not eligible for coverage under the terms of the plan as it existed on 2/9/14, the employee is offered affordable minimum value coverage no later than the first day of the 2015 plan year, and one of the following is true: As of any date during the period from 2/10/13 through 2/9/14, at least ¼ of all of your common law employees (full-time, part-time, seasonal, etc.) were actually covered under the non-calendar-year plan, or At least 1/3 of all of your common law employees (full-time, part-time, seasonal, etc.) were offered coverage under the non-calendar-year plan during the open enrollment period that ended most recently before 2/9/14, or As of any date during the period from 2/10/13 through 2/9/14, at least 1/3 of your full-time employees (using the new 30-hour definition) were actually covered under your non-calendar-year plan, or At least ½ of your full-time employees (using the new 30-hour definition) were offered coverage under the non-calendar-year plan during the open enrollment period that ended most recently before 2/9/14, and • As of the first day of your 2015 plan year, you offer affordable minimum essential coverage to 70% of your full-time employees.
Determine which employees work 30 hours/week and must be offered coverage • Determine how you will track hours and measure them for this purpose (e.g. system provided by your payroll provider) • Determine how you will aggregate hours of affiliated employers if employee works for more than one member of a controlled group or affiliated service group • Determine whether you will use the monthly measurement method (each month at month-end to determine penalty payment) or a look-back measurement method (look-back to prior 6-12 months to determine future eligibility) • If you elect the monthly measurement method, determine whether you will use a calendar month measurement, or the optional pay period measurement method • If you elect the look-back measurement method, chose the length and dates of the measurement/stability/administrative periods for new employees, for ongoing employees, consider whether to use a shortened period under the special transition rules for the first year of applicability, and document those selections in a policy and/or as part of your plan document • Document eligibility policy for employees who have a change in status from fulltime to part-time during the plan year in accordance with look-back measurement period rules • Identify classifications of seasonal and variable-hour employees who may be subject to an initial 12-month measurement period before you are required to offer them coverage (note that there are special rules if you are a staffing agency) • Determine whether your rehires need to be treated as new employees or ongoing employees (treated as new employees if separated for 13 weeks/26 weeks if employed by an educational institution; shorter periods may be allowed where separation exceeded length of prior employment and was at least 4 weeks) • Determine rules regarding which employer will make an offer of coverage to an eligible employee if the employee works for more than one member of a controlled group or affiliated service group Determine how you will maintain records to demonstrate that employees were offered coverage (electronic offers of coverage are permitted) Revise Policies to Redefine Health Insurance Eligibility: • Include all common law employees averaging 30 hours of service per week (counting all paid time, such as vacation and disability, and give credit for special leaves like FMLA, USERRA, jury duty and school break periods > 4 weeks, on-call hours must be counted in some circumstances) • Consider if groups traditionally excluded from coverage must become eligible (e.g., coaches, substitute teachers, W-2 temporary employees, individuals classified as independent contractors, per diems, adjunct professors, student employees or interns who are not part of a work/study program, etc.) to pass 70% eligibility requirement in 2015, or 95% eligibility requirement in 2016 • Consider if hiring or retention standards need to be changed with respect to temporary hires and other groups that are not part of your stable workforce (e.g., if temporary assignments should be limited to 90 calendar days, or if part-time employee hours should be limited to less than 30/week) • Consult with staffing agencies to determine who is offering coverage to agency employees, determine whether agency employees are your common law employees, ensure that agency contracts include a premium charge for employees who enroll in health insurance if they are likely your common law employees
Test for affordability: • Choose a safe harbor method for the affordability test (W-2, current rate of pay, or federal poverty level); analyze whether different rules should be used for hourly vs. salaried employees • Review cost-sharing subsidies (and wellness credits) to ensure they will avoid affordability penalty Consider plan design and subsidy changes so that you can offer at least one affordable option Adopt a policy regarding termination of benefits due to late payment or nonpayment of premiums that complies with COBRA termination rules (i.e., 30-day grace period for late payments, and advance written notice warning of future date that coverage will be terminated for nonpayment) Ensure coverage offered provides 60% minimum value Ensure plan covers all biological and adopted children to the end of the month or calendar year in which the child turns age 26, regardless of child’s dependent or employment status (plan does not need to cover spouses, step-children or foster children, but if it does, it must cover such children to age 26) Consult with unions regarding necessary changes to CBAs and verify whether multiemployer plan coverage passes minimum value and affordability tests Start gathering information that will be required for IRS reporting • the months during the calendar year for which coverage under the plan was available to the employee • the employee’s share of the monthly premium for the lowest cost option providing Minimum Value for self-only coverage • the name, address, and SSN of each full-time employee during the calendar year • the months, if any, during which the employee was covered under the employer’s health plan • whether coverage offered to full-time employees and their dependents provides Minimum Value and whether the employee had the opportunity to enroll his or her spouse and/or dependents • the total number of employees, by calendar month • whether an employee’s effective date of coverage was affected by a permissible waiting period, by calendar month • whether the employer or controlled group member had no employees or otherwise credited any hours of service during any particular month, by calendar month • whether the employer is part of a controlled group and if applicable, the name and EIN of each employer member of the aggregated controlled group on any day of the calendar year for which information is reported • if the employer is a governmental employer, the name, address and identification number if its designated reporting agent (if applicable) • if an employer contributes to a multiemployer plan, whether, with respect to a fulltime employee, the employer is not subject to a penalty due to the employer’s contributions to the multiemployer plan • if a third party is reporting for an employer with respect to its full-time employees, the name, address and identification number of the third party • whether Minimum Essential Coverage and Minimum Value coverage was offered to the employee only, employee and children only, employee and spouse only, or employee plus spouse and children • whether coverage was not offered to the employee, and if not, whether the failure will not result in a penalty (e.g., because the employee was in a waiting period, the employee was not a full-time employee, the employee was not employed during the month, whether the employee was in an initial measurement period, or no other code or exception applies)
• • • •
whether coverage was offered to the employee although the employee was not a full-time employee for that month whether the employee was covered under the plan whether the employer met one of the affordability safe harbors, and which one the name and SSN of covered dependents
2018 Health Reform Mandates: Calculate value of health insurance, FSAs and HSA contributions for possible Cadillac tax consequences (whether amounts will exceed $10,200 for single coverage, or $27,500 for family) Keep a close watch for upcoming guidance regarding payment and calculation of Cadillac tax
For more information on the content of this checklist, please contact Kate Saracene at: — [email protected] or 585-263-1438
