Foundation’s Solution to the
Affordable Care Act
Presented by John Hnat and Jason Stypick
Disclaimer: The information contained in this presentation is for informational purposes only and is not legal advice or a substitute for legal counsel.
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What is the Affordable Care Act?
A quick guide to the Affordable Care Act (ACA) and how it affects employers
What is the ACA?
The Affordable Care Act is responsible for the most sweeping reform of the American healthcare
system since the introduction of Medicare and Medicaid in 1965. Provisions in the ACA are intended
to expand access to insurance, emphasize preventative care, improve quality of care, and curb rising
health care costs.
While certain provisions of the act may affect every individual or business, our focus here is on the
responsibilities placed on large employers. These responsibilities include offering health coverage or
facing a penalty, providing a statement of offered coverage to employees, and reporting to the IRS
what coverage, if any, was offered.
Play or Pay
The Employer Shared Responsibility Provisions
1
2
Applicable Large Employers (ALEs) are required to offer affordable minimum value health
coverage to substantially all of their full-time employees (and their dependent children).
Failure to offer the required coverage may result in the employer owing one of the two
shared responsibility payment to the IRS.
Section 4980H(a) - “Sledgehammer Penalty”
If an ALE fails to offer coverage to at least 95% of its full-time
employees and their dependents, and at least one full-time employee
receives a premium tax credit, then the ALE is assessed a penalty of
$2,000* times the total number of full-time employees with the first
30 excluded.
Section 4980H(b) - “Tack-hammer Penalty”
If an ALE does offer coverage to at least 95% of its full-time
employees and their dependents, but one or more full-time
employees still receive a premium tax credit, then the ALE is
assessed a penalty of $3,000* times each full-time employee that
received the premium tax credit.
* Annual amounts. Penalties are assessed monthly at 1/12th of the annual amount. Penalties will also be adjusted for inflation.
Am I an Applicable Large Employer?
Or, Should I Be Worried About Owing a Shared Responsibility Payment?
1
An employer is an Applicable Large Employer if it employed an average of at least 50
full-time employees (including full-time equivalent employees) per month during the
prior calendar year.
2
Employees with more than 30 hours of service per week (or 130 hours per month) are
considered full-time.
3
Full-time equivalent employees are calculated for each month by adding the hours of
service (up to 120 hours per employee) from all employees that were not considered
full-time, and dividing by 120.
ALE Determination Example
Employer is an Applicable Large Employer
2015
Full-Time Employees
(More than 130 Hours)
Non Full-Time Hours
(Max. 120 per Employee)
Full-Time Equivalent
(Non Full-Time Hours / 120)
Total FT for Month
(Full-Time Plus FTEs)
January
February
March
April
May
June
July
August
September
October
November
December
45
43
44
45
48
50
68
55
45
43
42
40
761
754
758
765
779
804
1,018
902
759
750
778
512
6.34
6.28
6.32
6.38
6.49
6.70
8.48
7.52
6.33
6.25
6.48
4.27
51.34
49.28
50.32
51.38
54.49
56.70
76.48
62.52
51.33
49.25
48.48
44.27
Monthly Average Full-Time Employee Count
53
645.84 total FTEs divided by 12 months
Who Are My Full-Time Employees?
Identifying the employees that should be offered coverage
1
Any employees that average at least 30 hours of service per week (or 130 hours per
month) are considered full-time.
2
The IRS allows for measuring employee hours of service by one of two methods:
Monthly
Look-Back
Measurement Method
Measurement Method
Note: These methods are only available for the purpose of determining if an individual employee is full-time and
required to be offered coverage. The ALE determination must be done as described earlier.
Monthly Measurement Method
1
Each employee’s full-time status for a month is determined by the hours they work
during that month.
2
This requires making assumptions about the hours that will be worked when trying to
decide whether to offer coverage to an employee for a given month. If an employee
unexpectedly works full-time hours during a month they were not offered coverage,
you face a potential penalty.
3
This method also opens the possibility of adding or dropping coverage for an
employee every single month.
Look-Back Measurement Method
1
An employer determines an employee’s status by measuring their hours worked over
a look-back period, and then applying that status to a subsequent period of time.
2
This method consists of three separate periods:
Measurement
During this period each employee’s
status is determined by measuring their
hours over a period of 3-12 months.
This status then applies to each of the
subsequent periods.
Administrative
This is an optional period of up to 90
days to allow the completion of all the
administrative tasks required to make
an offer of coverage (i.e. computing
hours, completing forms, making the
offer, etc.)
Stability
This is the period during which the
status determined in the Measurement
period is applied to the employee,
regardless of how many hours are
actually worked during the stability
period. It must be the greater of 6
months or the length of the
Measurement period.
Look-Back Measurement Method
Example of a basic setup
12 Month Measurement
90 Day Administrative
2013
2014
12 Month Stability
2015
2016
2017
01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05 06 07 08 09 10 11 12
New Hire
6 Month Measurement
30 Day Administrative
2013
2014
6 Month Stability
2015
2016
2017
01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05 06 07 08 09 10 11 12
Meeting the IRS Reporting Requirements
New sections of the Internal Revenue Code
There are two new sections of the Internal Revenue Code that require information reporting
under the ACA: 6055 and 6056.
Section 6055
Section 6056
1
Requires providers of health coverage to report coverage
information and supply a statement to covered individuals.
1
Requires employers to report what offers of coverage
were made and supply a statement to full-time employees.
2
This information is used by the IRS to administer the
Individual Shared Responsibility provisions.
2
This information is used by the IRS to administer the
Employer Shared Responsibility provisions.
3
Only applies to employers that provide self-insured
coverage to some, or all, of their employees.
3
Applies to all ALEs, whether self-insured or fully-insured.
Meeting the IRS Reporting Requirements
Reporting related penalties
1
The IRS may assess a penalty in case of a late filing, a filing with incorrect or missing
information, or intentionally disregarding filing.
2
All penalties are per return and apply to the IRS filings and furnishing the statements
to your employees. Each penalty could be assessed twice.
3
The IRS may waive penalties on employers that can show a good faith effort to
comply. Late filings will not be considered a good faith effort. The deadline for filing
with the IRS is February 28th, or March 31st if filing electronically. Statements must be
provided to employees by January 31st.
Late or Incorrect Filing
Penalty
Penalty if Corrected Within 30 Days
Penalty if Corrected By August 1
Intentional Disregard of Filing
$250 Maximum $3,000,000
$50 Maximum $500,000
$100 Maximum $1,500,000
$500
No Maximum
How Can FOUNDATION Help?
Using FOUNDATION to help with the administration of the Employer Shared Responsibility provisions
How Can FOUNDATION Help?
FOUNDATION will help meet the ACA requirements in several ways.
1
Proper Tracking of Employee Hours of Service
2
Determining Applicable Large Employer Status
3
Monitoring and Measuring Employee Status Using the Look-Back Measurement Method
4
Meeting the IRS Reporting Requirements
Proper Tracking of Employee Hours
No matter which measurement method you use, tracking hours correctly is now more important than ever
1
2
3
!
Salary Employees - Unless you will always be assuming full-time status, you may want
to track the hours of salary employees using the salary proration feature.
History Adjustments – Be careful when including hours on a history adjustment.
Posting hours for a long time frame to a specific date may lead to your employee’s
full-time status being reported incorrectly.
Hours Adjustment Worksheet – A new hours worksheet has been added to allow you
to enter adjustments for your employees hours on a monthly basis. These hours
adjustments are used only in ACA reporting.
The only way to get truly accurate reporting is to be sure you are entering accurate, hourly timecards for all of your employees.
Determining Your ALE Status
Determining your ALE status can be done using the Monthly Hours Report. For a given year, It
will provide you with your count of full-time employees, full-time equivalent employees, your
totals for each month, and your overall average.
Things to Watch For:
1
Under the ACA, separate companies that are part of a “controlled group” are considered one employer for purposes of determining whether they are an ALE. That
means that if you are using FOUNDATION for multiple companies, you will need to run this report for each company and combine the results.
2
If you have any salary employees that had no hours entered in a month they were paid, this report will give them estimated hours based on the Employment
Status on their Employee Record. The net effect of this is that if you don’t enter hours for a salary employee, they will at least be considered a Full-Time
Equivalent for any month they collect pay.
3
The report will alert you if the seasonal work exception may apply to you. This exception has a lot of potential variables to it, so you’ll want to look at it closer in
these cases, and discuss with your legal counsel.
Monitoring & Measuring Employee Status
Setting Up Look-Back Measurement Method Tracking – Defining Measurement Groups
1
Measurement Groups are created in the Payroll Control File.
2
They are used to define the measurement, admin, and stability periods you want to
use for each group of employees. You will define ongoing and initial period rules.
3
Under the ACA, you’re allowed to set up different groups under the following
scenarios: union and non-union employees, employees in different unions, salaried
and hourly employees, and employees who primarily work in different states.
Monitoring & Measuring Employee Status
Setting Up Look-Back Measurement Method Tracking – Employee Maintenance
1
2
3
The “ACA” tab of the Employee Record is where you specify which Measurement
Group the employee belongs to.
You will also need to enter the start date for each employee on the “General” tab of
the Employee Record. For employees that existed prior to this feature, the hire date
was automatically inserted.
You can also enter an Employment Status on the “General” tab.
Monitoring & Measuring Employee Status
Look-Back Measurement Method Reporting
FOUNDATION provides three reports for monitoring and measuring employee status:
Employee Hours Tracking
Admin Period Summary
Measured Employee Status
The Employee Hours Tracking Report
can be used to monitor each employee’s
hours during their current measurement
period.
The Admin Period Summary Report will
tell you which employees are currently in
an admin period and whether their fulltime status has changed from their prior
measurement.
The Measured Employee Status Report
shows you the measured status for each
employee currently in a stability period.
It will show you how many hours they’ve
worked so far, a basic projection of how
many more hours they will work, and
how many more hours they can work
before being considered full-time.
Depending on the length of your admin
periods, you’ll want to run this report
fairly regularly, as it will tell you who
needs to receive an offer of coverage,
and when the offer needs to be made.
It tells you whether an employee is parttime or full-time status and the date
range during which that status applies.
Meeting the IRS Reporting Requirements
IRS forms 1094-C and 1095-C
1
FOUNDATION will allow Applicable Large Employers to meet the IRS reporting
requirements by generating forms 1094-C and 1095-C in printed and electronic formats.
2
1095-C Parts I and II can be entered through the bulk entry interface or on each
individual Employee Record.
3
1095-C Part III can be entered only on each individual Employee Record. This part
should only be filled out for employees enrolled in a self-insured plan.
4
1094-C will be entered as part of the generation process.
!
FOUNDATION will not allow for the generation of IRS forms 1094-B or 1095-B.
More Information
Further resources on the Affordable Care Act
IRS Affordable Care Act Employer Portal
http://www.irs.gov/Affordable-Care-Act/Employers
IRS Affordable Care Act Employer Shared Responsibility Provisions FAQs
http://www.irs.gov/Affordable-Care-Act/Employers/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act
Shared Responsibility for Employers Regarding Health Coverage – Official Rule from Federal Register
https://www.federalregister.gov/articles/2014/02/12/2014-03082/shared-responsibility-for-employers-regarding-health-coverage
1094-C (Draft)
1095-C (Draft)
1094/1095-C Instructions (Draft)
http://www.irs.gov/pub/irs-dft/f1094c--dft.pdf
http://www.irs.gov/pub/irs-dft/f1095c--dft.pdf
http://www.irs.gov/pub/irs-dft/i109495c--dft.pdf
For questions on the setup or reporting available in Foundation, please contact our Support department at (800) 246-0800 or review
the materials available at www.foundationsoft.com.
For questions on the Affordable Care Act or its implications, please contact your legal counsel or financial/benefits advisor.