As the end of the year quickly approaches, it is often a time to reflect on what has occurred. This past year has been a very exciting one at HR Strategies. We rebranded, brought on several new staff members, held some very important Management Training seminars, and even hosted an open house! Through it all we have tried to keep you, our reader, up to date and informed of important HR topics. This month we will be featuring a look back at some of the top blog posts of 2012! Of course what better way to start than with a look back at the regulations and timeline of the Patient Protection and Affordable Care Act, as it affects all Americans and companies; and quickly became one of the hottest topics in business and HR this year.
HR Strategies is continuing to take a hard look at the health reform in order to provide some clarity and guidance regarding PPACA’s impact on our clients and businesses everywhere. This post will offer analysis and interpretation on the important factors/elements of PPACA, including a timeline of applicable changes.
Eligibility factor: Some of the provisions of the health reform are based on the number of employees. Companies with fewer than 50 employees will not be subject to the “Play or Pay” Mandate. The IRS has issued proposed regulations that provide for calculating the numbers of employees as follows:
Employees who work 30 hours per week are considered full-time employees. Part-time employees are “converted” to full time equivalent, based on a 30 hrs work-week. For example, a company that has 35 full-time employees and 50 part-time employees who work 15 hrs per week, would produce the following equation: total full-time employees (35 regular FT) + 25 full time equivalents (50 part-time@15 hrs. week) = total of 60 employees. Therefore, the “Play or Pay” mandate would apply to the company.
Bear in mind, there are lookback and stability periods, which means that the determination is based on a lookback period of time (typically the prior 12 months before plan year effective date) and a stability period, which is based on volume or spikes in hiring within a set time. Temporary and seasonal employees will typically count against the total number of full-time equivalents, especially if those positions are on-going. There are exceptions to this rule: if the spike in hires is truly due to seasonal increases in volume, i.e., agriculture (harvest season), tourism (high-season), and after season is over the number again falls below the 50 employee threshold, then the “Play or Pay” mandate may not apply. All of these variables are still under consideration and await clarification from the appropriate agencies. Also, the IRS may revise its guidance in final regulations.
Considering the Impact of Play or Pay
Considering the impact of “Play or Pay”: By the time certain provisions of PPACA goes into effect, on 1/1/2014, the state sponsored exchanges (health insurance plans offered by the states and funded by Medicaid and employee taxes) may be a strong source of medical plan options for all employees. In theory, the exchanges would provide the employees alternatives in selecting health care plans. However, it is important that the employer calculates the cost to offer group health care or not. If the company is clearly under the 50 employees threshold, as explained in the preceding scenario, the employer is not “obligated” to provide insurance within the “adequate and affordable” requirements of the “Play or Pay” mandate. However, employers who are at or above the threshold must consider the following:
- Adequate: In general, the actuarial value of coverage provided in the group health plan must pay for a minimum of 60% of the benefit cost. Bear in mind that preventative services must now be covered at a 100% basis; there will be no pre-existing condition limitations and no annual or lifetime maximum benefits on essential benefits. Plans will also have to maintain coverage available to dependents up to age 26, regardless of dependent status. A company may choose to offer higher coverage and charge more for it, yet in order to do so, the minimum coverage option must be provided.
- Affordable: PPACA requires that the employee contributions towards coverage cost of employer sponsored health insurance cannot exceed 9.5% of the household income. However, the concept of “household income” has yet to be clarified by the IRS and other departments. For example: an employee makes $10.00/hr. for annual gross earnings of $20,800.00/yr. If we take the gross earnings (some experts are inclined to use net earnings, not gross) as listed on box 1 from the W-2, 9.5% of the household income would be $1,976.00. If the cost of employee only coverage is $400.00 per month and the employer pays 80% of the premium, or $320.00, the employee pays the remaining $80.00 per month premium, or 20%; then using the employee contribution/cost per month and gross wages annual calculation, the employee contribution would fall below the 9.5% of household income calculation ($960.00/yr.), satisfying the “affordable” requirement. Again, if we were to assume a net income of approximately 30% less than gross earnings, or $14,560, then the 9.5% of the w2 wages would equal $1,383.20. If the company contributed 50% of the premium, rather than 80%, the employee portion of the premiums would far exceed the 9.5% household income threshold. That means, the plan would not satisfy the “affordability” requirement.
- “Pay” factor: If we use the latter example, then the group health coverage does not satisfy the “play” requirement, and thus the employer will have to “pay”. Employers will need to evaluate the impact of these penalties, and whether it makes more financial business sense to try to meet the “adequate and affordable” requirements, or simply pay the penalties. An employer will pay an excise tax in each one of the following scenarios:
- An employer chooses not to offer a group health plan, and at least one full-time employee enrolls in an exchange and receives the premium tax subsidy: The excise tax is applied by full-time employee, not by full-time equivalent. Therefore, the employer will be required to pay $2,000 per full-time employee, excluding the first 30 employees. In the example used to explain eligibility, we identified 35 eligible full time employees. Thus, the employer would have to pay $10,000 in excise tax for the 5 employees after the first 30 are excluded. Keep in mind; however, that the proposed regulations on how to count employees may change.
- An employer’s plan is deemed “not affordable” (as shown in (2) above) and one or more employees qualify for Federal subsidy to purchase exchanges: The employer will be required to pay $3,000 per employee who qualifies for a Federal tax subsidy. An employee qualifies for this subsidy if the employee’s annual household income is at or below 400% of the Federal poverty level. To put it in perspective, a family of four whose household income is at or below $88,000/yr. would qualify for Federal subsidy.
Other PPACA Changes & Timeline
Please note that many of the processes discussed in the above paragraphs, along with those mentioned below, will require further clarification and interpretation from agencies, such as the Department of Labor, The IRS, and Health and Human Services. Rest assured, HR Strategies will keep you both updated and in compliance every step of the way.
|Change||Effective Date||Employer Size||Comments|
|New Flexible Spending Account Limit||1/1/2013 for calendar year plans||All Employers sponsoring FSAs||Employees may contribute up to $2,500.00 to their health FSAs. In the case of both spouses working, the limit is applied by employee, not to exceed $5,000 if filing jointly.|
|Reporting Cost of benefits on W-2s||Due 1/31/2013 for Tax Year 2012||Employers issuing 250 or more W-2s||Since HR Strategies clients receive their W-2 from us, cost of benefits will be included in the 2012 W-2s. The reported cost will include group health plan premiums (employer and employee contributions) that are COBRA eligible.|
|Uniform Summary of Benefits and Coverage||Open Enrollment and plan year effective date on or after 9/23/2012||All Employers with group health plans||HR Strategies is working with our carriers to develop these SBC. If an employer is not part of the HR Strategies Master Plan, it is imperative that the client coordinates with their carrier and broker to ensure the SBC is prepared timely.|
|Auto-Enrollment||1/1/2014 or later (pending guidance)||200+ employees||Employers will be required to automatically enroll their employees into the group health plan within 90 days of employment. Further guidance is expected.|
|Non-Discrimination Testing||TBA||TBA||This requirement will probably meet the same guidelines of retirement plan reporting via 5500 (100+ employees)|
If you are not a registered voter, or need to update your voter registration, HR Strategies can help you do so!
You can even vote early! Check out your county’s government website to find out where the advanced voting locations are.
As the Presidential Election is next week, HR Strategies welcomes you to take a look back at the history of the Electoral College and the 12thAmendment.
The U.S. Constitution set up the proceedings for electing our Executive, by establishing the Electoral College. The Twelfth Amendment provides the procedure for electing the President and Vice President. It replaced Article 22, Section 1, Clause 3, of the Constitution, which provided the original procedure; but that faced problems in the elections of 1796 and 1800.
The 12th Amendment was passed by Congress December 9, 1803, and ratified June 15, 1804.AMENDMENT XII: The Electors shall meet in their respective states and vote by ballot for President and Vice-President, one of whom, at least, shall not be an inhabitant of the same state with themselves; they shall name in their ballots the person voted for as President, and in distinct ballots the person voted for as Vice-President, and they shall make distinct lists of all persons voted for as President, and of all persons voted for as Vice-President, and of the number of votes for each, which lists they shall sign and certify, and transmit sealed to the seat of the government of the United States, directed to the President of the Senate; — the President of the Senate shall, in the presence of the Senate and House of Representatives, open all the certificates and the votes shall then be counted; — The person having the greatest number of votes for President, shall be the President, if such number be a majority of the whole number of Electors appointed; and if no person have such majority, then from the persons having the highest numbers not exceeding three on the list of those voted for as President, the House of Representatives shall choose immediately, by ballot, the President. But in choosing the President, the votes shall be taken by states, the representation from each state having one vote; a quorum for this purpose shall consist of a member or members from two-thirds of the states, and a majority of all the states shall be necessary to a choice. [And if the House of Representatives shall not choose a President whenever the right of choice shall devolve upon them, before the fourth day of March next following, then the Vice-President shall act as President, as in case of the death or other constitutional disability of the President. –]* The person having the greatest number of votes as Vice-President, shall be the Vice-President, if such number be a majority of the whole number of Electors appointed, and if no person have a majority, then from the two highest numbers on the list, the Senate shall choose the Vice-President; a quorum for the purpose shall consist of two-thirds of the whole number of Senators, and a majority of the whole number shall be necessary to a choice. But no person constitutionally ineligible to the office of President shall be eligible to that of Vice-President of the United States.
*Superseded by section 3 of the 20th amendment.
As we end this month, having taken a look at the Declaration of Independence, the U.S. Constitution, and voting rights; we would like to leave you with some thoughts to encourage you take remain patriotic (not only your daily personal life, but also in your business) throughout the year, not just on the 4th of July…
- “Economic Patriotism is doing what is right for American businesses, for American workers, for American consumers, and for America. Each of these entities is dependent upon each other doing the right thing for the other. It is not possible for one entity to abandon another without harm resulting to all entities. The American worker and the American consumer are tightly related, and often one in the same. It is simply not possible to adversely affect the American worker without also adversely affecting the American consumer.” http:www.americanreformation.org/AJCoalition/EconomicPatriotism.htm
- Veterans having served in our National Forces continue to look for work. Don’t we, at the very least, owe them the opportunity to work when they return from serving their country? “Veterans are a very strong talent pool. They possess skills and qualities that are immeasurable – such as leadership, pride, teamwork, and dedication,”- recruiter Danielle Micek.
- “Whenever a Guardsman or Reservist leaves for training, they are coming back to their companies with better skills, better training, and they are an asset to a company every time they leave.” – Barbara O’Reilly, Minnesota Department of Veterans Affairs
- Don’t just feel patriotic watching the fireworks on the 4th of July, when you hear the Star Spangled Banner at a ballgame, or when you enter the voting booth. Carry your patriotism and pride in America throughout the year. Americans took a risk on July 4th, 1776, and we are reaping the benefits every day.
The 26th Amendment was passed by Congress March 23, 1971, and ratified July 1, 1971.
Note: Amendment 14, section 2, of the Constitution was modified by section 1 of the 26th amendment.
- AMENDMENT XXVI: Section 1. The right of citizens of the United States, who are eighteen years of age or older, to vote shall not be denied or abridged by the United States or by any State on account of age.
Section 2. The Congress shall have power to enforce this article by appropriate legislation.
“The 26th Amendment lowered the voting age from 21 to 18, allowing millions of young people to participate actively in the democratic process and to have a powerful voice in shaping their political future.
The first rumblings to lower the voting age emerged in the midst of the Vietnam War, with student demonstrations running strong. The slogan “Old enough to fight, old enough to vote,” gained popularity and some groups, including student members of the California Teachers Association (CTA), hoped to change the system from within.
In 1970, President Richard Nixon passed the Voting Rights Act, which called for the voting age to be 18. The Senate voted 94-0 to pass the resolution, and 13 days later, on March 23, 1971, the House voted in favor. Within four months, the amendment was ratified by the required three-fourths of state legislatures. It was the fastest time any proposed amendment has been pressed forward, and President Nixon signed it into law in July.
Millions of 18, 19 and 20 year olds could now vote in the 1972 presidential election. They, and the young activists who fought for the change, paved the way for future generations of young people to exercise their political voices.” (Excerpts from http://democracyday.com/the-26th-amendment.html
HR Strategies strongly advocates for all to vote in our upcoming elections this November. Please remember that your vote counts in electing our public officials who determine our laws, including those regarding commerce, and human resource issues. If you haven’t registered to vote, you may do so at http://www.presidentialelection.com/register_to_vote/.
Additionally, as an employer are you making it possible for your employees to vote. Georgia code 21-2-404 reads as such:
Affording employees time off to vote
Each employee in this state shall, upon reasonable notice to his or her employer, be permitted by his or her employer to take any necessary time off from his or her employment to vote in any municipal, county, state, or federal political party primary or election for which such employee is qualified and registered to vote on the day on which such primary or election is held; provided, however, that such necessary time off shall not exceed two hours; and provided, further, that, if the hours of work of such employee commence at least two hours after the opening of the polls or end at least two hours prior to the closing of the polls, then the time off for voting as provided for in this Code section shall not be available. The employer may specify the hours during which the employee may absent himself or herself as provided in this Code section. (The law does not specify whether time off is to be paid)
HR Strategies advises employers to have set company policies, listed in their employee handbooks, which set forth how the employer deals with taking time off for voting. If you need assistance with your employees’ right to vote, or construction of employee policies and handbooks, contact HR Strategies at 770-339-0000.