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)|
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 19th Amendment was passed by Congress June 4, 1919, and ratified August 18, 1920.
- AMENDMENT XIX: The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any State on account of sex.
Congress shall have power to enforce this article by appropriate legislation.
“August 1995 marked the 75th anniversary of the ratification of the 19th amendment to the Constitution. The amendment guarantees all American women the right to vote. Achieving this milestone required a lengthy and difficult struggle; victory took decades of agitation and protest. Beginning in the mid-19th century, several generations of woman suffrage supporters lectured, wrote, marched, lobbied, and practiced civil disobedience to achieve what many Americans considered a radical change of the Constitution. Few early supporters lived to see final victory in 1920.
Between 1878, when the amendment was first introduced in Congress, and August 18, 1920, when it was ratified, champions of voting rights for women worked tirelessly, but strategies for achieving their goal varied. Some pursued a strategy of passing suffrage acts in each state–nine western states adopted woman suffrage legislation by 1912. Others challenged male-only voting laws in the courts. Militant suffragists used tactics such as parades, silent vigils, and hunger strikes. Often supporters met fierce resistance. Opponents heckled, jailed, and sometimes physically abused them.
By 1916, however, almost all of the major suffrage organizations were united behind the goal of a constitutional amendment. When New York adopted woman suffrage in 1917 and when President Woodrow Wilson changed his position to support an amendment in 1918, the political balance began to shift in favor of the vote for women. On May 21, 1919, the House of Representatives passed the amendment, and 2 weeks later, the Senate followed. When Tennessee became the 36th state to ratify the amendment on August 18, 1920, the amendment passed its final hurdle of obtaining the agreement of three-fourths of the states. Secretary of State Bainbridge Colby certified the ratification on August 26, 1920, and the face of the American electorate changed forever.” http://www.archives.gov/exhibits/charters/constitution_amendment_19.html
The 19th Amendment was a big start in the push towards The Civil Rights Act, which occurred many years later. The ratification of the 19th Amendment opened the doors on diversity and on equality for all, including the many “Acts” which affect employers/employees and are governed by the Equal Employment Opportunity Commission (EEOC), Department of Labor (DOL), and many more regulatory agencies.
HR Strategies would like to remind all to vote in this year’s elections, it is your civil right! If you are not a registered voter, and would like to register you may do so at http://www.presidentialelection.com/register_to_vote/.
Additionally, if you have questions regarding the EEOC, the DOL, and other employer regulatory compliance matters, please visit us at http://www.hr-strategies.com/, or reach us by phone at 770-339-0000.
The 17th Amendment was passed by Congress on May 13, 1912, and ratified April 8, 1913.
Note: Article I, section 3, of the Constitution was modified by the 17th amendment.
- AMENDMENT XVII: The Senate of the United States shall be composed of two Senators from each State, elected by the people thereof, for six years; and each Senator shall have one vote. The electors in each State shall have the qualifications requisite for electors of the most numerous branch of the State legislatures.
When vacancies happen in the representation of any State in the Senate, the executive authority of such State shall issue writs of election to fill such vacancies: Provided, That the legislature of any State may empower the executive thereof to make temporary appointments until the people fill the vacancies by election as the legislature may direct.
This amendment shall not be so construed as to affect the election or term of any Senator chosen before it becomes valid as part of the Constitution.
Elections to the United States Senate are to be held on November 6, 2012, with 33 of the 100 seats in the Senate being contested in regular elections whose winners will serve six-year terms from January 3, 2013 until January 3, 2019. Although there are no Georgia seats in the race for the United States Senate in 2012, there are a total of 56 seats up for election in the Georgia State Senate race.
HR Strategies would like to take this time to remind you to register to vote. Our elected public officials determine the laws and regulations which protect and shape the way business is done here in our fine state of Georgia, and our Nation.
If you haven’t registered to vote, or you need to update your voter registration you may do so at: http://www.presidentialelection.com/register_to_vote/