ACA Compliance Issues and Unattended …...ACA Compliance Issues and Unattended Consequences...

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™

ACA Compliance Issues and Unattended ConsequencesMANAGING LEAVES OF ABSENCE AND REDUCTIONS IN HOURS

Kat Lacy-Wilson, JD, LLMArea Asst. Vice President, Compliance Counsel

January 21, 2015


ACA’s Employer Mandate Analysis

Is there an employer/employee

relationship?

Is this an applicable large employer

(ALE)?

Is this a 30 hour employee?

Has a minimum value offer of

coverage been made for this

month?

If an offer has been made, was it affordable?

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This is a very conservative view based upon written guidance. If you, as an employer, want to do something different, it would probably be prudent to get a written legal opinion that supports your position.

© 2016 GALLAGHER BENEFIT SERVICES, INC.


ACA’s Impact of Existing Employer/Employee Relationship

If an applicable

large employer

If employee works at least 30

hours per week (FT)

Offer coverage or may be at risk for assessable

payment/penalty

3© 2016 GALLAGHER BENEFIT SERVICES, INC.


ACA’s Assessable Payments/Penalties for 2016

Failure to offer coverage = $2,160 annual maximum x (number of FT – 30

freebies)

Failure to offer affordable coverage

= $3,240 annual maximum



Employer/Employee RelationshipIndicia of control in work conditions and end work product

Indicia can be actual – payroll records (maybe)

Indicia can be inferred – more in NLRB discussion



What’s the problem?

Change in employment status does not always equal termination of employer/employee relationship

Leaves of absenceNon-work hours (e.g. time between FMLA

exhaustion and COBRA termination)


Working example



Working Example – ACME, Inc.

ACME, Inc. 115 FTEs (ALE status)

Lookback analysis -•Measurement – 11/1 to 10/31

•Admin – 11/1 to 12/31•Stability – 1/1 to 12/31

Leave of absence policy -•2 years of unpaid leave

•Cease benefits when go on leave (COBRA qualifying event)

•When return to work, allowed to elect new benefits



Working Example - Jay

VHE hired in 2013

11/1/13 – 10/31/14 meas period – avg. at least 30 hours

Offered coverage for 2015 stability period



Working Example – Jay’s LOA request

Date of request: September 15,

2015

Request LOA from 10/1/15 – 9/30/17• Anticipated return date – 10/1/17

Review of 11/1/14 – 10/31/15 meas period• Avg of about 35 hours• Most likely will be eligible for coverage for 2016 plan year



Summary of What We Know – ACME/Jay

Is there an employer/employee relationship? - Yes

(even during the LOA)

Is this an applicable large employer (ALE)? – Yes

Is this a 30 hour employee? - Yes

Has a minimum value offer of coverage been made for this month? – For 9/15, yes. For

10/15 and onward, ????

If an offer has been made, was it

affordable? – For 9/15, assume yes.

For 10/15 and onward, ????

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This is a very conservative view based upon written guidance. If you, as an employer, want to do something different, it would probably be prudent to get a written legal opinion that supports your position.



Working Example – ESR for 2015 plan year

ACME, Inc. Jan to Sept – offers of

coverage made

Oct to Dec – offers of coverage not made

ER may be at risk for failure to offer coverage for Oct to Dec

Jay Jan to Sept – received offers of coverage

Oct to Dec – did not receive offers of coverage

EE may be eligible to get subsidized coverage from the Marketplace from Oct to Dec




ACME, Inc. Jan to Dec – offers of

coverage not made

Still has an employer/employee relationship with Jay

ER may be at risk for failure to offer coverage for Jan to Dec

Jay Jan to Dec – did not receive offers of coverage

Still has an employer/employee relationship with ACME

EE may be eligible to get subsidized coverage from the Marketplace from Jan to Dec




ACME, Inc. Jan to Sept – offers of

coverage not made

Oct to Dec – offers of coverage made as Jay comes back to work

ER will more than likely not be at risk any month of the 2017 plan year

Jay Jan to Sept – did not receive offers of coverage but had zero hours of service for measurement period

Oct to Dec – offers of coverage made as Jay comes back to work

EE may be eligible to get subsidized coverage from the Marketplace from Jan to Sept but will cease eligibility in Oct.


Possible solutions



ACME’s Options – Option 1 (for FT hires only)

If Jay had been hired as a FT in

2013

If Jay had been offered ACME’s

group health plan coverage

within 90 days of date of hire

If Jay has a reduction in hours to less than 30

hours per week average

ACME could use a 3 month measurement period from date of

reduction in hours to confirm reduction and terminate coverage 1st day of the 4th month after the

date of reduction in hours

Hired FT in 2013

Offered coverage 1st of day after 60 day wait period

LOA changed to start 4/1 and is a reduction in hours

ACME monitors hours from 4/1/15 – 6/30/15

ACME can choose to terminate coverage effective 7/1/15


COBRA qualifying event


ACME’s Options – Option 2 (for FT and VHE hires)

If Jay had a reduction in

hours

If Jay is able to provide “reasonable

assurance” that either enrolled in or

in the process of becoming enrolled in other qualified

health plan

ACME could terminate Jay’s coverage upon receipt of Jay’s

request but only if the provision has been adopted

into ACME’s section 125 document

LOA effective 10/1/15

On 10/1/15, Jay provides reasonable assurance that

enrolled in spouse’s employer’s group health plan (e.g. copy of

membership card, affidavit, etc.)

ACME terminates coverage effective 10/1/15




ACME’s Options – Option 3 (for FT and VHE hires)

If ACME reduced its employer’s contribution

for employee’s

on LOA

Significant increase in cost

section 125 change in status

rule may be triggered

May allow for Jay to request termination of coverage if no other

group health plan options available from ACME

LOA effective 10/1/15

ACME amended LOA policy earlier in 2015 that employer contributions will

cease for LOA employees

Effective 10/1/15, Jay is responsible for 100% of employee premium

Jay requests termination of coverage due to significant cost increase and ACME

processes the request effective 10/1/15

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Takeaways

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The employer mandate is in play as long as there is an

employer/employee relationship.

Leaves of absence do not equal termination of employment.

What is earned in the measurement period must be

given for the subsequent stability period.

Termination of coverage in a stability period does NOT negate the requirement to offer coverage for the next stability period if the employee has earned sufficient hours of service for coverage.

What does your employee handbook say?

What does your plan document/SPD say?


What do your CBAs say?


Questions?

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The intent of this presentation is to provide you with general information regardingthe status of, and/or potential concerns related to, your organization’s currentemployee benefits environment. It does not necessarily fully address all of yourorganization’s specific issues. It should not be construed as, nor is it intended toprovide, legal advice. Questions regarding specific issues should be addressed byyour organization’s general counsel or an attorney who specializes in this practicearea, as appropriate.


ACA Compliance Issues and Unattended …...ACA Compliance Issues and Unattended Consequences...

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