Healthcare Reform
Questions & Answers for Employers
Updated November 19, 2014

© 2014 GALLAGHER BENEFIT SERVICES, I NC .

DISCLAIMER
We share this information with our clients and friends for general informational purposes only. It does not necessarily address all of your specific issues. It should not be construed as, nor is it intended to provide, legal advice. Questions regarding specific issues and application of these rules to your plans should be addressed by your legal counsel.

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Contents
BACKGROUND ......................................................................................................... 1
EMPLOYER RESPONSIBILITIES ......................................................................... 1
General ......................................................................................................... 1
1.

Is there anything we have to do immediately? .................................................................. 1

2.

Will I be required to offer health insurance coverage to my employees? .......................... 1

3.

When will this requirement be effective? .......................................................................... 1

4.

We have between 50 and 99 full-time employees (including full-time equivalents). Will we have to do anything in order to qualify for the delay until 2016? ....................................... 1

5.

Our plan is self-funded. Will we have to do anything as a result of this new law? ............ 2

6.

We are a governmental entity. Do we have to comply with this legislation? ..................... 2

7.

As a self funded non-Federal governmental plan, can we still opt out of the requirements of HIPAA including Mental Health Parity?......................................................................... 2

8.

We are a church plan and our plan is not subject to ERISA. Do we still have to comply with this legislation? .......................................................................................................... 3

9.

Does PPACA apply to expatriate plans? .......................................................................... 3

Employer Mandate ....................................................................................... 4
10.

Do I only have to “offer” the coverage, or do I also have to pay for the coverage to avoid a penalty? ......................................................................................................................... 4

11.

How do I determine how many full time employees I have? ............................................. 4

12.

We employ about 40 full-time employees working 120 or more hours per month and about 25 part-time employees and seasonal workers. So we are not subject to the employer mandate penalties, right? .................................................................................. 4

13.

Our workforce numbers go up and down during the year. How do we determine if we had at least 50 full-time employees on business days during the preceding calendar year? .. 5

14.

We are a subsidiary of a parent corporation with only 30 full-time employees. Are we exempt from the employer mandate? ............................................................................... 6

Updated: 11/19/14

15.

If we are a large employer and don’t offer coverage to any full-time employee, how do we calculate the penalty? ....................................................................................................... 6

Updated: 11/19/14

16.

We are a large employer that offers coverage to our full-time employees except for a certain class of full time employees. In that case, how do we calculate the penalty? ....... 6

Updated: 11/19/14

17.

So if we offer coverage to our full-time employees, will we be exempt from the employer mandate penalties? .......................................................................................................... 7

18.

If our employee qualifies for tax credits with respect to one of his dependent children, will we be liable for a penalty? ................................................................................................ 7

19.

Our plan year starts on July 1 every year. Does the employer mandate apply to us on
January 1, 2015 or does it start on July 1, 2015? ............................................................. 7

20.

As the parent corporation of several subsidiary corporations, do the transitions rules described above apply on a controlled group basis or do they apply separately to each member of our controlled group? ...................................................................................... 8

21.

We have more than 50 full-time employees so we are subject to the employer mandate penalties. How do we know which of our employees is considered “full-time” requiring us

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to pay a penalty if they qualify for premium tax credits at an exchange (if the employee has a variable work schedule or is seasonal)? ................................................................. 9
22.
23.

If we use a measurement/stability period safe harbor, which hours do we have to count when calculating the number of hours worked in the measurement period? .................... 9

24.

We have full-time employees that work outside the U.S. Do their hours have to be counted when determining if they are full-time employees? ........................................... 10

25.

Do we have to use the same method of counting hours for all of our non-hourly employees? .................................................................................................................... 10

26.

If we use a measurement/stability period safe harbor for our variable hour employees, is there a formula we can use to determine whether they worked 30 or more hours per week during the measurement period? .......................................................................... 10

27.

For our school district plan, can we use a 12-month measurement period by counting only the hours of service that were incurred during the school year (and no hours for the summer break)? ............................................................................................................. 10

28.

We generally do not track the full hours of service of our adjunct faculty, but instead compensate them on the basis of credit hours taught. How should we count hours of service for our adjunct faculty? ....................................................................................... 11

29.

As an educational organization, we frequently employ students. Do their hours have to be counted? .................................................................................................................... 11

30.

Do we have to count the hours of our unpaid interns? ................................................... 11

31.

Our city has a volunteer fire department and other volunteer positions where the volunteers are nominally paid for their expenses or may receive cash awards. Do we have to count their hours? .............................................................................................. 12

32.

Do our members of a religious order have to be treated as full-time employees of their orders? ........................................................................................................................... 12

33.

Do we have to count hours that an employee is on-call when determining if they are fulltime employees? ............................................................................................................ 12

34.

If an employee takes an unpaid FMLA leave or goes on unpaid military leave during their measurement period, how do we account for that time upon their return to work? ......... 12

35.

So, if an employee meets the 30 hours per week requirement over the measurement period, do we need to enroll them the day after the measurement period ends? ........... 13

36.

How does the full-time employee safe harbor work for ongoing employees? ................. 13

37.

How are new employees classified? ............................................................................... 15

38.

If we use the look-back measurement period/stability period method for new variable hour, part-time, or seasonal employees, how long can the initial measurement and stability periods be? ........................................................................................................ 16

39.

Do we have to make the measurement period and stability period the same for all employees? .................................................................................................................... 18

40.

At what point would we stop using the initial measurement/stability period and transition an employee to ongoing status? ..................................................................................... 18

41.

We intend to adopt a 12-month measurement period and a 12-month stability period but are facing time constraints in getting our systems set up in order to be ready to enroll fulltime employees on January 1, 2015. Are there any other options? ................................ 19

42.

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If we use the look-back measurement period/stability period method, how long can the measurement and stability periods be? ............................................................................ 9

Can we change the timing or duration of our standard measurement and stability periods? .......................................................................................................................... 19

43.

If one of our new variable hour, part-time, or seasonal employees is promoted to a permanent full-time position during their initial measurement period, how should their eligibility for coverage be treated? .................................................................................. 19

44.

What happens if the change in employment status occurs during a stability period? ..... 19

45.

What happens if an employee fails to make a timely contribution (e.g., tipped employees, reduced work schedules, and leaves of absence) during the stability period? ............... 19

46.

If an employee reduces their hours during their stability period and wants to terminate their coverage, can we let them do so? .......................................................................... 20

47.

We frequently have variable hour employees whose contracts are terminated and then they are rehired at a later date. Can we treat them as new employees and start the measurement period over again for purposes of determining if they are a full-time employee? ...................................................................................................................... 20

48.

What happens if the break in service is less than 13 weeks (26 weeks for an educational organization) and the “rule of parity” does not apply? ..................................................... 21

49.

If we transfer an employee out of the U.S., is that considered a termination of employment? .................................................................................................................. 21

50.

What if we bring an employee into the US from one of our foreign locations?................ 21

Updated: 11/19/14

51.

When we have large projects to complete, we occasionally hire temporary employees who may be hired to work a 40-hour per week schedule when initially employed, but may not work at least 30 hours per week thereafter. How should we classify them in order to determine if we should be offering them coverage? ....................................................... 21

New: 11/19/14

52.

If we hire temporary workers from a temporary staffing agency for short assignments, we will be required to offer them coverage if they average 30 or more hours per week? ..... 22

53.

We occasionally use employees from a PEO or other staffing firm. Are we required to offer them coverage if the PEO or staffing firm is already offering them coverage? ....... 22

54.

As a home care agency, we do not generally direct and control our workers. Do we have to count them as full-time employees for either determining if we are a large employer or for offering coverage? ..................................................................................................... 22

55.

We are an agricultural operation that frequently employees workers with H-2A and H-2B visas. Are these workers counted as employees for purposes of the employer mandate?
....................................................................................................................................... 23

56.

If we elect not to use the look-back measurement method to determine our employee’s status, is there any other method we can use? .............................................................. 23

57.

As a member employer of a controlled group, do we have to use the same method for determining our employee’s status as the other employer members of the controlled group? ............................................................................................................................ 23

58.

We pay 100% of the employee-only cost but only pay 50% of the family cost. Is our plan considered “affordable”? ................................................................................................. 23

59.

If we decide to implement an employee contribution for employee–only coverage, how will we know if the contribution exceeds 9.5% of the employee’s household income? ... 23

60.

Some of our employees are paid on a commission-only basis. How should we determine if coverage is affordable for those employees? .............................................................. 24

61.

How are our wellness incentives taken into account when determining if our employee’s contribution for employee–only coverage exceeds 9.5% of the employee’s household income? .......................................................................................................................... 25

62.

How do we calculate whether our plan's share of the total allowed cost of benefits is at least 60%? ...................................................................................................................... 25

New: 11/19/14

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New: 11/19/14

I have heard we may have to provide “vouchers” which the employee can use to buy insurance through an exchange. Is that true? ................................................................ 26

65.

Do I have to “offer” and pay for dependent coverage also? What if the dependent
(spouse or children) are covered by another employer’s plan? ...................................... 27

66.

Our coverage does not currently include coverage for dependents. When will we have to start offering dependent coverage in order to satisfy the employer mandate? ............... 27

67.

We don’t know our employee’s household income. How will we know if an employee is eligible for a premium subsidy? ...................................................................................... 27

68.

Will we be able to file an appeal if we disagree with the exchange’s determination that our employee qualifies for premium tax credits or cost-sharing reductions because our plan does not offer qualifying coverage? ........................................................................ 27

69.

We offer coverage to most of our full-time employees but we have one class of full-time employees that are not eligible for coverage. Which prong of the penalty will apply to our plan? ............................................................................................................................... 28

70.

As the parent corporation of several subsidiary corporations, are we responsible for a single penalty payment for all of the subsidiary corporations in the controlled group? ... 28

71.

If we offer no coverage to our full-time employees and the penalty assessment is done separately for each subsidiary, does each subsidiary get the 30- or 80- employee reduction? ....................................................................................................................... 28

72.

If we offer coverage that is not affordable but require our full-time employees to enroll, thereby making them ineligible for a premium subsidy, will we avoid being penalized? . 28

73.

Our plan year is effective July 1 so we may have some employees wanting to skip open enrollment and then join our health plan on January 1, 2014 in order to avoid the individual mandate penalty. We may also have some employees who will want to drop our coverage on January 1, 2014 and purchase coverage through an exchange. Do we have to allow them to make these mid-year changes? ................................................... 29

74.

What happens when we have employees that would like to drop our coverage outside of open enrollment and purchase a Marketplace plan? ...................................................... 29

75.

New: 11/19/14

Can we satisfy the Minimum Value (MV) requirement if we offer a plan that does NOT include hospitalization and/or physician services benefits? ............................................ 26

64.

Updated: 11/19/14

63.

If we contribute to a multiemployer union plan for our unionized employees, how will we know if we are subject to a penalty for the union members that work for us for 30 or more hours per week? ............................................................................................................. 30

Marketplace (Exchanges) .......................................................................... 31
76.
77.

Will I have to buy health insurance for my employees through one of the new
Marketplace exchanges? Starting when? ....................................................................... 31

78.

Am I considered a small employer for purposes of buying insurance through the
Marketplace exchange?.................................................................................................. 31

79.

We are a small employer. If we buy coverage through our state Marketplace, what information will we have to provide to our employees so that they can elect and enroll in a plan? ............................................................................................................................ 32

80.

If we have employees that are not offered or waive our coverage, when can they buy insurance at a Marketplace?........................................................................................... 32

81.

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I’ve been hearing about “exchanges”. Can you describe what they are? ....................... 31

Our plan is a non-calendar year plan renewing each July 1st. Will employees who waive our coverage at open enrollment be able to purchase coverage at a Marketplace at that time? ............................................................................................................................... 33

82.

We have an employee who is leaving and her benefits don't begin with her new employer for 90 days. Is she able to opt out of COBRA coverage and go to the Marketplace to buy coverage? ....................................................................................................................... 33

83.

If she elects COBRA, can she drop it at a later date to buy coverage at the Marketplace?
....................................................................................................................................... 33

84.

We pay the cost of the first 3 months of COBRA coverage for our employees who are laid off. Will that prevent them from buying coverage at a Marketplace after the subsidized period has ended? ........................................................................................ 33

Marketplace (Exchange) Notice ................................................................ 34
85.

How will our employees learn about the Marketplace exchanges and the possibility of receiving premium subsidies or cost-sharing reductions? .............................................. 34

86.

Who should receive the Marketplace notice? Can we include it in our health plan enrollment materials? ..................................................................................................... 34

87.

Does the notice have to be provided to former employees who are COBRA qualified beneficiaries or retirees? ................................................................................................ 34

88.

Do we have to provide the notice to new hires? ............................................................. 34

89.

We have union employees that are covered by a collectively bargained multiemployer plan, not our company’s group plan. Am I responsible for providing the notice to these employees? .................................................................................................................... 34

90.

Is there a deadline to provide the Marketplace notice? .................................................. 35

91.

Can we provide the notice electronically?....................................................................... 35

92.

Can we hand deliver the Marketplace notice? ................................................................ 35

93.

Are there model Marketplace notices we can use to satisfy our notice obligation? ........ 35

94.

Are any parts of the model notice optional?.................................................................... 35

95.

My organization is a controlled group of corporations comprised of a number of affiliated member employers. Which employer name and EIN should be reflected on page two of the notice – the parent company or the member employer?........................................... 36

96.

Is there a fine or penalty for not providing the Marketplace notice? ................................ 36

Grandfathered Plans ................................................................................. 36
97.

I’ve heard that existing plans may be “grandfathered”. What does that mean? .............. 36

98.

It sounds like our plan is grandfathered. What benefit changes will we have to make?
And by when? ................................................................................................................. 36

99.

Our plan is collectively bargained and we heard that we don’t have to make any changes until the last collective bargaining agreement expires. Has that changed? .................... 37

100. We also provide dental and vision coverage to our employees. Are we required to make these changes for those plans as well? .......................................................................... 37
101. We provide retiree health coverage for our retired employees. Will these benefit mandates apply to our retiree plan? ............................................................................... 37
102. What if I like some of these changes and want to incorporate them into my plan now?
Can I do that and still meet the “grandfathered plan” rules? ........................................... 38
103. We made some plan design changes that are effective 7/1/10. Will they result in a loss of grandfathered status? ..................................................................................................... 38
104. Specifically, what are the changes that cause a plan to lose grandfathered status? ...... 38
105. How do we know what medical inflation is? .................................................................... 39

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106. If all we are doing is changing insurers, that will cause a loss of grandfather status? .... 39
107. Is there anything we have to provide to the new insurer regarding the benefits and contributions we had under the prior insurer?................................................................. 39
108. Our plan is self funded and we are changing our third party administrator (TPA). Will that cause our self funded plan to lose its grandfathers status? ............................................ 39
109. Our plan is currently insured but we are considering a change to self funding and changing our PPO network. Would these changes cause our plan to lose grandfathered status? ............................................................................................................................ 40
110. We are thinking of amending our plan to delete coverage for depression. If we make this change, will it cause our plan to lose its grandfathered status? ...................................... 40
111. Our plan currently pays 90% of covered services and the employee pays 10%. We want to reduce our share to 80%. Would that cause the loss of grandfathered status? .......... 40
112. Our plan currently pays 90% of covered services but we want to reduce that to 50% for durable medical equipment only. Would that cause a loss of grandfathered status? ..... 40
113. Our plan is facing a significant premium increase this year so we want to raise the deductible. What effect will this have on our grandfathered plan status? ....................... 40
114. Our plan has a $10 office visit copay. We want to raise it to $20. Will this cause our plan to lose grandfathered status? ......................................................................................... 41
115. We want to raise the copayment for office visits, but leave all other copayments the same. Will that one change cause our plan to lose grandfather status? ........................ 41
116. We have just received our renewal and we need to lower our contribution and increase the employee’s contribution percentage for family coverage. As of March 23, 2010, we paid 100% of the employee’s coverage and 80% of the family coverage and we now want to reduce the 80% to 50%. Will this change cause us to lose grandfathered status?
....................................................................................................................................... 41
117. Our plan has an annual limit of $500,000. If we reduce that amount to $250,000, will the plan lose grandfathered status? ..................................................................................... 42
118. We are going to significantly reduce benefits and increase employee contributions for our
PPO option at next renewal but we are not changing our HMO option. Does our plan lose grandfathered status for both plan options or just the PPO option? ............................... 42
119. If we implement a new wellness program that includes a smoker surcharge, could that cause our plan to lose its grandfathered status? ............................................................ 42
120. We are going to change the tiers of coverage under our plan from self-only and family to a multi-tiered structure of employee-only, employee+one, employee+two and employee+three or more. Will our plan lose grandfathered status?............................... 42
121. Our plan operates on a calendar plan year but we are considering a plan amendment that will cause it to relinquish grandfather status. If we decide to make this amendment effective on July 1, 2011, does our plan relinquish grandfather status in the middle of the plan year? ....................................................................................................................... 43
122. Before we knew what changes would affect grandfathered status, we made several plan changes for our May 1, 2010 renewal that will result in a loss of grandfathered status.
Are there any exceptions that would allow us to keep these changes without losing our grandfathered status? ..................................................................................................... 43
123. We have to make changes due to Mental Health Parity for our next plan year starting on
August 1, 2010. Will these changes cause our plan to lose grandfathered status? ........ 43
124. If we lose our grandfathered status, what are the other health care reform requirements that will apply? ................................................................................................................ 43

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125. We intend to keep our plan grandfathered as long as possible. Is there anything we have to do to verify we have not made any changes that would result in the loss of grandfathered status? ..................................................................................................... 44
126. Will we have to tell our employees about our plan’s grandfathered status? ................... 45

Dependents to Age 26 ............................................................................... 45
127. Our plan currently covers children to age 23, so we'll have to extend that to age 26.
When do we have to do that? Can we do it now? .......................................................... 45
128. Do we have to offer coverage to adult children even if the "child" already has coverage through their own employer's plan? ................................................................................ 46
129. Our plan covers step children and in some cases grandchildren if they meet specific criteria. Will we now have to cover them to age 26 as well? ........................................... 46
130. Can I just continue the children already on my plan, or do I have to go back and offer the coverage to those who have already aged out? ............................................................. 46
131. Am I required to tell employees about this opportunity? How do I do that and by when?
....................................................................................................................................... 47
132. Do I have to offer the coverage to an adult child who has aged out, but is currently on
COBRA? ......................................................................................................................... 47
133. Can I charge more for these adult children? ................................................................... 47
134. Can I offer a more limited benefit to these adult children? .............................................. 47
135. If the adult child is married are they still allowed to have the coverage? ........................ 47
136. Do I have to cover the spouse or child (the grandchild of the employee) of the adult child too? ................................................................................................................................ 47
137. We have an employee whose child is 25 but is not a full time student, does this mean we will have to calculate imputed income for that employee? .............................................. 48
138. Does the same change apply for state tax purposes? .................................................... 48

Preexisting Condition Exclusions ............................................................ 48
139. Our plan has a preexisting condition limitation. Will we have to change it or eliminate it?
....................................................................................................................................... 48
140. We have a plan provision that excludes coverage for services that are the result of an injury that occurred before the effective date of the employee’s coverage. Is this still permissible? ................................................................................................................... 49
141. If our plan cannot apply a preexisting condition limitation to any covered person starting in 2014, will we still be required to provide HIPAA certificates of creditable coverage to individuals who lose coverage? ...................................................................................... 49

Lifetime and Annual Maximums ............................................................... 49
142. We have two plan options. One has a $1 million lifetime maximum and the other has a
$2 million lifetime maximum. How will these maximums be affected? ............................ 49
143. Our plan is self-funded. How do we know what benefits are “essential benefits”? ......... 49
144. Can we still keep our lifetime limit for benefits that are not considered “essential benefits”? ........................................................................................................................ 50
145. Does the prohibition on annual and lifetime dollar limits apply to expenses incurred outof-network? ..................................................................................................................... 50
146. We have an employee who dropped coverage at our last open enrollment because her daughter’s claims exceeded the lifetime maximum and no further claims were going to be paid. Do we have to let her back on the plan? ................................................................ 50

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147. Do we have to notify employees who exceeded the lifetime limit that they can return to the plan? How long can they have to reenroll? .............................................................. 50
148. Can we require her to enroll in the plan option she was enrolled in when her daughter’s claims exceeded the lifetime maximum? ........................................................................ 50
149. Our plan has no lifetime maximum but it has an annual maximum of $500,000. Will we have to change or eliminate the annual maximum? ....................................................... 51
150. Our plan has an annual maximum of $10,000 for chiropractic care. Do we have to remove the limit? ............................................................................................................ 51
151. We offer our employees a high deductible health plan combined with a Health
Reimbursement Arrangement (HRA). We contribute $1,000 annually to each employee’s
HRA. Does the elimination of annual limits mean we have to change our HRA? ........... 51
152. If we offer our employees an HRA that allows them to purchase coverage on the individual market, will the HRA be considered integrated with that individual market coverage and therefore satisfy the annual limit and/or preventive care requirements? .. 51
153. If we offer to reimburse our employees for individual or Marketplace coverage premiums, will that arrangement satisfy the annual limit requirements? .......................................... 52
154. We have a lot of minimum wage employees who can’t afford our health plan so we offer them a “mini-med” plan that has a $75,000 annual maximum. Will we have to raise that maximum? ...................................................................................................................... 52
155. One of our plan options is a stand-alone Health Reimbursement Arrangement (HRA) where we fund the account with $1,500 each year. Will we have to seek a waiver from the restricted annual limit requirement for our HRA? ...................................................... 52
156. How do we extend an annual limit waiver for our 2012 plan year? ................................. 53
157. When does the waiver program end? ............................................................................. 53
158. Do we have to tell employees if we have been granted a waiver? ................................. 53

Rescissions................................................................................................ 54
159. PPACA prohibits “rescissions”. What does this mean and how will it affect our plan? ... 54
160. We have several locations and sometimes we are not immediately notified by supervisors or managers when an employee loses eligibility for plan coverage when they are reassigned to a part time position. We can still terminate coverage retroactively in those cases, right? ......................................................................................................... 54
161. We only reconcile our bill or data feed for eligible employees and dependents once a month. Can we still retroactively terminate employees and dependents off our coverage on that reconciliation back to the end of the previous month? ........................................ 55
162. What if we have an employee who notifies us of his final divorce from his spouse. Are we allowed to terminate the coverage of the spouse retroactively to the date of the divorce? .......................................................................................................................... 55

Patient Protections .................................................................................... 55
163. What are the special rules that will apply to our HMO option regarding the choice of primary care physicians (PCP)? ..................................................................................... 55
164. We read that HMOs cannot require females to get authorization for OB/GYN services.
How does that work? ...................................................................................................... 55
165. Do we have to notify the employees enrolled in or enrolling in the HMO of these new rules? .............................................................................................................................. 55
166. There are new rules for emergency room services. How will they affect our plan? ....... 56

Preventive Care.......................................................................................... 56

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167. Our plan currently provides coverage for preventive services but we apply copays and deductibles to those services. I’ve heard we will have to eliminate these cost-sharing provisions. Is that true?................................................................................................... 56
168. We may have one plan option that is not grandfathered. What are the preventive services that the plan will have to cover without cost-sharing?....................................... 56
169. Does the list of women’s evidence-informed preventive care and screenings include coverage for contraception? ........................................................................................... 57
170. We are a church that believes contraception is contrary to our religious tenets so we do not currently cover them. Will we have to change our plan to add coverage for contraceptives? .............................................................................................................. 57
171. We are a religiously-affiliated organization (not a church) that currently excludes contraception because it is contrary to our religious beliefs. How does this rule apply to us? .................................................................................................................................. 57
172. Once the safe harbor expires, will we have to provide contraceptive coverage at that time? ............................................................................................................................... 58
173. We are a religiously-affiliated, non-profit organization that believes providing a selfcertification to our TPA makes us complicit in providing contraception. Are we required to provide the self-certification to our TPA? ........................................................................ 59
174. If we provide the self-certification to our TPA, are they required to provide or arrange for contraception coverage for our participants or beneficiaries?......................................... 59
175. Are there any other exemptions from the contraceptive mandate? ................................ 59
176. If we have to cover contraceptives, can we cover only oral contraceptives? .................. 59
177. Can we cover only the generic versions of prescribed contraceptive drugs or impose cost-sharing on brand name drugs? ............................................................................... 60
178. Do we have to cover over-the-counter contraceptives? .................................................. 60
179. Do we have to cover contraceptives for men? ................................................................ 60
180. Does our nongrandfathered option have to provide 100% coverage for both in-network and out-of network services on the list?.......................................................................... 60
181. Our nongrandfathered option has a limit on well baby visits per year. Can we keep that or other limits on the applicable preventive services? ......................................................... 60
182. What if an employee goes to their doctor for an office visit but also gets one of the recommended preventive services at the same time. Can we still apply a copay to the office visit charge? .......................................................................................................... 61
183. Some of the recommended preventive services include things like aspirin or other overthe-counter medications. Is our plan required to cover those items? .............................. 61
184. The list of required preventive services requires us to cover tobacco-use counseling and provide tobacco cessation interventions. For employees who use tobacco products, what services are we expected to provide as preventive coverage? ....................................... 61
185. What happens when there are changes to the recommendations or guidelines for covered preventive services? ......................................................................................... 61

Internal Claim and Appeal Process and External Review ....................... 62
186. What are the new claims and appeals processes and how will they apply? ................... 62
187. Our plan is a governmental plan that is not subject to ERISA and does not follow the current ERISA guidelines. Will we have to update our internal claim and appeal process?
....................................................................................................................................... 62
188. What changes did PPACA make to ERISA’s current claims and appeals rules? ........... 62

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189. Are we required to include diagnosis and treatment codes in our adverse benefit determination notices? ................................................................................................... 63
190. What must our plan do to ensure our adverse benefit determination notices are provided in a culturally and linguistically appropriate manner? ..................................................... 63
191. If my plan is insured, will I have to do anything? ............................................................. 63
192. How will the external review process apply to my plan? ................................................. 64
193. How will the Federal external review process work? ...................................................... 64
194. Our self funded ERISA plan year begins on January 1, 2011, and we will be making plan changes that will result in a loss of grandfathered status. If there is no Federal external review process available by that date, how will we comply with the requirement? ......... 64
195. Do we have to hire an independent review organization (IRO) to handle our external review process until the federal process is available? .................................................... 65
196. Is there any alternative to hiring three IROs for our self-funded plan?............................ 65
197. Our plan is a self-funded nonfederal governmental plan. What’s the process for participating in the Federally-administered external review process administered by
HHS? .............................................................................................................................. 65
198. Does the external review process apply to all adverse benefit determinations? ............. 66
199. Are there any model notices we can use to develop our self-funded plan’s adverse benefit determination notices? ........................................................................................ 66
200. Will the new requirements for internal and external claims and appeals processes apply to my life or disability coverage? ..................................................................................... 66

Cost-Sharing Limits ................................................................................... 66
201. Is it true that the maximum deductible we can have on our plan is $2,000/$4,000? ....... 66
202. Are there any other cost-sharing limits we need to be aware of? ................................... 66
203. Do the out-of-pocket cost sharing limits also have to apply to our out-of-network benefits? ......................................................................................................................... 67
204. We have a separate pharmacy benefit manager for our self-funded medical plan with a separate prescription drug out-of pocket maximum. Will we have to coordinate the two benefits so that the overall out-of-pocket maximum limits are not exceeded? ................ 67
205. Can we divide the annual limit on out-of-pocket costs across multiple categories of benefits (e.g. medical and Rx), rather than reconcile those claims under a single out-ofpocket maximum across multiple service providers? ...................................................... 67
206. We have a separate pharmacy benefit manager for our self-funded medical plan but our prescription drug benefit does not have an out-of-pocket maximum. Will we have to add one for 2014 that complies with the maximum out-of-pocket limit? ................................ 67

Summary of Benefits and Coverage (SBC) .............................................. 68
207. Will we have to provide any other new notices or disclosures as a result of these bills? 68
208. We have three plan options, will we have to provide a separate SBC for each option? . 68
209. Is there a deadline for providing SBCs to our newly eligible employees? ....................... 69
210. We have a self-funded PPO option but we also have an insured HMO option. Will our insurer help us with creating the SBC? ........................................................................... 69
211. When will our insurer provide us with the SBCs so we can distribute them to our employees? .................................................................................................................... 69
212. After our employee’s initial enrollment, at what other times does the SBC have to be distributed to participants and beneficiaries? .................................................................. 69

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213. What happens if negotiations with our insurer are not completed until we are already within 30 days of the renewal date? ............................................................................... 70
214. If we have more than one plan option, does that mean we have to provide every eligible employee with a new SBC for each option every year at open enrollment? ................... 70
215. Are we required to provide a separate SBC for each coverage tier (e.g., self-only coverage, employee-plus-one coverage, family coverage, etc.) within a benefit option? 70
216. Do we have to send each employee and dependent an SBC or can we just send it to the employee? ...................................................................................................................... 70
217. Our coverage is structured in a way that is different than contemplated by the SBC templates (e.g. different network or drug tiers, or in denoting the effects of a health flexible spending account, health reimbursement arrangement, or wellness program).
How do we describe those benefits in the SBC? ............................................................ 71
218. What if we have carved out a certain benefit, such as carving out the pharmacy benefit to a pharmacy benefit manager (“PBM”)? .......................................................................... 71
219. Do we have to provide an SBC for our dental or vision coverage? ................................. 71
220. Are we required to provide SBCs to individuals who are COBRA qualified beneficiaries?
....................................................................................................................................... 71
221. Where possible, we provide our plan communications to employees using electronic media (e.g. internet posting, email). Can the SBC be distributed electronically? ............ 72
222. Can the SBC be provided electronically through our online enrollment system?............ 72
223. Our plan is a governmental plan that is not subject to ERISA. Do we still have to comply with the ERISA electronic disclosure regulations? .......................................................... 72
224. We have several employees who are fluent only in a non-English language. Do we have to provide a translated version of the SBC to them? ...................................................... 72
225. If we make mid-year changes to our plan that require us to change the information in the
SBC, do we have to send out a new SBC? .................................................................... 73
226. Will we also have to send a Summary of Material Modification (SMM) to the plan participants if we have sent out the SBC advance notice? ............................................. 73
227. Will there be model notice/templates we can use to fulfill the SBC obligation? .............. 73
228. Have there been any changes to the SBC template or instructions for our self-funded plan in the second year of applicability? ......................................................................... 74
229. Has any of the safe harbor or enforcement relief for SBCs changed for the second year of applicability? ............................................................................................................... 75

90-Day Waiting Period Limit...................................................................... 75
230. We currently have a 180-day waiting period before coverage is effective. When will that have to be changed? ...................................................................................................... 75
231. Can we change our waiting period to three months instead of 90 days? ........................ 75
232. Our plan currently has a 90 day waiting period and then coverage is effective on the first day of the month following 90 days. Will that satisfy the requirement? ........................... 75
233. We currently have a 6-month waiting period and our plan year will not start until March 1,
2014. Can we apply the full 6-month waiting period to an employee hired in late 2013 or before March 1 of 2014?................................................................................................. 75
234. We currently require new employees to complete an orientation period before becoming permanent employees and eligible for coverage. Are we required to include the orientation period as part of the waiting period? ............................................................. 76

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235. If we require new full-time employees to complete a one-month orientation period plus satisfy our 90-day waiting period, are we automatically exempt from having to pay an employer mandate penalty for that 120-day period? ...................................................... 76
236. What happens if our new employee is in their waiting period but has not yet reached 90 days when the new plan year begins on March 1, 2014? ............................................... 77
237. Part-time employees are not eligible for our plan but there are situations where a parttime employee is promoted to full-time status. Assuming an employee worked as a parttime employee for more than 90 days, would we have to allow him to enroll immediately?
....................................................................................................................................... 77
238. If we implement a 90-day waiting period but an employee fails to complete the enrollment forms in a timely fashion and coverage is delayed a month, will that violate the law? .... 77
239. Only full-time employees working 30 or more hours per week are eligible for our plan.
Sometimes we have new hires with variable work schedules where it cannot be immediately determined if they will regularly work 30 hours per week. How can we handle those situations without violating the waiting period rules? ................................. 77
240. In addition to covering full-time employees working 30 or more hours per week, part-time employees also become eligible for coverage when they have completed a cumulative
1,200 hours of service. Will this have to be changed to comply with the 90-day rule? ... 78
241. We have employees covered by a multiemployer plan operating under a collective bargaining agreement that allows employees to earn eligibility for coverage by working hours for multiple contributing employers over a quarter. Is that allowed? .................... 79

Clinical Trials ............................................................................................. 79
242. Our plan is not grandfathered so what will we have to do to comply with the clinical trial mandate starting in 2014? .............................................................................................. 79
243. How is a “qualified individual” defined? .......................................................................... 79
244. Will we have to provide coverage for the investigational item, device or service? .......... 79
245. How will we know if a trial is an approved trial? .............................................................. 80
246. Can we require employees or dependents that are qualified individuals to use our HMO’s in-network providers? ..................................................................................................... 80

Nondiscrimination Rules for Insured Plans ............................................. 80
247. We only offer health insurance to our executives. Will we be able to continue this plan?
....................................................................................................................................... 80
248. Our insured plan is not grandfathered. Will we have to comply with the new nondiscrimination rule? ................................................................................................... 81
249. When will we have to comply with this rule? ................................................................... 81
250. What are the nondiscrimination rules under Code §105(h) that will apply to our insured plans if they lose grandfathered status? ......................................................................... 81
251. How do we know which of our employees are considered highly compensated employees? .................................................................................................................... 82
252. What are the penalties if we violate the nondiscrimination rule for insured, nongrandfathered plans? ................................................................................................ 82

Account-Based Plans ................................................................................ 82
Updated: 11/19/14

253. Will there be any changes to my healthcare flexible spending accounts (health FSAs)? 82
254. Our FSA plan year does not start on January 1, 2011. Will my employees be able to change their election amounts mid-plan year in anticipation of the limitations for OTC reimbursements coming on January 1, 2011? ................................................................ 83

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255. What would qualify as a prescription for over-the-counter medications? ........................ 83
256. Can an FSA (or HRA or HSA) still be used to reimburse employees for over-the-counter items that are not drugs or medicines? ........................................................................... 83
257. Our FSA plan uses an electronic debit card. Can that still be used to purchase over the counter drugs or medications that have a prescription? ................................................. 83
Updated: 11/19/14

258. Our health care FSA plan year is not on a calendar year basis. It starts on July 1. How do we implement the new FSA limit for non-calendar year plans? ...................................... 84

Updated: 11/19/14

259. Because our FSA plan is not on a calendar year basis, will we have to track employee contributions over two plan years to determine if the employee exceeds the maximum in a calendar year? ............................................................................................................. 84

Updated: 11/19/14

260. We have several married couples where both spouses work for us. Can they each elect health FSA coverage up to the maximum? ..................................................................... 84

Updated: 11/19/14

261. We use a flex credit system where we contribute flex credits to each employee’s health
FSA. Will those credits count towards the $2,500 maximum? ........................................ 84

Updated: 11/19/14

262. If we adopted the $500 health FSA carryover provision, will that change the amount our employees can elect to contribute to their FSAs? ........................................................... 84

Updated: 11/19/14

263. We are considering changing our FSA plan year from a January 1 basis to a fiscal year basis beginning July 1 and may have to run a short plan year. Do we have to adjust the maximum amount for the short plan year? ..................................................................... 85

Updated: 11/19/14

264. Our health FSA has a 2.5 month grace period. If an employee carries unused contributions into the FSA grace period, do those amounts count towards the new plan year’s election limit? ....................................................................................................... 85
265. If we have to reduce our health FSA maximum, do we need to amend our plan document to reflect the change? ..................................................................................................... 85
266. Can we continue to offer our FSA plan to our part-time employees who are not eligible for our health plan? ......................................................................................................... 85
267. Can we offer our FSA plan to union employees that are not offered our major medical plan but are offered coverage under their union plan? ................................................... 86
268. Will there be any changes to my Health Reimbursement Arrangement (“HRA”)? .......... 86
269. If we offer our current employees an HRA that allows them to purchase coverage on the individual market, will the HRA be considered integrated with that individual market coverage and therefore satisfy the annual limit or preventive care requirements? ......... 86
270. Will we be allowed to replace our current retiree coverage with an HRA that allows our retirees to purchase coverage on the individual market or at a Marketplace? ................ 86
271. We have a location in San Francisco where we offer a stand-alone HRA to our employees to satisfy the San Francisco Health Care Security Ordinance. Will we be able to continue that arrangement? ........................................................................................ 87
272. Some of our employees have HRAs that have accrued significant balances. Will those amounts have to be forfeited? ........................................................................................ 87
273. Will there be any changes to our Health Savings Accounts (“HSA”)? ............................ 87

Medical Loss Ratio/Rebate........................................................................ 88
274. Insurers are required to follow new minimum medical loss ratio (MLR) guidelines. Will this affect our plan? ........................................................................................................ 88
275. If our insurer has to pay a rebate, when will we receive it?............................................. 88
276. If we receive a rebate, are there guidelines or limits on how we can spend the money? 88

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277. The rebate we received for our ERISA plan is less than the amount we paid out of our general assets towards the cost of coverage. Are we allowed to keep the whole amount?
....................................................................................................................................... 89
278. What if our ERISA plan document is silent as to premium rebates or refunds? .............. 89
279. We use a VEBA trust to fund our plan where both the employer and employee contributions are deposited into the trust. Can we get our portion of the rebate back? .. 89
280. Are former employees who were covered under our ERISA plan last year entitled to a share of an MLR rebate? ................................................................................................ 89
281. Are our COBRA participants entitled to a share of an MLR rebate? ............................... 89
282. If we receive a rebate for our PPO option but not our HMO option, would we have to apply the portion of the rebate that is plan assets to the PPO plan only (since that’s where the rebate came from) or could the enhancement be applied to the HMO plan? . 90
283. As a governmental plan, are we required to track down former participants and return their portion of the rebate to them? ................................................................................. 90
284. Is there a timeframe under which our ERISA plan must use MLR refunds? ................... 90
285. Must our ERISA plan issue refunds or provide premium reductions to participants in proportion to whatever each individual employee actually paid (for example, based on employee-only versus family coverage or salary-dependent employee contributions)? . 90
286. If we have to return a portion of the refund to participants will it be taxable to them? ..... 91
287. If the plan asset portion of the MLR rebate can be classified as de minimis, does that mean the employer can use the money for purposes other than specified under the plan document, MLR rules or ERISA’s fiduciary rules? .......................................................... 91
288. What types of things would be considered benefit enhancements? ............................... 91
289. Instead of returning money back to participants, can we instead use the rebate to fund a wellness program for our employees? ............................................................................ 91

Wellness Programs ................................................................................... 92
290. We have a wellness program that provides a reward of 20% of the cost of coverage for employees that meet certain wellness standards. Will we be able to keep that program?
....................................................................................................................................... 92
291. Can we combine a health-contingent wellness program incentive that is 30% of the cost of coverage for meeting a non-tobacco based standard with another 50% incentive for meeting a tobacco-based standard? .............................................................................. 92
292. Is it true we can get a grant to help us pay for a wellness program? .............................. 92

Other ........................................................................................................... 92
293. We have several employees who waive our group health plan coverage. Will waivers be permitted under the new law? ......................................................................................... 92
294. If we want to offer coverage to same-sex spouses, does our insurer have to offer that coverage? ....................................................................................................................... 93

IRS REPORTING ..................................................................................................... 93
295. Will we have to report anything to the government regarding our plan’s coverage or contributions? ................................................................................................................. 93

W-2 Reporting ............................................................................................ 93
296. Is it true we will have to make changes to what we report on our employee’s W-2? ...... 93
297. What coverages are included in the amount that we must report on the W-2?............... 94

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298. Our EAP and wellness programs are considered group health plans but the cost is so little we don’t charge a premium to COBRA qualified beneficiaries to access them. Do we still have to include their cost in the aggregate reportable cost? .................................... 95
299. We offer an EAP to our employees that our long-term disability insurer provides for no additional cost as an add-on to the LTD benefits. Do we still have to include it in the aggregate reportable cost? ............................................................................................. 95
300. We are a church plan and our medical plan is self-funded and our dental and vision are excepted benefits so we are not required to report them. Do we still have to report the cost of our EAP or wellness program? ........................................................................... 95
301. We are a controlled group of corporations comprised of a number of member employers.
Do we have to aggregate all the W-2 we filed for all of our member employers to determine if we filed less than 250 W-2s in the preceding year? .................................... 95
302. Is there coverage we don’t have to include in the reporting? .......................................... 95
303. What value should we use for the costs that must be reported? .................................... 96
304. Our insurer charges us a composite rate for all covered employees. Do we report the same amount for every employee? ................................................................................ 96
305. We are an S corporation and our 2% or greater shareholder-employees are required to include the value of group health plan premium payments we make on their behalf in their income. Would we still have to also report this cost in Box 12 of their W-2? .......... 96
306. What do we do when an employee terminates employment in the middle of the year? . 96
307. What amount do we report if there is a cost or coverage change in the middle of the year? .............................................................................................................................. 96
308. What happens if the employee notifies us of a coverage change that may have an effect on the aggregate reportable cost for the previous year? For example, if one of our employees notifies us of a divorce in January that occurred in the preceding year and would reduce the cost of the employee’s coverage for that year? .................................. 97
309. We contribute to a multiemployer plan for our union employees. Do we have to report that contribution or the value of the multiemployer plan coverage on the union employee’s W-2? ............................................................................................................ 97
310. Do we have to provide a W-2 that includes the aggregate cost of our health plan coverage to retirees covered by our plan that don’t receive any other compensation from us? .................................................................................................................................. 97

§6055 – Minimum Essential Coverage Reporting .................................... 97
311. If our plan is insured, do we still have to file the §6055 return? ...................................... 97
312. If we provide minimum essential coverage to our employees under a self-funded plan, who is responsible for the §6055 reporting? ................................................................... 97
313. What information will we have to include on the Code §6055 return for our self-funded plan? ............................................................................................................................... 98
314. What if we are not able to get the spouse’s or children’s social security number (SSN)?
....................................................................................................................................... 98
315. We are a parent of a controlled group of corporations comprised of a number of member employers and our plan covers employees of all the member employers. Do we have to file the §6055 return on behalf of the other employer members? ................................... 98
Updated: 11/19/14

316. What forms should we use to file the §6055 return? ....................................................... 99
317. What is the deadline for filing the §6055 return? ............................................................ 99
318. Can our TPA file the §6055 report on our behalf? .......................................................... 99

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319. Do we have to provide reporting on HSAs, HRAs or FSAs?........................................... 99
320. Do we file a §6055 return for employees that are offered our coverage but waive it? .. 100
321. If my §6055 filing is incorrect due to retroactive enrollment of a baby or some other circumstance that occurs at the end of the year, will I be required to file a corrected return with the IRS? ...................................................................................................... 100
322. Do we have to provide a copy of the §6055 return to our employees? ......................... 100
323. Is the deadline for employee reporting the same as the IRS reporting deadline? ......... 100
324. Do we have to mail the form to the employee or can we provide it electronically? ....... 100
325. If one of our employees dies during the year, do we still have to provide the statement for that employee? ............................................................................................................. 101
New: 11/19/14

326. Are we subject to penalties if we fail to file the required information in a timely manner?
..................................................................................................................................... 101

§6056 – Applicable Large Employer Reporting ..................................... 102
327. We are a large employer so we will also have to file the Code §6056 return. What information will we have to include on the Code §6056 return?.................................... 102
328. If we are subject to both the §6055 and §6056 reporting because we are a large employer with a self-funded plan, can we combine the filings to streamline the process?
..................................................................................................................................... 103
329. We offer coverage to all of our full-time employees. Is there an easier way to satisfy the
§6056 reporting requirement? ...................................................................................... 103
330. We are a parent of a controlled group of corporations comprised of a number of member employers and our plan covers employees of all the member employers. Do we have to file the §6056 return on behalf of the other employer members? ................................. 103
331. We contribute to a multiemployer plan on behalf of our union employees. Are we required to file returns under §6056? ............................................................................ 104
New: 11/19/14

332. Does §6056 apply to nonprofit and/or governmental employers? ................................. 104
333. Can our TPA file the §6056 report on our behalf? ........................................................ 104

Updated: 11/19/14

334. What forms should we use to file the §6056 return? ..................................................... 105
335. What is the deadline for filing the §6056 return with the IRS? ...................................... 105
336. Do we file a §6056 return for full-time employees that are offered our coverage but waive it? .................................................................................................................................. 105
337. Do we file a §6056 return for full-time employees that are not offered our coverage? .. 105
338. If I am a large employer but all my employees are part-time employees, will I be required to report pursuant to §6056? ........................................................................................ 105
339. Do we have to provide a copy of the §6056 return to our full-time employees? ........... 105
340. What is the deadline to provide the reporting to my employees? ................................. 105
341. Do we have to mail the form to the employee or can we provide it electronically? ....... 106

INDIVIDUAL RESPONSIBILITY ....................................................................... 107
342. Won’t my employees be required to obtain their own health insurance coverage? ...... 107
343. What types of coverage will allow our employees to satisfy the individual mandate? ... 107
344. Are our foreign employees working in the United States subject to the individual mandate?...................................................................................................................... 108

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345. Does the individual mandate apply to our employees who are U.S. citizens working in other countries? ............................................................................................................ 108
346. What happens if one of our employees has a gap in coverage during the year? ......... 109
347. If our plan year starts on July 1, 2014, will our employees be penalized for the period of no coverage between January 1st and July 1st because they didn’t enroll in our plan for the plan year starting on July 1, 2013? ......................................................................... 109
348. We have several Medicare eligible employees. How will these bills affect their Medicare coverage? ..................................................................................................................... 109

TAXES AND SUBSIDIES ...................................................................................... 110
Cadillac Plans .......................................................................................... 110
349. Okay, I’ve been hearing all about these “Cadillac plans”. What are they? .................... 110
350. What professions would be classified as high-risk professions under the Cadillac tax? 110
351. Do I pay the excise tax or does the insurance carrier/TPA pay it? How do they know the amount?........................................................................................................................ 111
352. What coverages should we be including when we are determining the aggregate cost of group health plan coverage for our employees?........................................................... 111
353. How do we calculate the cost of our plan? ................................................................... 111
354. If the tax is based on the cost of individual and family coverage but we use four tiers for our COBRA rates, how should we determine the cost of coverage? ............................ 111
355. Do the cost thresholds remain the same after 2018 or are they adjusted each year for changes in the cost-of-living? ....................................................................................... 111
356. When do I have to start paying the excise tax on these so-called “Cadillac plans”?..... 111

Small Business Premium Tax Credit ...................................................... 112
357. As a small employer with only 21 employees, will we be eligible for any assistance to help us provide coverage to our employees? ............................................................... 112
358. How much is the tax credit?.......................................................................................... 112
359. Does it include dental or vision? ................................................................................... 112
360. Can premiums we paid in 2010, but before the new health reform legislation was enacted, be counted in calculating the credit? .............................................................. 112
361. We are a tax-exempt organization. Can we qualify for the tax credit? .......................... 113
362. Can we claim the credit if we had no taxable income for the year? .............................. 113
363. How do we claim the tax credit? ................................................................................... 113
364. Is there a limit on the amount of years a small business can claim the tax credit? ....... 113
365. How do we determine how many full time equivalent employees (FTE) we have for purposes of the tax credit? ........................................................................................... 113
366. How do we determine the amount of our average annual wages? ............................... 114
367. Do we have to count our seasonal employees when determining the number of full time equivalent employees we have or the amount of our average annual wages?............. 114

Early Retiree Reinsurance Program ....................................................... 114
368. I heard that the federal government will subsidize my company’s retiree medical coverage costs? Is that true? Starting when? ............................................................... 114
369. When will the cost threshold and cost limit amounts be indexed? ................................ 115

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370. How and when will we know if our application for the Early Retiree Reinsurance Program has been certified? ....................................................................................................... 115
371. We received notification that our application has been approved and we already have claims that are eligible for reimbursement. How do we submit the claims? .................. 116
372. When does the Early Retiree Reinsurance Program end? ........................................... 116
373. Is there anything we have to do to close out our participation in the ERRP program? . 116
374. Is there a deadline for using ERRP reimbursement funds? .......................................... 116
375. Will we have to tell our employees if we are participating in the early retiree reinsurance program? ...................................................................................................................... 116

Patient-Centered Outcomes Research Institute Fee ............................. 117
376. What is the Patient-Centered Outcomes Research (PCORI or CER) fee? ................... 117
Updated: 11/19/14

377. How much is the fee? ................................................................................................... 117
378. If our medical plan is insured, is there anything we have to do?................................... 117
379. We sponsor a self-funded health plan. How will we pay the fee? ................................. 117
380. Our plan is not subject to ERISA. Do we still have to pay the PCORI fee? .................. 118
381. We sponsor a single self-funded plan that covers employees of three other employer members of our controlled group. Is each employer member responsible for their own fee? .............................................................................................................................. 118
382. If we have two plan options, one is a self-funded PPO option and the other is an insured
HMO option. Will there be two fees for our arrangement? ............................................ 118
383. Can we hire our TPA to file the return on behalf of our self-funded plan? .................... 118
384. Can we use plan assets from our plan trust or employee contributions to pay the PCORI fee? .............................................................................................................................. 118
385. Our self-funded plan includes prescription drug benefits managed by a pharmacy benefit manager. We will have to pay two separate fees? ...................................................... 118
386. We also sponsor a health care FSA and provide dental and vision benefits. Will we have to pay a separate fee for them? .................................................................................... 118
387. We offer a health reimbursement arrangement (HRA) that is integrated with a high deductible health plan. Do we have to pay separate fees for each plan? ..................... 119
388. We don’t offer a major medical plan but we offer a stand-alone HRA to help our employees pay for their health care expenses. Will we have to pay the fee for the HRA?
..................................................................................................................................... 119
389. Will the fee apply to our EAP or wellness program if they provide limited medical benefits? ....................................................................................................................... 119
390. We have employees working and living overseas that are covered under a separate expatriate plan. Does this fee apply to that coverage? ................................................. 119
391. For our self-funded plan, how do we determine the average number of lives covered under our plan for the plan year?.................................................................................. 119
392. Do we include COBRA qualified beneficiaries in our count? ........................................ 120
393. Do we have to count covered retirees and their dependents when calculating the fee?
..................................................................................................................................... 120

Transitional Reinsurance Program......................................................... 121
394. What is the transitional individual market reinsurance fee? .......................................... 121
395. How much is the reinsurance fee? ............................................................................... 121

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396. So for our insured plan option, the insurer will pay the fee? ......................................... 121
Updated: 11/19/14

397. If our plan is self-funded, will the TPA be responsible for the cost of the fee? .............. 121

Updated: 11/19/14

398. How will we pay the fee for our self-funded plan? ........................................................ 122
399. What if we are already registered on Pay.gov for another purpose? ............................ 122

Updated: 11/19/14

400. What type of supporting documentation will we have to provide? ................................ 122

New: 11/19/14

401. Do we need to include company-level information in the Supporting Documentation file?
..................................................................................................................................... 123
402. Is the Automated Clearing House (ACH) process at Pay.gov the only way to pay the reinsurance contributions payment for the 2014 benefit year? ..................................... 123
403. Will we be able to pay the full amount in one payment rather than two installments? .. 123
404. Can we use plan assets from our plan trust or employee contributions to pay the reinsurance fee? ........................................................................................................... 123
405. Our plan is not subject to ERISA. Do we still have to pay the reinsurance fee? ........... 123
406. We sponsor a single self-funded plan that covers employees of three other employer members of our controlled group. Is each employer member responsible for their own fee? .............................................................................................................................. 123
407. Does the fee apply to just medical or does it also apply to our health FSA, dental and/or vision coverage?........................................................................................................... 123
408. We offer a health reimbursement arrangement (HRA) that is integrated with a high deductible plan. Does the fee apply separately to our HRAs? ...................................... 124
409. We offer a stand-alone, retiree-only HRA that allows our retirees to purchase their own individual coverage. We will have to pay the fee for this plan? ..................................... 124
410. Will the fee apply to our EAP or wellness programs if they provide only limited medical benefits? ....................................................................................................................... 124
411. We have employees working and living overseas that are covered under a separate expatriate major medical insurance policy. Does the individual market reinsurance fee apply to that coverage? ................................................................................................ 124
412. Does this fee apply to plans sponsored by Indian Tribal Governments? ...................... 124

Updated: 11/19/14

413. For our self-funded plan, how will the average number of covered lives be determined?
..................................................................................................................................... 124
414. We have a 7/1 plan year. In 2014, we moved from a fully insured plan (7/1/2013 6/30/2014) to a self-funded plan effective 7/1/2014. Since the transitional reinsurance fee is a calendar year fee – who is responsible for payment and how do we calculate ad pay the fee for 2014? .......................................................................................................... 125

New: 11/19/14

415. We switched our plan from insured to self-funded in the middle of the third quarter of
2014. Can we use either of the Snapshot” counting methods in our situation? ............ 126
416. If there is a reduction in the number of covered lives in the fourth quarter of the year, can we exclude those lives from our annual enrollment count? .......................................... 126
417. Do we count our employees or retirees that are covered by both our group health plan and Medicare? .............................................................................................................. 126
418. Do we include COBRA qualified beneficiaries in our count? ........................................ 126

Updated: 11/19/14

419. Our self-funded plan includes a self-funded prescription drug benefit managed by a pharmacy benefit manager. Will we have to pay two separate fees? ........................... 126
420. Our major medical plan is insured but our prescription drug coverage is carved-out on a self-funded basis. Will we have to pay two fees? ......................................................... 127

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421. We have two plan options. One is a self-funded PPO option and the other is an insured
HMO option. Who will pay the fees for each option? .................................................... 127
New: 11/19/14

422. What do we need to do if we discover that the Form we submitted is wrong after the payment date has passed and the contribution was paid? ........................................... 127
423. Will the 2015 and 2016 timing of the reinsurance contribution submission process be similar to 2014? ............................................................................................................ 127

New: 11/19/14

424. Can we deduct the cost of the reinsurance fee as a business expense? ..................... 127

Health Insurer Fee ................................................................................... 127
425. Are there any other taxes or fees we need to be aware of? ......................................... 127
426. Is our self-funded health plan subject to this fee? ......................................................... 128
427. Will this fee apply to our insured dental and vision coverage? ..................................... 128
428. If we have an EAP or wellness program that provides limited medical services, will the fee apply to those benefits? .......................................................................................... 128
429. Does the fee apply to our insured retiree coverage? .................................................... 128
430. We purchase travel insurance for employees that are travelling overseas. Will the fee apply to this coverage? ................................................................................................. 128

Medicare Part D Drug Subsidy................................................................ 128
431. Will I still be allowed to deduct the Medicare Part D retiree drug subsidies I receive from the federal government? Will the subsidies still even be available? ............................. 128

Other ......................................................................................................... 129
432. Will my employees see any other tax increases? ......................................................... 129

MISCELLANEOUS ............................................................................................... 129
433. Will reform reduce my health insurance costs? ............................................................ 129
434. Are there any other requirements that I should know about that aren’t getting as much media attention? ........................................................................................................... 129
435. Is COBRA coverage extended now beyond 18 months for my terminating employees?
..................................................................................................................................... 130
436. I’ve heard that several state attorneys general have filed a lawsuit against the federal government claiming that it is unconstitutional to force individuals to buy health insurance. Is it? ............................................................................................................ 130

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BACKGROUND
On Tuesday, March 23, 2010, President Obama signed into law the Patient Protection and
Affordable Care Act (H.R. 3590) (“the Act”). On Thursday, March 25, 2010, the House and
Senate passed The Health Care and Education Reconciliation Act of 2010 (H.R. 4827) (the
“Reconciliation Bill”) which amends several provisions of the Act. Together, the bills comprise the overall healthcare reform legislation package. President Obama signed the Reconciliation
Bill into law on March 30, 2010.

EMPLOYER
RESPONSIBILITIES
General
1. Is there anything we have to do immediately?
Although the Act was effective on the date the President signed it, most of its provisions are not effective immediately. For example, certain coverage mandates don’t take effect until the first plan year starting on or after September 23, 2010.
Other provisions are phased in between 2011 and 2018.
2. Will I be required to offer health insurance coverage to my employees?
No. However, if you have at least 50 full-time employees, and you don’t offer coverage, you will owe a penalty if any full time employee is eligible for and purchases subsidized coverage through a Marketplace exchange.
3. When will this requirement be effective?
The employer mandate and potential assessment of employer penalties was originally effective January 1, 2014. On July 2, 2013, the mandate was delayed for one year until January 1, 2015. On February 12, 2014, it was delayed until January
1, 2016 for large employers with between 50 and 99 full-time employees who meet certain criteria.
4. We have between 50 and 99 full-time employees (including full-time equivalents).
Will we have to do anything in order to qualify for the delay until 2016?
Yes. There are three conditions that have to be satisfied:
1. During the period beginning on February 9, 2014, and ending on December 31,
2014, you are not able to reduce the size of your workforce or the overall hours of service of your employees solely in order to satisfy the condition of having between 50 and 99 full-time employees (including full-time equivalents). If a reduction in workforce size or overall hours of service was made for bona fide business reasons, it will not be considered to have been made in order to satisfy the workforce size condition (and thus would be permissible); and
2. You cannot eliminate or materially reduce the health coverage, if any, you offered as of February 9, 2014 during either a) the period beginning on February

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9, 2014, and ending on December 31, 2015 if you have a calendar year plan; or
b) for the period beginning on February 9, 2014, and ending on the last day of the plan year that begins in 2015 if you have a non-calendar year plan. This means that between the dates described above, you cannot narrow or reduce the class of employees (or dependents) eligible for coverage on 2/9/14 and you must continue to make a contribution toward the cost of employee-only coverage that is either (a) at least 95% of the dollar amount contributed on February 9,
2014 or (b) was the same (or a higher) percentage of the cost contributed on
February 9, 2014; and
3. Your plan year start date was not modified after February 9, 2014 to begin on a later calendar date (e.g. changing the start date of the plan from January 1 to
December 1); and
4. You certify, on a prescribed form to be issued at a later date, that you meet the eligibility requirements set forth above.
5. Our plan is self-funded. Will we have to do anything as a result of this new law?
Self-funded plans are generally treated the same as fully-insured plans under the
Act. You should be analyzing the coming changes for the impact they will have on your self-funded plan.
6. We are a governmental entity. Do we have to comply with this legislation?
Yes. There are no exceptions for nonfederal governmental plans so you should be analyzing the coming changes for the impact they will have on your plan.
7. As a self funded non-Federal governmental plan, can we still opt out of the requirements of HIPAA including Mental Health Parity?
Self-funded governmental plans can still opt out of some requirements including
Mental Health Parity, but the opt-out election will no longer be available for other requirements. PPACA made several significant changes to the Public Health Service Act (PHSA) which resulted in changes to HIPAA’s opt-out provision. Prior to enactment of
PPACA, sponsors of self-funded nonfederal governmental plans could elect to “opt out” of all 7 of the following requirements:
1. Limitations on preexisting condition exclusion periods.
2. Requirements for special enrollment periods.
3. Prohibitions against discriminating against individual participants and beneficiaries based on health status (but not including provisions added by the
Genetic Information Nondiscrimination Act of 2008).
4. Standards relating to benefits for newborns and mothers.

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5. Parity in the application of certain limits to mental health and substance use disorder benefits (including requirements of the Mental Health Parity and
Addiction Equity Act of 2008).
6. Required coverage for reconstructive surgery following mastectomies.
7. Coverage of dependent students on a medically necessary leave of absence.
Under the revised PHSA, you can no longer choose to exempt your plan from categories 1 through 3 listed above, but may continue to exempt the plan from requirement categories 4 through 7. This change is effective for plan years starting on or after September 23, 2010.
CMS will continue to accept opt-out elections via U.S. Mail or fax until December 31,
2014. Starting January 1, 2015, the election must be filed electronically. A NonFederal Governmental Plans Module User Manual that describes the process for filing the opt-out electronically can be found here: http://www.cms.gov/CCIIO/Resources/Forms-Reports-and-OtherResources/Downloads/HIOSNon-FedModuleUserManual.pdf. 8. We are a church plan and our plan is not subject to ERISA. Do we still have to comply with this legislation?
Yes. The Act does not include a blanket exception for church plans so you should be analyzing the changes for the impact they will have on your plan. However, there are special rules or exceptions that may apply for certain provisions including contraceptive coverage, external claim reviews, medical loss ratio (MLR) rebates, and W-2 reporting. Those special rules or exceptions are discussed in later sections of these FAQs.
9. Does PPACA apply to expatriate plans?
It does but due to the special challenges in complying with certain provisions of
PPACA, there is a special transition rule that applies. The transition relief says that insured expatriate health plans with plan years ending on or before December 31,
2016 will be deemed to have satisfied the requirements of PPACA if they are in compliance with the pre-PPACA version of the Public Health Service Act and other applicable law under ERISA and the Internal Revenue Code, including, for example, the mental health parity provisions, the HIPAA nondiscrimination provisions, the
ERISA §503 requirements for claims procedures, and any reporting and disclosure obligations under ERISA Part 1.
For purposes of this temporary transitional relief, an expatriate health plan is defined as a plan that limits enrollment only to primary insureds who reside outside of their home country or outside of the United States for at least six months of a 12-month period and any covered dependents. The 12-month period can fall within a single plan year or across two consecutive plan years.
This relief does not apply to self-funded expatriate health plans.

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Employer Mandate
Delayed until January 1, 2015 for employers with 100 or more full-time employees and until January 1, 2016 for large employers with between 50 and 99 full-time employees who met certain criteria. 10. Do I only have to “offer” the coverage, or do I also have to pay for the coverage to avoid a penalty?
You are not required to offer coverage nor pay any part of the coverage if you offer it. However, you are subject to the employer mandate if you are a “large employer”. A large employer is an employer that employed at least 50 full-time employees
(including full-time equivalent employees) on business days in the preceding calendar year.
11. How do I determine how many full time employees I have?
For purposes of determining if you employ at least 50 full-time employees, they are defined as those common law employees who work on average 120 hours per month. A common law employee/employer relationship exists when the employer for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished. That is, an employee is subject to the will and control of the employer not only as to what shall be done but how it shall be done. In this connection, it is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if the employer has the right to do so. The right to discharge is also an important factor indicating that the person possessing that right is an employer. Other factors characteristic of an employer, but not necessarily present in every case, are the furnishing of tools and the furnishing of a place to work to the individual who performs the services. In general, if an individual is subject to the control or direction of another merely as to the result to be accomplished by the work and not as to the means and methods for accomplishing the result, he is not an employee.
Accordingly, a leased employee (as defined in Code § 414(n)(2)), a sole proprietor, a partner in a partnership, a worker described in Code §3508 (that is, real estate agents and direct sellers), or a 2-percent S corporation shareholder are not commonlaw employees.
12. We employ about 40 full-time employees working 120 or more hours per month and about 25 part-time employees and seasonal workers. So we are not subject to the employer mandate penalties, right?
You may be. The health reform law does not require you to provide coverage for employees working on average less than 30 hours per week (“part-time”). However, the hours worked by part time employees are counted to determine whether you

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have at least 50 full-time employee equivalents and therefore are subject to the employer mandate. This is done by taking the total number of monthly hours worked by part time employees (but not to exceed 120 hours for any one part-time employee) and dividing by 120 to get the number of “full time equivalent” employees. You would then add those “full-time equivalent” employees to your 40 full-time employees.
The hours worked by seasonal workers are also counted to determine whether you have at least 50 full-time employee equivalents and therefore are subject to the employer mandate. For purposes of determining whether you are a large employer, seasonal workers are workers who perform labor or services on a seasonal basis
(i.e. exclusively performed at certain seasons or periods of the year and which, from its nature, may not be continuous or carried on throughout the year). There is an exemption from the employer mandate that says you would not be considered to employ more than 50 full-time employees if:
 Your workforce only exceeds 50 full-time employees for 120 days, or fewer, during the calendar year; and
 The employees in excess of 50 who were employed during that 120-day
(or fewer) period were seasonal workers.
13. Our workforce numbers go up and down during the year. How do we determine if we had at least 50 full-time employees on business days during the preceding calendar year?
For purposes of determining if you are a large employer, the formula requires the following steps:
1. Determine the total number of full-time employees working at least 120 hours per month (including any full-time seasonal workers) for each calendar month in the preceding calendar year;
2. Determine the total number of full-time equivalents (including non-full-time seasonal employees) for each calendar month in the preceding calendar year;
3. Add the number of full-time employees and full-time equivalents described in
Steps 1 and 2 above for each month of the calendar year;
4. Add up the 12 monthly numbers;
5. Divide by 12.
If the average per month is 50 or more, you are a large employer.
For 2015 only, there is a special transition rule that gives you the option to do the above calculation based on any 6 consecutive calendar months in 2014 (rather than the entire 2014 calendar year).
Note: The employer mandate has been delayed until January 1, 2015 for employers with 100 or more full-time employees and until January 1, 2016 for large employers with between 50 and 99 full-time employees who met certain criteria.

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14. We are a subsidiary of a parent corporation with only 30 full-time employees.
Are we exempt from the employer mandate?
In order to determine if the members of your controlled group constitute a large employer, you will have to count all the employees of the controlled group or affiliated service group together.
If the total for all the related employers within the controlled group is at least 50 full time employees, then each separate company , including those companies that individually do not employ enough employees to meet the threshold, is considered a large employer subject to the employer mandate. For example, if an applicable large employer is comprised of a parent corporation and 10 wholly owned subsidiary corporations, each of the 11 corporations, regardless of the number of employees, is considered a large employer.
Updated: 11/19/14

15. If we are a large employer and don’t offer coverage to any full-time employee, how do we calculate the penalty?
If you don’t offer coverage to your full-time employees (and their dependents), you are subject to an employer shared responsibility penalty if at least one of your fulltime employees purchases coverage at a Marketplace exchange with premium tax credits. Employees eligible for a premium tax credit are those whose household income is between 100% (133% in states that expanded Medicaid) and 400% of the federal poverty level and who are not eligible for employer-sponsored coverage that is affordable and meets minimum value. The monthly penalty you would have to pay would be 1/12 of $2,000 (this amount will be adjusted annually for inflation) multiplied by the number of full-time employees you have for that month (minus the first 30).
The annual penalty of $2,000 is expected to be indexed for 2015 to $2,080.
Under a transition rule for 2015, the monthly penalty calculation would be 1/12 of
$2,080 (indexed annually) multiplied by the number of full-time employees you have for that month minus the first 80 (instead of the first 30).

Updated: 11/19/14

16. We are a large employer that offers coverage to our full-time employees except for a certain class of full time employees. In that case, how do we calculate the penalty? If you offer coverage to less than 95% of your full-time employees and their dependents, you are subject to an employer shared responsibility penalty if at least one of your full-time employees purchases coverage at a Marketplace exchange with premium tax credits. The monthly penalty you would have to pay would be 1/12 of
$2,000 (indexed annually) multiplied by the number of full-time employees you have for that month (minus the first 30).
Under a transition rule, for your 2015 plan year and any months in 2016 that are within your 2015 plan year, you will only be required to offer coverage to 70% or more of your full-time employees (rather than 95%) if you did not modify your plan year start date after February 9, 2014 to begin on a later calendar date (for example, changing the start date of the plan year from January 1 to December 1). In addition, if you offer coverage to less than 70% of your full-time employees, the monthly penalty calculation would be 1/12 of $2,080 (indexed annually) multiplied by the

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number of full-time employees you have for that month minus the first 80 (instead of the first 30).
Updated: 11/19/14

17. So if we offer coverage to our full-time employees, will we be exempt from the employer mandate penalties?
Not necessarily. If you have at least 50 full-time employees and you offer coverage to at least 95% (70% for the 2015 plan year if certain criteria are met) of your fulltime employees, you are still subject to a penalty if:
1. A full-time employee’s contribution for employee-only coverage exceeds 9.5% of the employee’s household income (note: see below regarding three affordability “safe harbors”) or the plan’s value is less than 60%; and
2. The employee’s household income is less than 400% of the federal poverty level; and 3. The employee waives your coverage and purchases coverage at a Marketplace exchange with premium tax credits.
The penalty will be calculated separately for each month in which the above applies.
The amount of the penalty for a given month equals the number of full-time employees who receive a premium tax credit for that month multiplied by 1/12 of
$3,000. This amount will be adjusted annually for inflation. The annual penalty of
$3,000 is expected to be indexed for 2015 to $3,120.
18. If our employee qualifies for tax credits with respect to one of his dependent children, will we be liable for a penalty?
No. An employee’s receipt of a premium tax credit or cost sharing reduction with respect to coverage for a dependent will not result in liability for you.
19. Our plan year starts on July 1 every year. Does the employer mandate apply to us on January 1, 2015 or does it start on July 1, 2015?
The employer shared responsibility mandate is generally effective on January 1,
2015. However, transition rules apply that may delay the assessment of penalties until the first day of your first plan year that starts on or after January 1, 2015. The transition rules say that if 1) you maintained a non-calendar year plan as of
December 27, 2012; 2) your plan year was not modified after December 27, 2012 to begin at a later calendar date; 3) at least 95% (70% if certain criteria as described above are met) of your full-time employees are offered coverage no later than that first day of the plan year that starts in 2015; and 4) your employees would not be eligible for coverage under any other of your group health plans that has a calendar year plan year, penalties will not be assessed for the months prior to the first day of the plan year that starts in 2015 for:
A. Any employee (whenever hired) that would be eligible for coverage, as of the first day of the first plan year that begins in 2015 under the eligibility terms of the plan as in effect on February 9, 2014; and

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B. Any other employees that are not eligible under the terms of the plan in effect on February 9, 2014 if:
i.

your non-calendar year plan covered at least one quarter of your employees (full-time and part-time) as of any date in the 12 months ending on February 9, 2014 or your plan offered coverage to at least one third of your employees (full-time and part-time) during the open enrollment period that ended most recently before February 9, 2014; OR

ii.

your non-calendar year plan covered at least one third of your full-time employees as of any date in the 12 months ending on February 9, 2014 or your plan offered coverage to one half or more of your full-time employees during the open enrollment period that ended most recently before February 9, 2014.

Therefore, if the four criteria described above are met, for any of your employees who are eligible to participate in the plan under its terms as of February 9, 2014
(whether or not they take the coverage), you will not be subject to a penalty for those employees until July 1, 2015 if they are offered affordable coverage that provides minimum value no later than July 1, 2015.
For any other of your employees that were not eligible to participate under the terms of the plan in effect on February 9, 2014, you can avoid liability for a penalty for those non-eligible employees until July 1, 2015 if they are offered affordable, minimum value coverage on July 1, 2015 and:
1. Your plan covered at least one quarter of all your full-time and part-time employees as of any date in the 12 months ending on February 9, 2014 or offered coverage under your non-calendar year plan to at least one third of your full-time and part-time employees during the open enrollment period for your July
1, 2013 renewal; OR
2. Your plan covered at least one third of your full-time employees as of any date in the 12 months ending on February 9, 2014 or offered coverage to one half or more of your full-time employees during the open enrollment period for your July
1, 2013 renewal.
20. As the parent corporation of several subsidiary corporations, do the transitions rules described above apply on a controlled group basis or do they apply separately to each member of our controlled group?
The transition rules generally are applied separately to each member company of your controlled group in determining eligibility for the transition relief.
Example – A parent corporation sponsors a single health plan that is also available to two additional controlled group members. The parent corporation and controlled group member 1 independently qualify for the transition relief; however, controlled group member 2 does not qualify for the transition relief. Controlled group member
2 would be subject to the affordability and minimum value requirements on January
1, 2015 while the parent corporation and controlled group member 1 could wait until the first day of the 2015 plan year to comply.

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21. We have more than 50 full-time employees so we are subject to the employer mandate penalties. How do we know which of our employees is considered “fulltime” requiring us to pay a penalty if they qualify for premium tax credits at an exchange (if the employee has a variable work schedule or is seasonal)?
For purposes of the employer mandate penalties, the guidance permits you to use two methods to determine if an employee is a full time employee. The first is a “lookback measurement period/stability period” method where you may use a standard measurement/stability period for ongoing variable hour employees, while using a different initial measurement/stability period for new variable hour and seasonal employees. The second method is the “monthly” method where full-time employee status is determined on a month-to-month basis.
22. If we use the look-back measurement period/stability period method, how long can the measurement and stability periods be?
For ongoing employees, the standard measurement period must be at least 3 but not more than 12 consecutive months. The stability period for employees that are determined to be full-time must be the greater of six consecutive calendar months or the length of the standard measurement period. If an employee did not work full time, the stability period cannot be longer than the standard measurement period.
23. If we use a measurement/stability period safe harbor, which hours do we have to count when calculating the number of hours worked in the measurement period? For hourly employees, you must calculate actual hours of service and hours for which payment is made or due for vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence.
For non-hourly employees, you are permitted to calculate the number of hours of service using one of three methods. You may apply different methods for different classifications of non-hourly employees, so long as the classifications are reasonable and consistently applied. The three methods are:
1. Counting actual hours of service (as in the case of hourly employees) and hours for which payment is made or due for vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty or leave of absence; or
2. Using a days-worked equivalency method whereby the employee is credited with eight hours of service for each day the employee is credited with at least one hour of service (including hours of service for which no services were performed); or
3. Using a weeks-worked equivalency of 40 hours of service per week for each week, the employee is credited with at least one hour of service (including hours of service for which no services were performed).
However, you cannot use the days-worked or weeks-worked equivalency method if the result would be to substantially understate an employee's hours of service (e.g. employees working three 10-hour days).

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24. We have full-time employees that work outside the U.S. Do their hours have to be counted when determining if they are full-time employees?
No. Hours worked outside the United States do not have to be counted.
25. Do we have to use the same method of counting hours for all of our non-hourly employees? No. You are not required to use the same method of calculating a non-hourly employee’s hours of service for all non-hourly employees, and may apply different methods of calculating a non-hourly employee’s hours of service for different categories of non-hourly employees, provided that the categories are reasonable and consistently applied.
You may also change the method of calculating a non-hourly employee’s hours of service for one or more categories of non-hourly employees for each calendar year.
26. If we use a measurement/stability period safe harbor for our variable hour employees, is there a formula we can use to determine whether they worked 30 or more hours per week during the measurement period?
Employees would be deemed to be full-time employees if they work on average at least 130 hours per month. For example, using a 12-month measurement period you would count up the number of hours worked in those 12 months and divide by 12. If the hours worked per month averages 130 or more, that employee would be a fulltime employee for the ensuing stability period.
27. For our school district plan, can we use a 12-month measurement period by counting only the hours of service that were incurred during the school year
(and no hours for the summer break)?
No. For employees of educational institutions, a 12-month measurement period is permitted but a special rule applies that says for employment break periods (e.g. summer break) of four or more consecutive weeks, you must either:
1. Determine the average hours of service per week for the employee during the measurement period excluding the employment break period and use that average as the average for the entire measurement period; or
2. Credit the employee with hours of service for the employment break period at a rate equal to the average weekly rate at which the employee was credited with hours of service during the weeks in the measurement period that are not part of an employment break period (but no more than 501 hours of service are required to be credited).
Also, you cannot treat your employees who work during the active portions of the academic year as seasonal employees.

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28. We generally do not track the full hours of service of our adjunct faculty, but instead compensate them on the basis of credit hours taught. How should we count hours of service for our adjunct faculty?
You must use a reasonable method for crediting hours of service that is consistent with the purposes of the employer mandate. For example, a method of crediting hours would be reasonable if it took into account all of your adjunct professor’s hours of service including classroom or other instruction time and other hours that are necessary to perform the employee’s duties, such as class preparation time, faculty meetings, or office hours.
Until further guidance is issued, one method that is reasonable for this purpose would credit an adjunct faculty member of an institution of higher education with (a) 2 1/4 hours of service (representing a combination of teaching or classroom time and time performing related tasks such as class preparation and grading of examinations or papers) per week for each hour of teaching or classroom time and, separately, (b) an hour of service per week for each additional hour outside of the classroom the faculty member spends performing duties he or she is required to perform (such as required office hours or required attendance at faculty meetings).
For example, assume an adjunct professor teaches a course load of twelve credit hours and is required to hold office hours for 2 hours per week and attend a onehour faculty meeting each week. Under the method above, the university would credit the adjunct professor with 27 hours of service per week (12 x 2.25) for teaching time, an additional 2 hours per week for the office hours, and 1 hour for the faculty meeting.
This would result in a total credit of 30 hours of service per week, and the adjunct would be a full-time employee for purposes of PPACA.
29. As an educational organization, we frequently employ students. Do their hours have to be counted?
It will depend on the situation. The hours of students in positions subsidized through the federal work study program or a substantially similar program of a State or political subdivision do not have to be counted. However, all hours of service for which a student employee is paid or entitled to payment in a capacity other than through the federal work study program (or a State or local government’s equivalent) are required to be counted as hours of service.
30. Do we have to count the hours of our unpaid interns?
No. Services performed by an intern do not count as hours of service to the extent that the intern does not receive, and is not entitled to, payment in connection with those hours.
However, hours of service for which interns receive, or are entitled to receive, compensation are counted and are subject to the general rules, including the option to use the look-back measurement or monthly method for determining full-time employee status.

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31. Our city has a volunteer fire department and other volunteer positions where the volunteers are nominally paid for their expenses or may receive cash awards.
Do we have to count their hours?
No. Hours of service do not include hours worked as a “bona fide volunteer.” Bona fide volunteers include any volunteer (including a volunteer firefighter) who is an employee of a government entity or an organization described in section 501(c) that is exempt from taxation under section 501(a) whose only compensation from that entity or organization is in the form of (i) reimbursement for (or reasonable allowance for) reasonable expenses incurred in the performance of services by volunteers, or
(ii) reasonable benefits (including length of service awards), and nominal fees, customarily paid by similar entities in connection with the performance of services by volunteers.
32. Do our members of a religious order have to be treated as full-time employees of their orders?
There are no special rules for members of a religious order but until further guidance is issued, you do not have to count as an hour of service any work performed by an individual who is subject to a vow of poverty as a member of that order when the work is in the performance of tasks usually required (and to the extent usually required) of an active member of the order.
33. Do we have to count hours that an employee is on-call when determining if they are full-time employees?
It will depend on the situation. Generally, you will be required to use one of the reasonable methods for crediting hours of service for any on-call hour for which payment is made or due, for which the employee is required to remain on-call on your premises, or for which the employee’s activities while remaining on-call are subject to substantial restrictions that prevent the employee from using the time effectively for the employee’s own purposes.
34. If an employee takes an unpaid FMLA leave or goes on unpaid military leave during their measurement period, how do we account for that time upon their return to work?
For periods of special unpaid leave including under FMLA, USERRA or on account of jury duty, you must determine the average hours of service per week for the employee during the measurement period – excluding the special unpaid leave period – and use that average as the average for the entire measurement period.
Alternatively, you can choose to credit employees with hours of service during the leave at a rate equal to the employee’s average weekly rate during the weeks in the measurement period that were not special unpaid leave.
The rule for special unpaid leave does not apply if you are using the monthly method to determine full-time employee status.

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35. So, if an employee meets the 30 hours per week requirement over the measurement period, do we need to enroll them the day after the measurement period ends?
For ongoing employees, you can build in an “administrative period” after the measurement period ends and before the associated stability period begins. This administrative period can’t reduce or lengthen the measurement period or the stability period; it can’t be longer than 90 days; and it must overlap with the prior stability period; so that, during the administrative period, you continue to offer coverage to ongoing employees until the new stability period begins.
For new variable or seasonal employees, you can build in an administrative period before the start of the stability period. This administrative period must not exceed 90 days in total. For this purpose, the administrative period is counted from the date of hire to the date the employee is first offered coverage under your group health plan, other than the initial measurement period. Thus, for example, if you begin the initial measurement period on the first day of the first month following the employee’s start date, the period between the employee’s start date and the first day of the next month must be taken into account in applying the 90-day limit on the administrative period.
Similarly, if there is a period between the end of the initial measurement period and the date the employee is first offered coverage under your plan, that period must be taken into account in applying the 90-day limit on the administrative period.
In addition, you are limited in how long the initial measurement period and the administrative period combined can be for a new variable or seasonal employee.
Specifically, your initial measurement period and administrative period together cannot extend beyond the last day of the first calendar month beginning on or after the first anniversary of the employee’s start date. For example, if you use a 12-month initial measurement period for a new variable hour employee, and begin that initial measurement period on the first day of the first calendar month following the employee’s start date, then the administrative period before coverage starts cannot be longer than one month, assuming, of course, the employee met the full-time hours requirement during the initial measurement period
36. How does the full-time employee safe harbor work for ongoing employees?
For ongoing employees with variable hours, you have the option to determine each ongoing employee’s full-time status by looking back at a standard measurement period between 3 and 12 consecutive calendar months (as chosen by you). You can choose the months in which the standard measurement period starts and ends, provided that you are uniform and consistent in applying it for all employees in the same category. (See below in this section for permissible categories.) For example, if you chose a standard measurement period of 12 months, it could be the calendar year, a non-calendar plan year, or a different 12-month period, such as one that ends shortly before the start of the plan’s annual open enrollment season. If you determine that an employee averaged at least 30 hours per week during the standard measurement period, then you must treat the employee as a full-time employee during a subsequent “stability period”, regardless of the employee’s number of hours of service during the stability period, so long as he or she remained an employee.
The stability period would have to be at least six consecutive calendar months and no shorter than the standard measurement period. If you determine that the

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employee did not work full-time during the standard measurement period, you would not have to treat the employee as a full-time employee during the stability period that follows and you would not incur an employer mandated penalty.
Example – Facts: You choose a 12-month stability period that begins January 1 and a 12-month standard measurement period that begins October 15. Consistent with the terms of your group health plan, only an ongoing employee who works full-time
(an average of at least 30 hours per week) during the standard measurement period is offered coverage during the stability period associated with that measurement period. You also choose to use an administrative period between the end of the standard measurement period (October 14) and the beginning of the stability period
(January 1) to determine which employees worked full-time during the measurement period, notify them of their eligibility and of the coverage available under the plan for the calendar year beginning on January 1, answer questions and collect materials from employees, and enroll those employees who elect coverage in the plan.
Previously-determined full-time employees already enrolled in coverage continue to be offered coverage through the administrative period until January 1.
Situation: Phil and Cara have been employees for several years, continuously from their start date. Phil worked full-time during the standard measurement period that begins October 15 of Year 1 and ends October 14 of Year 2 and for all prior standard measurement periods. Cara also worked fulltime for all prior standard measurement periods, but is not a full-time employee during the standard measurement period that begins October 15 of Year 1 and ends October 14 of Year 2.
Conclusions: Because Phil was employed for the entire standard measurement period that begins October 15 of Year 1 and ends October 14 of Year 2, he is an ongoing employee with respect to the stability period running from January 1 through
December 31 of Year 3. Because Phil worked full-time during that standard measurement period, he must be offered coverage for the entire Year 3 stability period (including the administrative period from October 15 through December 31 of
Year 3). Because Phil worked full-time during the prior standard measurement period, he would have been offered coverage for the entire Year 2 stability period, and if enrolled would continue such coverage during the administrative period from
October 15 through December 31 of Year 2.
Because Cara was employed for the entire standard measurement period that begins October 15 of Year 1 and ends October 14 of Year 2, Cara is also an ongoing employee with respect to the stability period in Year 3. Because Cara did not work full-time during this standard measurement period, she is not required to be offered coverage for the stability period in Year 3 (including the administrative period from
October 15 through December 31 of Year 3). However, because Cara worked fulltime during the prior standard measurement period, she would be offered coverage through the end of the Year 2 stability period, and if enrolled would continue such coverage during the administrative period from October 15 through December 31 of
Year 2.
In this example, you would comply with the standards because your measurement and stability periods are no longer than 12 months; the stability period for ongoing employees who work full-time during the standard measurement period is not shorter

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than the standard measurement period; the stability period for ongoing employees who do not work full-time during the standard measurement period is not longer than the standard measurement period; and the administrative period is not longer than
90 days.
Phil:

Stability Period
Jan 1, Year 2-Dec 31, Year 2
Phil continues coverage for
Year 2, including Admin Period

Year 1

Stability Period
Jan 1, Year 3-Dec 31, Year 3
Phil offered coverage for all of
Year 3, including Admin Period

Year 2

Year 3

Standard Measurement Period
Oct15,Year 1-Oct 14,Year 2
Phil averages 30 hpw

Administrative Period
Oct 15-Dec 31, Year 2

Cara:

Stability Period
Jan 1, Year 2-Dec 31, Year 2
Cara continues coverage for
Year 2, including Admin Period

Year 1

Stability Period
Jan 1, Year 3-Dec 31, Year 3
Cara not offered coverage for
Year 3, including Admin Period

Year 2

Year 3

Standard Measurement Period
Oct15,Year 1-Oct 14,Year 2
Cara averages less than 30 hpw

Administrative Period
Oct 15-Dec 31, Year 2
Cara’s coverage terminates on Dec 31

37. How are new employees classified?
New hires are generally classified based on the employee’s hours worked, or, the amount of hours the employee is reasonably expected to work as of their hire date.
 New employee reasonably expected to work full-time (i.e. 30 or more hours per week) - If you reasonably expect an employee to work full-time when you hire them, and coverage is offered to the employee before the end of the employee’s initial 90 days of employment, you will not be subject to the employer mandate payment for that employee, if the coverage is affordable and meets the minimum required value.

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 New employee reasonably expected to work part-time (i.e. less than
30 hours per week)- If you reasonably expect an employee to work parttime and the employee’s number of hours do not vary, you will not be subject to the employer mandate penalty for that employee if you don’t offer them coverage.
 New variable hour and seasonal employees – If based on the facts and circumstances at the date the employee begins working (the start date), you cannot determine that the employee is reasonably expected to work on average at least 30 hours per week, then that employee is a variable hour employee. A “seasonal employee” is defined for purposes of the employer responsibility penalty as an employee who is hired into a position for which the “customary” annual employment is six months or less. Customary means that by the nature of the position an employee typically works for a period of six months or less, and that period should begin each calendar year in approximately the same part of the year, such as summer or winter.
Factors to consider in determining if a new hire is or is not a full-time employee as of their start date include, but are not limited to, whether the employee is replacing an employee who was or was not a full-time employee, the extent to which employees in the same or comparable positions are or are not full-time employees, and whether the job was advertised, or otherwise communicated to the new hire or otherwise documented (for example, through a contract or job description), as requiring hours of service that would average 30 (or more) hours of service per week or less than 30 hours of service per week.
38. If we use the look-back measurement period/stability period method for new variable hour, part-time, or seasonal employees, how long can the initial measurement and stability periods be?
Once hired, you have the option to determine whether a new variable hour, parttime, or seasonal employee is a full-time employee using an “initial measurement period” of between three and 12 months (as selected by you). You would measure the hours of service completed by the new employee during the initial measurement period to determine whether the employee worked an average of 30 hours per week or more during this period. If the employee did work at least 30 hours per week during the measurement period, then the employee would be treated as a full-time employee during a subsequent “stability period,” regardless of the employee’s number of hours of service during the stability period, so long as he or she remains an employee. The stability period must be a period that is the same length as the stability period for ongoing employees, must be for at least six consecutive calendar months, and cannot be shorter than the initial measurement period. If the employee didn’t work on average at least 30 hours per week during the measurement period, you would not have to treat the employee as a full-time employee during the stability period that followed the measurement period. That stability period could not be more than one month longer than the initial measurement period and must not exceed the remainder of the first entire standard measurement period (plus any associated administrative period) for which a variable hour employee, seasonal employee, or part-time employee has been employed.

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Example – Facts: For new variable hour employees under a calendar year plan, you use a 12-month initial measurement period that begins on the start date and apply an administrative period from the end of the initial measurement period through the end of the first calendar month beginning on or after the end of the initial measurement period.
Situation: Dianna is hired on May 10, 2015. Dianna’s initial measurement period runs from May 10, 2015, through May 9, 2016. Dianna works an average of 30 hours per week during this initial measurement period. You offer affordable coverage to
Dianna for a stability period that runs from July 1, 2016 through June 30, 2017.
Conclusion: Dianna worked an average of 30 hours per week during her initial measurement period and you had: (1) an initial measurement period that does not exceed 12 months; (2) an administrative period totaling not more than 90 days; and
(3) a combined initial measurement period and administrative period that does not last beyond the final day of the first calendar month beginning on or after the oneyear anniversary of Dianna’s start date. Accordingly, from Dianna’s start date through June 30, 2017, you are not subject to an employer mandate penalty with respect to Dianna because you complied with the standards for the initial measurement period and stability periods for a new variable hour employee.
However, you must test Dianna again based on the period from October 15, 2015 through October 14, 2016 (your first standard measurement period that begins after
Dianna’s start date) to see if she qualifies to continue coverage beyond the initial stability period.
Standard Measurement Period
Oct 15, 2015-Oct 14, 2016

2015

Standard Measurement Period
Oct 15, 2016-Oct 14, 2017

2016

Initial Measurement Period
(≤ 12 months)
May 10, 2015-May 9, 2016

2017
Initial Coverage
Stability Period
July 1, 2016-Jun 30, 2017

Administrative Period
(≤ 90 days)
May 10, 2016-Jun 30, 2016

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39. Do we have to make the measurement period and stability period the same for all employees?
No. You may use measurement periods and stability periods that differ either in length or in their starting and ending dates for the following categories of employees:
1. Each group of collectively bargained employees covered by a separate collective bargaining agreement;
2. Collectively bargained and non-collectively bargained employees;
3. Salaried employees and hourly employees;
4. Employees whose primary places of employment are in different States.
40. At what point would we stop using the initial measurement/stability period and transition an employee to ongoing status?
Once a new employee, who has been employed for an initial measurement period, has been employed for an entire standard measurement period, the employee must be tested for full-time status, beginning with that standard measurement period, at the same time and under the same conditions as other ongoing employees.
Example: If you have a calendar year standard measurement period that also uses a one-year initial measurement period beginning on the employee’s start date, you would test a new variable hour employee whose start date is February 12 for fulltime status first based on the initial measurement period (February 12 through
February 11 of the following year) and again based on the calendar year standard measurement period (if the employee continues in employment for that entire standard measurement period) beginning on January 1 of the year after the start date. If you determine the employee is a full-time employee during the initial measurement period or standard measurement period, then he or she must be treated as a fulltime employee for the entire associated stability period. This is the case even if the employee is determined to be a full-time employee during the initial measurement period but determined not to be a full-time employee during the overlapping or immediately following standard measurement period. In that case, you may treat the employee as a part-time employee only after the end of the stability period associated with the initial measurement period. Thereafter, the employee’s full-time status would be determined in the same manner as that of other ongoing employees.
In contrast, if you determine the employee is not a full-time employee during the initial measurement period, but IS determined to be a full-time employee during the overlapping or immediately following standard measurement period, you must treat the employee as a full-time employee for the entire stability period that corresponds to that standard measurement period (even if that stability period begins before the end of the stability period associated with the initial measurement period).
Thereafter, the employee’s full-time status would be determined in the same manner as that of other ongoing employees.

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41. We intend to adopt a 12-month measurement period and a 12-month stability period but are facing time constraints in getting our systems set up in order to be ready to enroll full-time employees on January 1, 2015. Are there any other options? Yes. Solely for purposes of stability periods beginning in 2015, you may adopt a transition measurement period that is shorter than 12 months but that is no less than
6 months long and that begins no later than July 1, 2014 and ends no earlier than
90-days before the first day of the plan year beginning on or after January 1, 2015
(90 days being the maximum permissible administrative period). For example, you could use a measurement period from April 15, 2014 through October 14, 2014 (six months), followed by an administrative period ending on December 31, 2014 with a
12-month stability period starting on January 1, 2015.
42. Can we change the timing or duration of our standard measurement and stability periods? You may change your standard measurement period and stability period for subsequent years, but you may not change them once the standard measurement period has begun.
43. If one of our new variable hour, part-time, or seasonal employees is promoted to a permanent full-time position during their initial measurement period, how should their eligibility for coverage be treated?
For a new variable hour, part-time, or seasonal employee who changed employment status to full-time during their initial measurement period, you should treat her as a full-time employee on the earlier of:
1. The first day of the fourth month following the change in employment status; or
2. If the employee averages 30 or more hours of service per week during the initial measurement period, the first day of the initial stability period that would have applied had the employee not had a change in employment status.
44. What happens if the change in employment status occurs during a stability period? An ongoing employee’s change in employment status during his or her stability period would not affect the employee’s status as a full-time employee or non full-time employee for the remainder of that stability period.
45. What happens if an employee fails to make a timely contribution (e.g., tipped employees, reduced work schedules, and leaves of absence) during the stability period? If your employee’s payment is late, you must provide the employee with a 30-day grace period in order to make the payment. If your employee does not make the payment within the grace period, you are not required to provide coverage for the period for which the premium is not timely paid and may terminate coverage. In addition, you are treated as having offered that employee coverage for the remainder of the coverage period (typically the remainder of the plan year) and cannot be penalized for terminating coverage if the premium is not paid. Similarly, if the

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employee makes a partial payment that is "not significantly less" than the total amount due (the lesser of 10% of what is due or $50), you must either accept the deficient payment as payment in full or notify the employee in writing of the underpayment and give the employee a reasonable amount of time to pay the remaining balance.
New: 11/19/14

46. If an employee reduces their hours during their stability period and wants to terminate their coverage, can we let them do so?
At your discretion, you may choose to amend your §125 cafeteria plan to allow an employee to prospectively revoke coverage under your plan provided the following conditions are met:
 The employee was reasonably expected to average at least 30 hours of service per week and there is a change in that employee’s status so that the employee will reasonably be expected to average less than 30 hours of service per week after the change, even if that reduction does not result in the employee losing eligibility under the group health plan (this may occur, for example, if a full-time employee is in a stability period); and
 The employee’s election to revoke your group health plan corresponds to the employee’s intended enrollment (and any covered dependents), in another plan that provides minimum essential coverage (MEC). The new coverage must be effective no later than the first day of the second month following the month that includes the date your coverage is revoked. For example, if the employee revokes coverage effective on May 31st, they must intend to enroll in any other minimum essential coverage that is effective no later than July 1st. You may rely on a certification from the employee that the employee and related individuals have enrolled or intend to enroll in new MEC coverage by the required deadline.
To allow these new permitted election changes, you must amend your §125 cafeteria plan. You must adopt the amendment on or before the last day of the plan year in which you allow the new election changes and you must inform participants of the plan amendment. For your plan year that starts in 2014, you may amend your plan to adopt the new permitted election changes at any time on or before the last day of the plan year that begins in 2015.
Please note: These new events do not apply to an employee’s health FSA elections.
The employee cannot be allowed to also revoke or change their Health FSA election.
Also, you should verify that your insurer or stop loss insurer will allow employees to make a mid-year election change to drop the coverage under these circumstances.
47. We frequently have variable hour employees whose contracts are terminated and then they are rehired at a later date. Can we treat them as new employees and start the measurement period over again for purposes of determining if they are a full-time employee?
It will depend on the length of the non-employment period. If the period of nonemployment is at least 13 weeks (26 weeks for employees of educational organization), you may treat the rehired employee as a new employee.

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You can also use the “rule of parity” that says an employee may be treated as a new employee if the period of non-employment of less than 13 weeks (for an employee of an educational organization employer, a period that is shorter than 26 weeks) is at least four weeks long and is longer than the employee’s period of employment immediately preceding the period of non-employment. For example, if an employee works six weeks, terminates employment, and is rehired ten weeks later, that rehired employee is treated as a new employee because the ten-week period of nonemployment is longer than the immediately preceding six-week period of employment. 48. What happens if the break in service is less than 13 weeks (26 weeks for an educational organization) and the “rule of parity” does not apply?
For employees that are treated as continuing employees (as opposed to an employee who is treated as terminated and rehired), the measurement and stability period that would have applied to the employee had the employee not experienced the period of non-employment would continue to apply upon the employee’s resumption of service. For example, if the continuing employee returns during a stability period in which the employee is treated as a full-time employee, the employee is treated as a full-time employee upon return and through the end of that stability period and must be offered coverage again as of the first day that employee is credited with an hour of service, or, if later, as soon as administratively practicable.
For this purpose, offering coverage by no later than the first day of the calendar month following resumption of services is deemed to be as soon as administratively practicable. 49. If we transfer an employee out of the U.S., is that considered a termination of employment? You may treat an employee as having terminated employment if the employee transfers to a position outside the U.S. if the position is anticipated to continue indefinitely or for at least 12 months and if substantially all of the employee’s compensation will constitute income from sources outside the United States.
50. What if we bring an employee into the US from one of our foreign locations?
You may treat an employee transferring to the US from a position outside the U.S.
(with compensation from sources outside the U.S.) as a new hire. However, if the employee previously had hours of service at your U.S. location, then the rules related to rehired employees would apply (i.e. breaks in service of more or less than 13 weeks). Updated: 11/19/14

51. When we have large projects to complete, we occasionally hire temporary employees who may be hired to work a 40-hour per week schedule when initially employed, but may not work at least 30 hours per week thereafter. How should we classify them in order to determine if we should be offering them coverage?
A new non-seasonal employee that is expected to be employed initially at least 30 hours per week can be classified as a variable hour employee if, based on the facts and circumstances at the start date, the period of employment at more than 30 hours per week is reasonably expected to be of limited duration and it cannot be determined that the employee is reasonably expected to be employed on average at

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least 30 hours per week over your entire initial measurement period. NOTE: You must assume that the temporary employee will work for the entire duration of the initial measurement period—you may not consider their limited duration to automatically classify them as variable hour.
For example, say you hire an employee to fill in for employees who are absent and to provide additional staffing at peak times. You expect that this employee will average 30 hours of service per week or more for the first few months of employment, while assigned to a specific project, but you also reasonably expect that the assignments will be of unpredictable duration, that there will be periods of unpredictable duration between assignments, that the hours per week required by subsequent assignments will vary, and that the employee will not necessarily be available for all assignments.
In this example, you must assume that the temporary employee will work for the entire duration of the initial measurement period. But because you cannot determine whether this employee is reasonably expected to average at least 30 hours of service per week over the duration of the initial measurement period, you may treat this employee as a variable hour employee.
If the temporary employee is hired as a full-time employee for an indefinite period that is longer than three months, then they should be offered coverage consistent with waiting period rules. A temporary employee with a tenure of under three months generally should not raise issues under the employer mandate, since penalties do not apply until the first day of the fourth month after the individual is hired.
New: 11/19/14

52. If we hire temporary workers from a temporary staffing agency for short assignments, we will be required to offer them coverage if they average 30 or more hours per week?
No. Employees of temporary staffing agencies are generally considered commonlaw employees of the temporary staffing agency. So the staffing agency has the obligation to determine if they are full-time employees of the agency.
53. We occasionally use employees from a PEO or other staffing firm. Are we required to offer them coverage if the PEO or staffing firm is already offering them coverage?
No, if certain conditions are met. If the PEO or staffing firm offers coverage to your employee that is performing services for you as your common-law employee, the
PEO or staffing firm’s offer is treated as an offer of coverage made by you if the fee you pay to the PEO or staffing firm for an employee enrolled in the staffing firm’s plan is higher than the fee you would pay to the staffing firm for the same employee if the employee did not enroll in the staffing firm’s plan.
54. As a home care agency, we do not generally direct and control our workers. Do we have to count them as full-time employees for either determining if we are a large employer or for offering coverage?
Each case will have to be evaluated to determine whether you or the service recipient is the common law employer of the provider. If the service recipient has the right to direct and control the home care provider as to how they perform the services,

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including the ability to choose the home care provider, select the services to be performed, and set the hours of the home care provider, these facts would indicate that the service recipient may be the employer under the common law standard rather than your agency. In that case, you would not be subject to penalties with respect to that particular provider.
55. We are an agricultural operation that frequently employees workers with H-2A and H-2B visas. Are these workers counted as employees for purposes of the employer mandate?
Yes. There are no special rules for H-2A or H-2B workers though in many cases they can be classified as seasonal employees and thus would be subject to your measurement method.
56. If we elect not to use the look-back measurement method to determine our employee’s status, is there any other method we can use?
There is another method that is referred to as the “monthly method.” Under the monthly method, the determination of the employee’s status is based on hours of service in each month and is not based on averaging over a prior period. However,
IRS representatives have informally indicated that this method was intended to be used simply as a method used at the end of the year to determine whether penalties would apply for any months of the year.
57. As a member employer of a controlled group, do we have to use the same method for determining our employee’s status as the other employer members of the controlled group?
No. You may use different measurement methods (the look-back measurement method or the monthly measurement method) and/or different starting and ending dates and lengths of measurement and stability periods.
58. We pay 100% of the employee-only cost but only pay 50% of the family cost. Is our plan considered “affordable”?
Yes. Your plan will be affordable because the determination of affordability is based on the employee’s required contribution for employee-only coverage. Because your employees pay less than 9.5% of their household income towards the cost of employee-only coverage, the plan is considered affordable. This is the case even if the employee contribution for family coverage exceeds 9.5% of the employee’s household income.
59. If we decide to implement an employee contribution for employee–only coverage, how will we know if the contribution exceeds 9.5% of the employee’s household income?
If you offer minimum value coverage to your full-time employees and their dependents, there are three affordability “safe harbors” that will allow you to easily determine if the cost of your group health plan is affordable. The three safe harbors are: 1. Form W-2 safe harbor– If you offer full-time employees and their dependent children the opportunity to enroll in your plan, you can compare the employee

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contribution of self-only coverage for your lowest cost plan that meets the minimum value against the employee’s current W-2 wages as reported in box 1 of Form W-2. If the cost of the coverage for self-only coverage does not exceed
9.5% of the employee’s wages as described above, the coverage is affordable.
Application of this safe harbor is determined after the end of the calendar year on an employee-by-employee basis, taking into account the Form W-2 wages and the required employee contribution for that year. In addition, to qualify for this safe harbor, the employee’s required contribution must remain a consistent amount or percentage of all Form W-2 wages during the calendar year (or during the plan year for plans with non-calendar year plan years) so that you are not permitted to make discretionary adjustments to the required employee contribution for a pay period.
2. Rate of pay safe harbor – For hourly employees, you would on a monthly basis
(1) take the lower of the employee’s hourly rate of pay as of the first day of the coverage period (generally the first day of the plan year) or the employee’s lowest hourly rate of pay during the calendar month, (2) multiply that rate by 130 hours per month, and (3) determine affordability based on the resulting monthly wage amount. Specifically, the employee’s monthly contribution amount (for the self-only premium of the employer’s lowest cost coverage that provides minimum value) is affordable if it is equal to or lower than 9.5 percent of the computed monthly wages (that is, the employee’s applicable hourly rate of pay x 130 hours). For non-hourly employees (e.g. salaried employees), you would compare the employee contribution to the employee’s monthly salary as of the first day of the coverage period. This safe harbor cannot be used for non-hourly employees if the monthly compensation is reduced, including due to a reduction in work hours.
3. Federal poverty line safe harbor – Your coverage will be affordable if the employee’s cost for self-only coverage under your plan does not exceed 9.5% of a monthly amount determined as the federal poverty line for a single individual in the state in which the individual resides, divided by 12. You are permitted to use the federal poverty line guidelines in effect six months prior to the beginning of the plan year.
You may choose to use one or more of these safe harbors for all of your employees or for any reasonable category of employees, provided you do so on a uniform and consistent basis for all employees in a category. Reasonable categories generally include specified job categories, nature of compensation (for example, salaried or hourly), geographic location, and similar bona fide business criteria.
60. Some of our employees are paid on a commission-only basis. How should we determine if coverage is affordable for those employees?
Recognizing that the rate of pay safe harbors cannot be used for employees who are compensated solely on the basis of commissions, the final regulations indicate that you should use the two other affordability safe harbor methods, Form W-2 wages and federal poverty line, for determining affordability for your employees whose compensation is not based on a rate of pay.

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61. How are our wellness incentives taken into account when determining if our employee’s contribution for employee–only coverage exceeds 9.5% of the employee’s household income?
If your plan charges a higher contribution for tobacco users, the 9.5% affordability threshold will be determined by using the lower contribution that is charged to nontobacco users, or tobacco users who complete the related wellness program. In other words, the plan may assume that each employee has earned the tobaccorelated incentive and would be paying the lower contribution. However, wellness program incentives that do not relate to tobacco use are treated as not earned in calculating affordability. In other words, the affordability of a plan that charges a higher contribution for participants who do not complete the related wellness program will be determined based on the higher contribution.
There is temporary transition relief for plan years beginning before January 1, 2015 if certain requirements are met. The transition rule says you will not be subject to an assessable penalty payment with respect to an employee who received a premium tax credit because your offer of coverage was not affordable or did not satisfy minimum value, if it would have been affordable or satisfied minimum value based on the employee contribution for your plan that would have applied if the employee had satisfied the requirements of your wellness plan that was in effect as of May 3,
2013.
62. How do we calculate whether our plan's share of the total allowed cost of benefits is at least 60%?
The IRS released three possible methods for determining whether your coverage meets the 60% minimum value threshold. The three methods are:
1. Minimum Value (MV) Calculator – HHS and Treasury have developed an MV calculator for insured large group or self-funded plans to use to determine whether a plan provides the minimum 60% value. You can access the calculator and methodology at: http://cciio.cms.gov/resources/regulations/index.html#pm 2. Design Based Safe Harbors - The IRS would develop an array of design-based safe harbors in the form of checklists that would provide a simple, straightforward way for plan sponsors to determine minimum value – without the need of actuarial expertise or performing calculations. If your self-funded plan’s terms are consistent with or more generous than any one of the safe harbor checklists, your plan would be treated as providing minimum value.
3. Actuarial Certification - Plans with nonstandard features that are not able to use the MV calculator or the safe harbor checklists would have to obtain appropriate certification of the plan’s value by an actuary. An actuary performing an actuarial certification for a plan with nonstandard features must use the MV
Calculator to determine the plan’s MV for plan coverage the MV calculator measures. The actuary would then add to that MV percentage the result of the actuary’s analysis of the nonstandard features.

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In addition, all amounts you contribute for the current plan year to an employee’s
HSA are taken into account in determining your plan’s share of costs for purposes of MV and are treated as amounts available for first dollar coverage. Amounts you newly made available under an HRA that is integrated with your major medical plan for the current plan year count for purposes of MV in the same manner if the amounts may be used only for cost-sharing and may not be used to pay insurance premiums.
With respect to wellness plan incentives not related to tobacco use, your plan’s share of costs for MV purposes is determined without regard to reduced cost-sharing (e.g. lower or waived deductibles, coinsurance, copays) available under a wellness program (i.e. the higher, non-discounted cost-sharing is used). However, for wellness programs designed to prevent or reduce tobacco use, MV may be calculated assuming that every eligible individual satisfies the terms of the program relating to prevention or reduction of tobacco use (i.e. the lower, cost-sharing is used). New: 11/19/14

63. Can we satisfy the Minimum Value (MV) requirement if we offer a plan that does
NOT include hospitalization and/or physician services benefits?
No. Your plan will not provide minimum value if it excludes substantial coverage for in-patient hospitalization services or physician services (or both), even if it shows a value of 60% when using the online Minimum Value Calculator. The agencies have issued guidance stating that they intend to propose regulations and update the MV
Calculator so that employers will not be permitted to use the MV Calculator (or any actuarial certification or valuation) to demonstrate that a Non-Hospital/Non-Physician
Services Plan provides minimum value for 2015 or later.
The guidance provides transitional relief, however, if you have already entered into a binding written commitment with a vendor to provide a Non-Hospital/Non-Physician
Services MV Plan prior to November 4, 2014, or, you have begun enrolling employees in a Non-Hospital/Non-Physician Services MV Plan prior to November 4,
2014. If that is the case, then you can keep your plan for the 2015 plan year if two additional requirements are met:
1. Your plan year must begin no later than March 1, 2015; and
2. You must:
 not state or imply in any disclosure to participants that your offer of coverage under the Non-Hospital/Non-Physician Services MV Plan precludes an employee from obtaining a premium tax credit, if otherwise eligible; and
 timely correct any prior disclosures that stated or implied that the offer of the Non-Hospital/Non-Physician Services MV Plan would preclude an otherwise tax-credit-eligible employee from obtaining a premium tax credit.
64. I have heard we may have to provide “vouchers” which the employee can use to buy insurance through an exchange. Is that true?
No. A “free choice voucher” requirement was included in PPACA but that requirement was repealed upon passage of the Fiscal Year 2011 Federal Budget on
April 17, 2011.

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65. Do I have to “offer” and pay for dependent coverage also? What if the dependent
(spouse or children) are covered by another employer’s plan?
The Act does not require you to offer or pay for health coverage that includes spouses and dependent children (but see section entitled "Dependents to Age 26" for the requirements that apply to plans that provide coverage for children). However, to avoid penalties under the employer mandate and to qualify for the Form W-2 affordability “safe harbor” described above, you will have to offer qualified coverage to all full-time employees and their dependent children until the end of the month in which the child turns 26. The regulations define an employee’s dependent children as the employee’s biological and adopted children. Thus, an offer of coverage to an employee’s spouse, step-child or foster child is not required in order to comply with the employer mandate.
Also, the term dependent does not include a child who is not a citizen or national of the United States unless the child is a resident of the United States or a country contiguous to the United States (certain adopted children are excepted from this rule). 66. Our coverage does not currently include coverage for dependents. When will we have to start offering dependent coverage in order to satisfy the employer mandate? If you did not offer dependent coverage (or only offered it to some dependents) during the plan year that begins in 2013 (2013 plan year) or the 2014 plan year, you will not be liable for penalties for your plan year that begins in 2015 if you can demonstrate that you are taking steps during the 2014 or 2015 plan year (or both) to extend coverage under the plan to the dependents that were not offered coverage during the 2013 or 2014 plan year.
67. We don’t know our employee’s household income. How will we know if an employee is eligible for a premium subsidy?
It will be up to the exchange in your state to determine if an individual is eligible for a premium subsidy. You will then be notified by the exchange if/when an employee has qualified.
68. Will we be able to file an appeal if we disagree with the exchange’s determination that our employee qualifies for premium tax credits or cost-sharing reductions because our plan does not offer qualifying coverage?
Yes. HHS intends to make an appeal process available that will allow you to appeal a determination that your employee is eligible for premium tax credits or cost-sharing reductions in part because your plan is either unaffordable or the plan’s share of the total allowed cost of benefits is less than 60%.
You will have 90 days from the date you are notified that one of your employees qualified for premium tax credits to file your appeal. You will be permitted to submit evidence to support your appeal including information pertaining to whether coverage was offered to the employee, whether the employee has elected such coverage, the employee’s portion of the lowest cost minimum value plan you offer, and whether or not the employee is in fact employed by you.

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Updated: 11/19/14

69. We offer coverage to most of our full-time employees but we have one class of full-time employees that are not eligible for coverage. Which prong of the penalty will apply to our plan?
If you offer coverage to at least 95% (70% for the 2015 plan year if certain criteria are met) of your full-time employees (and their dependent children), you will be subject to a monthly penalty of 1/12 of $3,000 (indexed annually) for each full-time employee that receives a premium tax credit or cost-sharing reduction for coverage purchased through a Marketplace exchange in that month because your coverage is unaffordable or does not meet a minimum value.
If coverage is not offered to at least 95% (70% for the 2015 plan year if certain criteria are met) of your full-time employees (and their dependents), then you will be subject to the monthly “no coverage” penalty which is 1/12 of $2,000 (indexed annually) multiplied by the number of full-time employees you have for that month (minus the first 30) if at least one employee receives a premium tax credit or cost-sharing reduction through an exchange. For 2015 plan years only, the penalty calculation for large employers would be 1/12 of $2,080 multiplied by the number of full-time employees you have for that month (minus the first 80).
70. As the parent corporation of several subsidiary corporations, are we responsible for a single penalty payment for all of the subsidiary corporations in the controlled group?
No. For any year that you are considered a large employer, the employer mandate standards generally are applied separately to each member company of the controlled group in determining liability for, and the amount of, any penalty payment.
Further, each of the member companies cannot be held liable for the penalties of any other entity in the controlled group.
71. If we offer no coverage to our full-time employees and the penalty assessment is done separately for each subsidiary, does each subsidiary get the 30- or 80employee reduction?
No. For a controlled group that is a large employer under the aggregation rules, only one 30-employee reduction is allowed. The 30- or 80-employee reduction must be allocated ratably among the member companies of the large employer based on each company’s number of full-time employees compared to the total number of employees within the controlled group.
72. If we offer coverage that is not affordable but require our full-time employees to enroll, thereby making them ineligible for a premium subsidy, will we avoid being penalized? No. You cannot make your employees ineligible for a premium tax credit by providing them with mandatory coverage (i.e. where they are not offered an opportunity to decline) that is not affordable or does not meet minimum value. You must allow employee to decline your coverage unless the coverage meets both of the following requirements 1. It provides minimum value; and

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2. It is offered either at no cost to the employee or at a cost, for any calendar month, of no more than 9.5 % of the federal poverty line for a single individual for the applicable calendar year.
73. Our plan year is effective July 1 so we may have some employees wanting to skip open enrollment and then join our health plan on January 1, 2014 in order to avoid the individual mandate penalty. We may also have some employees who will want to drop our coverage on January 1, 2014 and purchase coverage through an exchange. Do we have to allow them to make these mid-year changes? No. Neither the availability of health plan coverage through an exchange nor wanting to avoid the individual mandate penalty constitute a change in status event under a
§125 plan. As a result, employees would not be permitted to change their salary reduction elections during the plan year in order to enroll in your health plan or to terminate their coverage.
However, at your discretion, the IRS will allow you to amend your written cafeteria plan to permit either or both of the following changes in salary reduction elections:
1. An employee who elected to salary reduce through your cafeteria plan for your fiscal plan year beginning in 2013 can be allowed to prospectively revoke or change his or her election once, during that plan year, without regard to whether the employee experienced a change in status event; and
2. An employee who did not make a salary reduction election through your cafeteria plan for health plan coverage with a fiscal plan year beginning in 2013 can be allowed to make a prospective salary reduction election for health coverage on or after the first day of the 2013 plan year, without regard to whether the employee experienced a change in status event.
If you want to allow the above election changes, you must amend your §125 plan document to incorporate these rules. If adopting an amendment to allow this onetime exception, you are permitted to make your amendment more restrictive than the two options listed above. For example, you may want to limit the exception to a certain specified time of the year – e.g. the first month of 2014 - rather than the whole plan year.
Also, you should verify that your insurer or stop loss insurer will allow employees to make a mid-year election change to enroll or drop the coverage under these circumstances. New: 11/19/14

74. What happens when we have employees that would like to drop our coverage outside of open enrollment and purchase a Marketplace plan?
At your discretion for plan years starting in 2014 and later, you may choose to amend your §125 cafeteria plan to allow an employee to prospectively revoke coverage under your group health plan provided the following conditions are met:
 The employee is eligible for a Special Enrollment Period to enroll in a
Qualified Health Plan (QHP) through a Marketplace, or the employee seeks to enroll in a Qualified Health Plan through a Marketplace during the
Marketplace’s annual open enrollment period; and

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 The employee’s election to revoke your plan corresponds to his or her intended enrollment (including any dependents) in a Marketplace Qualified
Health Plan effective beginning no later than the day immediately following the last day of the original coverage that is revoked. For example, if the employee revokes coverage effective on May 31st, they must intend to enroll in a Qualified Health Plan through a Marketplace with coverage that is effective no later than June 1st. You may rely on a certification from the employee that the employee and related individuals have enrolled or intend to enroll in the new QHP coverage by the required deadline.
To allow these new permitted election changes, you must amend your §125 cafeteria plan. You must adopt the amendment on or before the last day of the plan year in which you allow the new election changes and you must inform participants of the plan amendment. For your plan year that starts in 2014, you may amend your plan to adopt the new permitted election changes at any time on or before the last day of the plan year that begins in 2015.
Please note: These new events do not apply to an employee’s health FSA elections.
The employee cannot be allowed to also revoke or change their Health FSA election.
Also, you should verify that your insurer or stop loss insurer will allow employees to make a mid-year election change to drop the coverage under these circumstances.
75. If we contribute to a multiemployer union plan for our unionized employees, how will we know if we are subject to a penalty for the union members that work for us for 30 or more hours per week?
You will not be subject to a penalty with respect to a full-time union employee if:
1. You are required to make a contribution to a multiemployer plan pursuant to a collective bargaining agreement or an appropriate related participation agreement; and
2. Coverage under the multiemployer plan is offered to the full-time employee (and the employee’s dependents); and
3. The coverage offered to the full-time employee is affordable and provides minimum value.
For purposes of determining whether coverage under the multiemployer plan is affordable, you may use any of the affordability safe harbors. Coverage under a multiemployer plan will also be considered affordable if the employee’s required contribution, if any, toward self-only health coverage under the plan does not exceed
9.5% of the wages reported to the qualified multiemployer plan, which may be determined based on actual wages or an hourly wage rate under the applicable collective bargaining agreement.

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Marketplace
(Exchanges)
76. I’ve been hearing about “exchanges”. Can you describe what they are?
A Marketplace (formerly known as an “Exchange”) is an arrangement through which private and non-profit insurers offer small employers (up to 100 employees) and individuals the ability to purchase health insurance. The Act requires each state to set up a Marketplace exchange for the purchase of health insurance coverage.
Coverage can be purchased through the Marketplace starting in 2014. States have the option to allow large employers (more than 100 employees) to begin purchasing coverage through a State Marketplace starting in 2017.
Regional or national Marketplaces could also be established to set standards for what benefits would be covered, how much insurers could charge, and the rules insurers must follow in order to participate in the Marketplace.
It is expected that each Marketplace will offer four categories of plans plus a catastrophic plan including:
 Bronze plan – Essential health benefits covering 60% of the benefit costs of the plan, with an out-of-pocket limit equal to the Health Savings Account
(HSA) current law limit ($5,950 for individuals and $11,900 for families in
2010);
 Silver plan – Essential health benefits covering 70% of the plan benefit costs, with HSA out-of-pocket limits;
 Gold plan – Essential health benefits covering 80% of the plan benefit costs, with HSA out-of-pocket limits;
 Platinum plan – Essential health benefits covering 90% of the plan benefit costs, with HSA out-of-pocket limits;
 Catastrophic plan – Available to individuals up to age 30, or to those who are exempt from the mandate to purchase coverage. Provides catastrophic coverage only, with the coverage level set at the current High Deductible
Health Plan levels except that preventive benefits and coverage for three primary care visits would be exempt from the deductible.
77. Will I have to buy health insurance for my employees through one of the new
Marketplace exchanges? Starting when?
No. Employers will not be required to purchase coverage through a Marketplace though it will initially be an option for small employers starting in 2014.
78. Am I considered a small employer for purposes of buying insurance through the
Marketplace exchange?
A small employer for purposes of buying coverage through a State or federally facilitated SHOP Marketplace is defined as an employer with 50 or less full time equivalent employees. Starting in 2016, all SHOPs will be open to employers with up to 100 FTEs.

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Federally facilitated SHOPs will use the same counting method that is used for determining if an employer is a “large employer” under the employer mandate. Both full-time employees and full-time equivalent employees will be counted. Stateoperated SHOPs are permitted to use the state’s own employee counting methods for determining the employer’s size and employee’s status as a full-time employee until 2016.
Starting in 2017, states can allow businesses with more than 100 employees to purchase coverage through a Marketplace.
Note: On November 27, 2013, HHS announced that online enrollment through the
SHOP Marketplace in states that are using the federally-facilitated exchange has been delayed until 2015. However, for small businesses in those states, the small employer will still be able to enroll their employees in a certified SHOP plan through an agent, broker, or insurer that offers a certified SHOP plan and has agreed to conduct enrollment according to HHS standards that apply for the Marketplace. In addition, for small businesses that want to their employees' coverage to begin on
January 1, 2014, the current enrollment deadline has been extended to December
23, 2013 from December 15, 2013.
79. We are a small employer. If we buy coverage through our state Marketplace, what information will we have to provide to our employees so that they can elect and enroll in a plan?
You will be required to provide information to your employees about the timeframes for enrollment, instructions on how to access the exchange website and any tools available to compare plan options, and the exchange’s toll-free customer service hotline. 80. If we have employees that are not offered or waive our coverage, when can they buy insurance at a Marketplace?
Coverage can be purchased during the annual open enrollment period (the proposed open enrollment period for
2015
is
November
15,
2014–
February 15, 2015) or if an individual experiences a special enrollment event. For special enrollment events, they will be able to purchase individual policies for up to
60 days following the event. These special enrollment events include:
 An individual or dependent loses minimum essential coverage due to losing job-based coverage, divorce, the end of an individual policy plan year in 2014, COBRA exhaustion, aging off a parent’s plan, losing eligibility for Medicaid or CHIP, and similar circumstances. Note: Voluntarily ending coverage doesn’t qualify for a special enrollment period;
 An individual gains a dependent or becomes a dependent through marriage, birth, adoption, or placement for adoption;
 An individual, who was not previously a citizen, national, or lawfully present individual gains such status;
 An individual’s enrollment or non-enrollment in a QHP is unintentional, inadvertent, or erroneous and is the result of the error, misrepresentation, or inaction of the Exchange or HHS;

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 An enrollee adequately demonstrates to the Exchange that the QHP in which he or she is enrolled substantially violated a material provision of its contract in relation to the enrollee;
 An individual is determined newly eligible or newly ineligible for advance payments of the premium tax credit or has a change in eligibility for costsharing reductions, regardless of whether such individual is already enrolled in a QHP;
 An individual or enrollee gains access to new QHPs as a result of a permanent move;
 An Indian may enroll in a QHP or change from one to another one time per month;  An individual or enrollee demonstrates to the Exchange that the individual meets other exceptional circumstances (as defined by the Exchange); and
 The Exchange determines that a qualified individual or enrollee (or his or her dependent) was not enrolled in QHP coverage, was not enrolled in the
QHP selected by the qualified individual or enrollee, or is eligible for but is not receiving advance payments of the premium tax credit or cost-sharing reductions as a result of misconduct by a “non-Exchange entity” (e.g. someone fraudulently claiming to be an Exchange-approved navigator).
81. Our plan is a non-calendar year plan renewing each July 1st. Will employees who waive our coverage at open enrollment be able to purchase coverage at a
Marketplace at that time?
No, unless they also experience one of the special enrollment events described above. Otherwise, they will have to wait until the next annual open enrollment period at the Marketplace to purchase coverage.
82. We have an employee who is leaving and her benefits don't begin with her new employer for 90 days. Is she able to opt out of COBRA coverage and go to the
Marketplace to buy coverage?
Yes. She can either elect COBRA or go to the Marketplace to purchase coverage instead. The decision to not elect COBRA will not affect the determination of whether she is eligible for premium tax credits at a Marketplace.
83. If she elects COBRA, can she drop it at a later date to buy coverage at the
Marketplace?
No. In order to buy coverage at the Marketplace, she would either have to wait until the next annual open enrollment period, or she would have to exhaust her full duration of COBRA to qualify for a special enrollment event at the Marketplace.
84. We pay the cost of the first 3 months of COBRA coverage for our employees who are laid off. Will that prevent them from buying coverage at a Marketplace after the subsidized period has ended?
Yes. Employees who accept the subsidized COBRA coverage would either have to wait until the next annual open enrollment period to enroll at a Marketplace, or they would have to exhaust the full duration of their COBRA coverage to qualify for a special enrollment event at the Marketplace.

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Marketplace
(Exchange) Notice
85. How will our employees learn about the Marketplace exchanges and the possibility of receiving premium subsidies or cost-sharing reductions?
You must provide a written notice to each employee and to each newly hired employee, informing them of the following:
 The existence of the State’s Marketplace including a description of the services provided by the Marketplace, and the manner in which the employee may contact the Marketplace to request assistance.
 If your plan pays less that 60% of the total allowed costs of benefits provided under the plan, a statement that the employee may be eligible for a premium tax credit and a cost sharing reduction if the employee purchases a qualified health plan through the Marketplace.
 If the employee purchases a qualified health plan through the Marketplace, a statement that the employee will lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of any employer contribution may be excludable from income for Federal income tax purposes.
86. Who should receive the Marketplace notice? Can we include it in our health plan enrollment materials?
The Marketplace notice must be sent to all employees (including those working fewer than 30 hours per week and temporary and seasonal employees), regardless of their eligibility or enrollment in your medical plan. Distribution via health plan materials would therefore not satisfy the notice requirement.
The notice should also be distributed to employees not present at the workplace, such as those on FMLA or other leaves of absence.
87. Does the notice have to be provided to former employees who are COBRA qualified beneficiaries or retirees?
No. Only your current employees must receive the notice by October 1, 2013.
88. Do we have to provide the notice to new hires?
Yes. For employees hired on or after October 1, 2013, you must provide the notice within 14 days of their start date.
89. We have union employees that are covered by a collectively bargained multiemployer plan, not our company’s group plan. Am I responsible for providing the notice to these employees?
Yes. You must furnish the notice to all of your employees – regardless of an employee’s benefit eligibility or enrollment status, full or part-time status, or union affiliation. The requirement to provide the Marketplace notice can be satisfied if another entity
(such as an issuer, multiemployer plan, or third-party administrator) sent the notice

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on your behalf. Although, you are not relieved of your obligation to provide the notice to all employees if the other entity only provides the notice to those employees enrolled in the plan, while not providing the notice to those employees not enrolled in the plan. You must therefore ensure the notice is provided to all employees.
90. Is there a deadline to provide the Marketplace notice?
The notice was originally scheduled to be distributed by March 1, 2013, but the requirement has been delayed until October 1, 2013, which coordinates with the first open enrollment period for the Marketplace.
For employees who are current employees before October 1, 2013, you are required to provide the notice not later than October 1, 2013. You are required to provide the notice to each new employee within 14 days of an employee’s start date beginning
October 1, 2013.
91. Can we provide the notice electronically?
It may be provided electronically if the requirements of the Department of Labor’s electronic disclosure safe harbor are met.
92. Can we hand deliver the Marketplace notice?
The guidance only expressly permits first-class mail and electronic disclosure.
However, it also refers to ERISA's disclosure regulations, which allow hand delivery.
As such, hand delivery appears to be acceptable as long as you take steps reasonably calculated to ensure actual receipt of the notice.
You will need however to distribute the notice by mail or electronically to employees not present at the workplace, such as those on FMLA or other leaves of absence.
93. Are there model Marketplace notices we can use to satisfy our notice obligation?
Two model notices were provided with the guidance. One model notice is for employers that offer health plan coverage and the other is a model notice for employers not offering plan coverage. The model notices can be accessed at the
DOL website at http://www.dol.gov/ebsa/healthreform\ (see the section titled “Notice to Employees of Coverage Options”). The notices are available in both English and
Spanish and in Word and PDF format.
94. Are any parts of the model notice optional?
According to the guidance, if you are using the model notice for employers that provide coverage to their employees, all the content on pages 2 and 3 of the model notice is optional. However, on the model notice itself, only the content on page three is expressly labeled as optional. At the minimum, we do recommend that you complete fields #3-12 of Part B on page two, as this is generic employer information that should not require customization for any specific employee.

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95. My organization is a controlled group of corporations comprised of a number of affiliated member employers. Which employer name and EIN should be reflected on page two of the notice – the parent company or the member employer?
The guidance does not specify which employer name and EIN may or must be used on the Marketplace notice. It would likely be most reasonable to use the name and
EIN of whichever employer could most easily answer questions related to the employees’ coverage eligibility, enrollment and costs. For example, if your parent company sponsors a single health plan for all employees of all member employers and enrollment is handled by a centralized Human Resource Department for all the member employers, use the parent company name and EIN. Alternatively, if the member employers in your controlled group each independently sponsor their own plans and handle enrollment for their own employees, use the member employer’s name and EIN.
96. Is there a fine or penalty for not providing the Marketplace notice?
The DOL released an FAQ verifying that you will not be fined or penalized if you fail to provide the notice, but the DOL also reiterated that employers should still provide the written Marketplace notice to its employees by October 1, 2013.

Grandfathered
Plans
97. I’ve heard that existing plans may be “grandfathered”. What does that mean?
Existing plans, including plans maintained pursuant to a collective bargaining agreement, in operation as of March 23, 2010 are grandfathered if no significant changes have been made to the plan. However, certain benefit mandates included in the Act will apply.
98. It sounds like our plan is grandfathered. What benefit changes will we have to make? And by when?
The legislation includes the following mandates which all grandfathered group health plans, including collectively bargained plans, will have to comply with effective with the first plan year starting on or after September 23, 2010:
 Provide coverage to dependent children until they turn age 26 unless they are eligible for any other employer provided coverage that is not a group health plan of a parent
 Eliminate lifetime aggregate dollar limits on “essential benefits”
 Eliminate annual dollar limits on “essential benefits”(unless permitted by the Secretary)
 Eliminate preexisting condition exclusion for enrollees up to age 19
 Prohibit the rescinding of coverage except in the case of fraud, intentional misrepresentation, or nonpayment of premiums
Starting in 2014, grandfathered plans must:
 Eliminate annual aggregate benefit limits

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 Provide coverage of dependents to age 26 regardless of eligibility for other coverage  Eliminate preexisting condition limitations for adults
 Eliminate waiting periods of greater than 90 days
99. Our plan is collectively bargained and we heard that we don’t have to make any changes until the last collective bargaining agreement expires. Has that changed? Initially, it appeared that there was a delayed effective date for collectively bargained plans but that’s not the case. Insured and self funded plans maintained pursuant to a collective bargaining agreement ratified before March 23, 2010 are deemed to be grandfathered plans. Because they are grandfathered plans, they are subject to the same reforms and effective dates as any other grandfathered plan.
For insured collectively bargained plans only, the plan will remain grandfathered until the last agreement expires, even if plan changes, including changing insurers, are made during the collective bargaining agreement that would normally result in a loss of grandfathered status.
After the last collective bargaining agreement expires, the determination of whether the plan is still grandfathered is made by comparing the coverage on the expiration date with the coverage that was in effect on March 23, 2010.
100. We also provide dental and vision coverage to our employees. Are we required to make these changes for those plans as well?
Maybe. The mandated changes for grandfathered plans only apply to your group health plans that are not “excepted benefits” as defined under HIPAA. If your dental and/or vision are excepted benefits, then you are not required to make any of the required changes for those coverages.
HIPAA excepted benefits include most health FSAs and limited scope dental and vision plans. Excepted benefits will be those dental and vision benefits that are either provided under a separate policy or contract of insurance or are not an integral part of the group health plan (i.e. employees can waive the dental or vision).
101. We provide retiree health coverage for our retired employees. Will these benefit mandates apply to our retiree plan?
It depends. There is an exception for retiree-only plans subject to ERISA that cover fewer than two active employees. For health insurers and nonfederal governmental plans subject to the Public Health Service Act, HHS has indicated they will apply a
“non-enforcement” policy for insured retiree-only plans and retiree plans sponsored by non-federal governmental entities. In addition, HHS is encouraging states, which have enforcement authority over insurers, not to enforce the new health care reform provisions on these plans.
If your retiree plan covers both retirees and active employees under the same plan, then the exception will not apply and the health care reform provisions that apply to the plan will apply to both active and retired employees covered under the plan.

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If your retiree plan also covers individuals on long-term disability, the answer is not clear. Until guidance is issued, HHS will treat these plans as satisfying the exception and will not apply either HIPAA or the health care reform mandates to this type of plan. However, HHS will be reviewing these types of plans and may release further guidance at a later date. If the guidance is more restrictive, it will be prospective, applying only to plan years that begin sometime after issuance. Pending such further guidance, if you choose to adopt any or all of the HIPAA or health care reform mandates, it will not prejudice your exemption.
102. What if I like some of these changes and want to incorporate them into my plan now? Can I do that and still meet the “grandfathered plan” rules?
If you would like to immediately adopt any of the mandated changes, it will not affect your plan’s status as a grandfathered plan.
103. We made some plan design changes that are effective 7/1/10. Will they result in a loss of grandfathered status?
It depends. Certain plan changes made after March 23, 2010 will result in a loss of your plan’s grandfathered status unless the changes were adopted or incorporated into a legally binding contract that was executed before June 14, 2010 (See the Q&A on “transition rules’ later in this section). The changes that can cause a loss of grandfathered status are more specifically described below and include any decrease in the plan’s coinsurance amount, reductions in annual limits or employer contributions, reductions in benefits for the treatment or diagnosis of a particular condition, and in some cases, a change of insurers. Also, increases in coinsurance, copays, deductibles and out-of-pocket maximums can cause your plan to lose grandfathered status. If your plan changes are any of the increases described above, it will require an analysis of the amount of the increase compared to increases in medical inflation.
104. Specifically, what are the changes that cause a plan to lose grandfathered status? Any of the following six plan design changes (measured from March 23, 2010) are considered to change a health plan so significantly that they will cause a plan to lose grandfather status:
1. Elimination of all or substantially all benefits for a particular medical condition.
2. Any increase in the employee’s coinsurance percentage.
3. A deductible or out-of-pocket maximum increase that exceeds medical inflation plus 15%.
4. A copayment increase that exceeds medical inflation plus 15% (or, if greater, $5 plus medical inflation).
5. A decrease in the employer contribution towards the cost of coverage by more than 5%.

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6. Imposition of annual limits on the dollar value of all benefits below specified amounts. These six changes are the only plan design changes that will cause a cessation of grandfather status.
105. How do we know what medical inflation is?
Medical inflation is the increase since March 2010 in the overall medical care component of the Consumer Price Index for All Urban Consumers (CPI-U)
(unadjusted) published by the Department of Labor. To calculate medical inflation, the increase in the overall medical care component is computed by subtracting
387.142 (the overall medical care component of the CPI-U (unadjusted) published by the Department of Labor for March 2010) from the index amount for any month in the 12 months before the new change is to take effect and then dividing that amount by 387.142.
The CPI – U values can be found on the Bureau of Labor Statistics website at: http://www.bls.gov/cpi/tables.htm 106. If all we are doing is changing insurers, that will cause a loss of grandfather status? It depends. If the change in insurers was effective after March 23, 2010 but prior to
November 15, 2010, your plan has lost grandfathered status.
If you changed insurers and your new insurance policy was effective on or after
November 15, 2010, your plan does not lose grandfathered status unless your new policy includes plan design changes that, when compared to the previous insurance policy, would exceed the allowable changes that generally cause a plan to lose grandfather status (e.g. increase in cost sharing, significant increases in copays, deductibles, etc.).
107. Is there anything we have to provide to the new insurer regarding the benefits and contributions we had under the prior insurer?
Yes. You must provide to your new health insurer documentation of the benefits, cost sharing, employer contributions, and annual limits under the prior insurer sufficient to determine whether any plan changes that would cause a loss of grandfathered status have been made.
108. Our plan is self funded and we are changing our third party administrator
(TPA). Will that cause our self funded plan to lose its grandfathers status?
No. Changing third party administrators will not result in the loss of grandfathered status for your self funded plan.

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109. Our plan is currently insured but we are considering a change to self funding and changing our PPO network. Would these changes cause our plan to lose grandfathered status?
The guidance we have does not address the effect of changing your plan’s funding mechanism from insured to self funding or changing networks. Further guidance is necessary on this question and it may also depend on the date you make the changes. What we do know is that changing from self funding to insured coverage will not cause a loss of grandfathered status if the new insurance policy is effective on or after November 15, 2010 and no changes are made to the contributions or benefits that would normally cause a loss of grandfathered status. If the change was effective prior to November 15th, the new insurance policy would not be grandfathered. The agencies responsible for enforcing the rules have invited comments from the public regarding the effect of these types of changes (or any other changes) so we anticipate that further guidance will be forthcoming. However, it appears that any new standards subsequently published in the final regulations that are more restrictive than what was included in the interim final regulations would only apply prospectively to changes to plans made after the publication of final rules.
110. We are thinking of amending our plan to delete coverage for depression. If we make this change, will it cause our plan to lose its grandfathered status?
Yes. The elimination of all benefits or substantially all benefits to diagnose or treat a particular condition will cause a loss of grandfathered status.
111. Our plan currently pays 90% of covered services and the employee pays 10%.
We want to reduce our share to 80%. Would that cause the loss of grandfathered status? Yes. Any increase in the participant’s coinsurance amount will cause the plan to lose grandfathered status.
112. Our plan currently pays 90% of covered services but we want to reduce that to
50% for durable medical equipment only. Would that cause a loss of grandfathered status?
Yes. Because it is an increase in the participant’s coinsurance amount, it would cause the plan to lose grandfathered status.
113. Our plan is facing a significant premium increase this year so we want to raise the deductible. What effect will this have on our grandfathered plan status?
It depends. Employers are permitted to raise plan deductibles (or other fixed cost sharing amounts such as out-of-pocket limits) but your plan would cease to be a grandfathered plan if the increase since 3/23/10 is greater than a percentage equal to medical inflation plus 15%.
Example: On March 23, 2010, a grandfathered health plan has a $300 deductible.
The plan is subsequently amended to increase the deductible to $400. As of March
23, 2010, the medical care component of the CPI-U is 387.142. Within the 12-month

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period before the $400 deductible takes effect, the greatest value of the overall medical care component of the CPI-U (unadjusted) is 475.
Conclusion: The increase in the deductible from $300 to $400 is an increase of
33.33%. Medical inflation from March 2010 to the date of the change is 0.2269 (475
– 387.142 = 87.858; 87.858/387.142 = 0.2269). Therefore, the maximum percentage increase in the deductible permitted is 37.69% (0.2269 = 22.69%; 22.69% + 15% =
37.69%). Because a 33.33% increase does not exceed 37.69%, the change in the deductible would not cause the plan to lose its grandfathered status.
114. Our plan has a $10 office visit copay. We want to raise it to $20. Will this cause our plan to lose grandfathered status?
Maybe. The increase to your copay will result in a loss of grandfathered status if the increase is more than the greater of:
 $5 (adjusted for medical inflation); or
 A percentage equal to medical inflation plus 15%.
Example: On March 23, 2010, a grandfathered health plan has a $30 office visit copay. The plan is subsequently amended to increase the copay to $40. Within the
12-month period before the $40 copay takes effect, the greatest value of the overall medical care component of the CPI-U (unadjusted) is 455.
Conclusion: The increase in the copayment from $30 to $40 is 33.33%. Medical inflation from March 2010 is 0.1753 (455 – 387.142 = 67.858; 67.858/387.142 =
0.1753). The maximum percentage increase permitted is 32.53% (17.53% + 15% =
32.53%). Because 33.33% exceeds 32.53%, the change in the copayment requirement at that time will cause the plan to lose its grandfathered status.
115. We want to raise the copayment for office visits, but leave all other copayments the same. Will that one change cause our plan to lose grandfather status? Yes. Any copayment increase that exceeds medical inflation plus 15% (or, if greater,
$5 plus medical inflation) from March 23, 2010, will cause a plan to lose grandfather status, even if all other copayment amounts remain the same.
116. We have just received our renewal and we need to lower our contribution and increase the employee’s contribution percentage for family coverage. As of
March 23, 2010, we paid 100% of the employee’s coverage and 80% of the family coverage and we now want to reduce the 80% to 50%. Will this change cause us to lose grandfathered status?
Yes. To retain grandfathered plan status, you cannot decrease the percentage of premiums you pay by more than 5 percentage points below your contribution rate on
March 23, 2010. This rule applies to any tier of coverage (e.g. self-only, 2 person, family, etc.) for any class of employee. Because the decrease in your contribution for family coverage would be 30%, your plan would lose grandfathered status.

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117. Our plan has an annual limit of $500,000. If we reduce that amount to $250,000, will the plan lose grandfathered status?
Yes. Grandfathered status is lost when the annual limit is reduced by any amount.
Similarly, if a plan did not have an annual limit on March 23, 2010, grandfathered status is lost if one is added at a later date.
118. We are going to significantly reduce benefits and increase employee contributions for our PPO option at next renewal but we are not changing our
HMO option. Does our plan lose grandfathered status for both plan options or just the PPO option?
If the changes to the PPO result in a loss of grandfathered status, only the PPO option will be affected. The HMO option will remain grandfathered for as long as no changes are made to the HMO option that would result in a loss of grandfathered status. 119. If we implement a new wellness program that includes a smoker surcharge, could that cause our plan to lose its grandfathered status?
Yes. According to the DOL, adding a surcharge (such as contribution or cost-sharing surcharges) may implicate the grandfather plan rules and should be examined carefully before implementing. For example, if a contribution surcharge decreases the employer's contribution for a plan option by more than 5% for any tier of coverage
(single, two-person, family, etc.), then it could cause the loss of grandfather status for that option.
120. We are going to change the tiers of coverage under our plan from self-only and family to a multi-tiered structure of employee-only, employee+one, employee+two and employee+three or more. Will our plan lose grandfathered status? The determination of whether the change in employer contribution will cause a loss of grandfathered status is made on a tier-by-tier basis. So, if you change the tier structure from what was in place on March 23, 2010, your contribution for any new tier is tested by comparing it to the contribution rate for the corresponding tier on
March 23, 2010. For example, if your contribution rate for family coverage was 50% on March 23, 2010, then your contribution rate for any new tier, other than employeeonly, must be within 5% of 50% (or at least 45%). If it is lower than 45%, you would lose grandfathered status.
If, however, your new tier structure only adds a new coverage tier, without eliminating or modifying any other coverage tier, and those individuals eligible under the new tier were not previously covered under the plan, then the new tier would not be compared to those in place on March 23, 2010, and would not cause the plan to lose grandfathered status.

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121. Our plan operates on a calendar plan year but we are considering a plan amendment that will cause it to relinquish grandfather status. If we decide to make this amendment effective on July 1, 2011, does our plan relinquish grandfather status in the middle of the plan year?
Yes. Your plan will cease to be a grandfathered health plan when the plan amendment becomes effective on July 1, 2011. You would then have to make all the other plan changes that apply to nongrandfathered plans effective concurrent with the change that causes the loss of grandfathered status.
If you want to avoid relinquishing grandfathered status in the middle of a plan year, any changes you make that would cause your plan to relinquish grandfather status should be made effective the first day of the next plan year.
122. Before we knew what changes would affect grandfathered status, we made several plan changes for our May 1, 2010 renewal that will result in a loss of grandfathered status. Are there any exceptions that would allow us to keep these changes without losing our grandfathered status?
Yes. There are two “transition rules” that if applicable, may allow you to keep your plan changes without losing grandfathered status.
The first transition rule says that if the changes were adopted prior to March 23,
2010, they would be considered part of the plan as of March 23rd, even though they were effective at a later date. A change is deemed to be adopted if the changes were incorporated into a legally binding contract that was executed on or before March
23, 2010 or if a written plan amendment was adopted on or before March 23, 2010.
The second transition rule says that if plan changes were made prior to June 14,
2010 (the date regulations were released), the plan will not lose its grandfathered status if:
1. the plan changes that cause the loss of grandfathered status are revoked or modified effective by the first day of the first plan year beginning on or after
September 23, 2010; and
2. the terms of the plan, as modified, would not otherwise cause the plan to lose grandfathered status.
123. We have to make changes due to Mental Health Parity for our next plan year starting on August 1, 2010. Will these changes cause our plan to lose grandfathered status?
No. Plan changes made to comply with Federal or State legal requirements will not cause a loss of grandfathered status unless the mandated changes exceed the allowable changes established in the grandfathered plan regulations.
124. If we lose our grandfathered status, what are the other health care reform requirements that will apply?
In addition to the changes required for grandfathered plans, any new plan or any plan that loses its grandfathered status will have to comply with the additional

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requirements listed below effective for plan years starting on or after September 23,
2010:
 Provide coverage to children to age 26 regardless of whether they are eligible for other employer-sponsored coverage;
 Provide coverage for recommended preventive services, without cost sharing  For emergency room care: o No pre-authorization permitted – in or out of network o Identical coverage in and out of network

 For Primary Care Physician Designations: o Participants may designate any available participating primary care provider o

Parents may select pediatrician for child(ren)

o

May not require authorization or referral for OBGYN care from participating obstetrician or gynecologist

 New claims appeal rules including both internal and external review
 Nondiscrimination rules for fully insured health plans under Code §105(h) On December 22, 2010, it was announced that enforcement of this rule will be delayed until further guidance is issued.
For plan years starting on or after January 1, 2014, new plans or plans that have lost grandfathered status will have to comply with additional requirements including:
 No discrimination against individuals participating in clinical trials;
 No discrimination based on health status;
 Provide essential benefits (small group insured plans only);
 No discrimination against health care providers acting within the scope of their professional license and applicable State law;
 Prohibit out-of-pocket limits in excess of the applicable out-of-pocket limits for qualified high deductible health plans; and
 Prohibit deductibles in excess of the applicable deductible limits for qualified high deductible health plans (applies only to insured plans in the small group market).
125. We intend to keep our plan grandfathered as long as possible. Is there anything we have to do to verify we have not made any changes that would result in the loss of grandfathered status?
Yes. You will be required to maintain records of your plan's grandfathered status for as long as the plan takes the position that it is grandfathered. This means you must maintain records documenting the terms of the plan in effect on March 23, 2010, and any other documents necessary to verify, explain, or clarify your plan’s status as a grandfathered health plan. This should include intervening and current plan documents, health insurance policies, certificates or contracts of insurance, summary plan descriptions, documentation of premiums or the cost of coverage, and documentation of required employee contribution rates.

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In addition, you must make these records available for inspection to participants or
State or Federal agencies upon request.
126. Will we have to tell our employees about our plan’s grandfathered status?
Yes. To maintain status as a grandfathered plan, you must disclose, in any plan materials provided to participants, that your plan believes it is a grandfathered plan under PPACA. This includes SPDs, open enrollment materials, or materials provided upon opportunities to enroll in, renew or change coverage. The disclosure must also provide contact information for questions and complaints. The following model language can be used to satisfy the grandfathered plan disclosure requirement:
This [group health plan or health insurance issuer] believes this [plan or coverage] is a “grandfathered health plan” under the Patient Protection and Affordable Care
Act (the Affordable Care Act). As permitted by the Affordable Care Act, a grandfathered health plan can preserve certain basic health coverage that was already in effect when that law was enacted. Being a grandfathered health plan means that your [plan or policy] may not include certain consumer protections of the
Affordable Care Act that apply to other plans, for example, the requirement for the provision of preventive health services without any cost sharing. However, grandfathered health plans must comply with certain other consumer protections in the Affordable Care Act, for example, the elimination of lifetime limits on benefits.
Questions regarding which protections apply and which protections do not apply to a grandfathered health plan and what might cause a plan to change from grandfathered health plan status can be directed to the plan administrator at [insert contact information]. [For ERISA plans, insert: You may also contact the Employee
Benefits Security Administration, U.S. Department of Labor at 1-866-444-3272 or www.dol.gov/ebsa/healthreform. This website has a table summarizing which protections do and do not apply to grandfathered health plans.] [For nonfederal governmental plans, insert: You may also contact the U.S. Department of Health and
Human Services at www.healthcare.gov.]

Dependents to
Age 26
127. Our plan currently covers children to age 23, so we'll have to extend that to age 26. When do we have to do that? Can we do it now?
For grandfathered plans, the change must be made by the first day of the first plan year that starts on or after September 23, 2010. For example, a calendar year plan would have to comply by January 1, 2011. However, the change can be made sooner. You should make sure the insurer or stop loss carrier approves the change if you intend to implement it prior to the required effective date.
For insured plans, many insurers are implementing this change ahead of the actual effective date. You can contact your insurer for more information on how this change will affect your plan.

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128. Do we have to offer coverage to adult children even if the "child" already has coverage through their own employer's plan?
If your plan is not grandfathered, you are not able to deny coverage to adult children even if they have coverage through their own or any other employer’s plan.
If your plan is grandfathered, you would not have to offer the coverage until 2014.
Before 2014, you must provide coverage to dependent children until they turn age
26, unless they are eligible to enroll for any other employer provided coverage that is not a group health plan of a parent. This could include coverage through their own employer’s plan or through a spouse’s employer’s plan.
While it is not entirely clear from the guidance we have, it appears that the child is not treated as eligible for other coverage until the first date the individual can actually enroll and be covered under the plan. For example, if the child is eligible for other coverage but cannot be enrolled due to plan restrictions, they probably remain eligible under the parent's plan until such time they can actually enroll in the other plan. Also, coverage cannot be denied under the parent’s plan if the child is only eligible to enroll for COBRA coverage under their former employer or spouse’s former employer’s plan.
Starting in 2014 and later, coverage under all plans must be available regardless of whether the child has any other coverage (but COB rules may still apply).
129. Our plan covers step children and in some cases grandchildren if they meet specific criteria. Will we now have to cover them to age 26 as well?
The DOL issued “safe harbor” guidance that says plans that cover the following categories of children to age 26 will be in compliance with this requirement:
 Biological children (sons, daughters);
 Stepchildren;
 Adopted children (including children placed for adoption); and
 Foster children who are placed with the employee by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.
Coverage can be discontinued for children in any of the above categories prior to age 26 if the applicable relationship no longer exists.
For an individual who is not in one of the four categories, such as a grandchild or niece, a plan may impose additional conditions on eligibility for health coverage, such as a condition that the individual be a dependent for income tax purposes.
130. Can I just continue the children already on my plan, or do I have to go back and offer the coverage to those who have already aged out?
If the child’s coverage under your plan was ended (or if the child was not eligible for coverage) because, under the terms of the plan, coverage was not available to age
26, you are required to give children under age 26 a special enrollment opportunity of at least 30 days. This special enrollment opportunity must be provided beginning

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no later than the first day of the first plan year beginning on or after September 23,
2010.
131. Am I required to tell employees about this opportunity? How do I do that and by when?
Yes. You must provide a written notice to employees describing the special enrollment opportunity. You can give or send the notice to the employee or it can be included with other enrollment materials, provided the statement describing the special enrollment opportunity is highlighted. This notice must be provided no later than the first day of the first plan year starting on or after September 23, 2010. For example, a calendar year plan would have to provide the notice and the 30-day special enrollment opportunity no later than January 1, 2011.
The DOL has issued a model notice for this purpose which can be downloaded in
Word format from their website at: http://www.dol.gov/ebsa/healthreform/
132. Do I have to offer the coverage to an adult child who has aged out, but is currently on COBRA?
Yes. If the child who aged out has elected COBRA, the plan must allow the child to be enrolled as a dependent of an active employee. In addition, if the child subsequently loses eligibility due to a qualifying event, the child would have another opportunity to elect COBRA.
133. Can I charge more for these adult children?
In most cases, no. The employee cannot be required to pay more for a child’s coverage based on their age (e.g. adding a surcharge for children over age 18 or over age 23). However, an additional surcharge for adult children could be applied if that surcharge is applied for every new child added to the plan regardless of age.
134. Can I offer a more limited benefit to these adult children?
No. The benefits or coverage cannot vary based on the child’s age. It must be identical to the coverage that is provided to similarly situated children who are not adult children.
135. If the adult child is married are they still allowed to have the coverage?
Yes. Eligibility for coverage of children up to age 26 cannot be based on factors such as financial dependence, student status, residence, or marital status.
136. Do I have to cover the spouse or child (the grandchild of the employee) of the adult child too?
No. Plans that provide dependent coverage are only required to provide coverage to the employee’s children (e.g. biological or adopted children) until the age of 26. The plan is not required to provide coverage to the employee’s son-in-law or daughterin-law or grandchildren.

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137. We have an employee whose child is 25 but is not a full time student, does this mean we will have to calculate imputed income for that employee?
Not for federal tax purposes. The definition of a tax dependent in the Internal
Revenue Code for group health plan purposes was amended as part of the health care reform package to include children until the end of the year they turn age 26.
This change will also apply to children to age 26 who are covered under a plan that currently extends coverage to children to age 26 (or older).
The IRS has now issued Notice 2010-38 that offers guidance on the tax exclusion for these adult children. It clarifies several items including:
 Child is defined as son/daughter, step son/daughter, adopted child or eligible foster child, without regard to whether the child is financially supported by the employee or resides with the employee or is a full time student  Coverage for these adult children can be paid for on a pretax basis under a
§125 cafeteria plan
 The change in status regulations will be amended so that employees can add coverage under a §125 plan for a newly-eligible adult child where the plan has been amended mid-year to add the adult child coverage.
138. Does the same change apply for state tax purposes?
In many cases, states have adopted the federal definition of gross income so that whatever is included (or not included) in income for federal purposes also applies at the state level. However, there were some states (e.g. California) where this was not the case and coverage for adult children was still taxable. Fortunately, all the states that were nonconforming with the federal rules have now either passed resolutions or legislation conforming the state tax treatment of adult dependent coverage with the federal tax treatment of adult dependent coverage.

Preexisting
Condition
Exclusions
139. Our plan has a preexisting condition limitation. Will we have to change it or eliminate it?
Yes. Starting with your first plan year beginning on or after 9/23/10, a preexisting condition limitation cannot be applied to any enrollee who is under age 19. This includes employees and spouses under age 19 and dependents under age 19.
Starting with your first plan year beginning on or after 1/1/14, preexisting condition limitations will be prohibited for all plans and all covered individuals so you will have to eliminate it altogether by that date.

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140. We have a plan provision that excludes coverage for services that are the result of an injury that occurred before the effective date of the employee’s coverage. Is this still permissible?
Because this provision operates to exclude benefits for a condition that was present before the effective date of coverage, it is considered a preexisting condition exclusion. Therefore, it will be subject to the same rules described above. Starting with your next plan year beginning on or after 9/23/10, it cannot be applied to enrollees under age 19, and then starting in 2014, it will have to be eliminated.
141. If our plan cannot apply a preexisting condition limitation to any covered person starting in 2014, will we still be required to provide HIPAA certificates of creditable coverage to individuals who lose coverage?
No. Effective January 1, 2015, you will no longer have to provide a HIPAA certificate of creditable coverage to individuals who lose coverage under your group health plan. Lifetime and
Annual
Maximums
142. We have two plan options. One has a $1 million lifetime maximum and the other has a $2 million lifetime maximum. How will these maximums be affected?
Effective with your first plan year starting on or after 9/23/10, lifetime maximums that apply to essential benefits will have to be eliminated regardless of whether or not your plan is grandfathered.
143. Our plan is self-funded. How do we know what benefits are “essential benefits”? The Act defines “essential benefits” to include the following categories of coverage:
 Ambulatory patient services
 Emergency services
 Hospitalization
 Maternity and newborn care
 Mental health and substance use disorder services, including behavioral health treatment
 Prescription drugs
 Rehabilitative and habilitative services and devices
 Laboratory services
 Preventive and wellness services and chronic disease management
 Pediatric services, including oral and vision care (services for individuals under 19 years of age)
The agencies enforcing PPACA have said they will take into account good faith efforts to comply with a reasonable interpretation of the term “essential health benefits” until regulations are issued. In addition, HHS released guidance in 2012 stating that a self-funded plan would be in compliance if it used one of the following

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four choices as a benchmark plan, reflecting the scope of essential health benefits offered by a typical employer plan and supplemented as needed to ensure coverage of all ten statutory categories:
1. The largest plan by enrollment in any of the three largest small group insurance products in a State’s small group market;
2. Any of the largest three State employee health benefit plans by enrollment;
3. Any of the largest three national FEHBP plan options by enrollment; or
4. The largest insured commercial non-Medicaid Health Maintenance Organization
(HMO) operating in a State.
144. Can we still keep our lifetime limit for benefits that are not considered
“essential benefits”?
Yes. Lifetime limits on benefits that are deemed not to be essential benefits are permitted. 145. Does the prohibition on annual and lifetime dollar limits apply to expenses incurred out-of-network?
Yes. There is no exception for out-of-network benefits.
146. We have an employee who dropped coverage at our last open enrollment because her daughter’s claims exceeded the lifetime maximum and no further claims were going to be paid. Do we have to let her back on the plan?
Yes. If she is eligible for coverage, you must inform the employee in writing that the plan’s lifetime maximum no longer applies and she and her daughter are allowed to enroll in the plan and the daughter is eligible for benefits again.
147. Do we have to notify employees who exceeded the lifetime limit that they can return to the plan? How long can they have to reenroll?
Yes, you must provide them with at least 30 days to enroll and the enrollment opportunity must be provided no later than the first day of the first plan year starting on or after 9/23/10. If they enroll, the coverage must start no later than the first day of that plan year.
The DOL has issued a model notice for this purpose which can be downloaded in
Word format from their website at: http://www.dol.gov/ebsa/healthreform/
148. Can we require her to enroll in the plan option she was enrolled in when her daughter’s claims exceeded the lifetime maximum?
No. She must be offered all the benefit options available to similarly situated employees. Page 50 | © Gallagher Benefit Services, Inc. 2014

149. Our plan has no lifetime maximum but it has an annual maximum of $500,000.
Will we have to change or eliminate the annual maximum?
Yes. Starting in 2014, plans cannot have annual maximums on essential benefits.
For plan years beginning before 1/1/14, you can have an annual maximum on essential benefits provided the limit is no less than:
 $750,000 for a plan year beginning on or after September 23, 2010, but before September 23, 2011,
 $1,250,000 for a plan year beginning on or after September 23, 2011, but before September 23, 2012, and
 $2,000,000 for plan years beginning on or after September 23, 2012, but before January 1, 2014.
150. Our plan has an annual maximum of $10,000 for chiropractic care. Do we have to remove the limit?
Until HHS has provided more guidance on the specifics of what is an essential benefit and whether chiropractic care would fall under one of the categories of essential benefits, it’s not possible to answer this question. Until these regulations are issued, the agencies enforcing PPACA have said they will take into account good faith efforts to comply with a reasonable interpretation of the term “essential health benefits”. An alternative to having annual dollar maximums might be to replace them with day or visit limits, which are not limited or restricted for chiropractic care at this time.
151. We offer our employees a high deductible health plan combined with a Health
Reimbursement Arrangement (HRA). We contribute $1,000 annually to each employee’s HRA. Does the elimination of annual limits mean we have to change our HRA?
No. When HRAs are integrated with other coverage under a group health plan (e.g. with a high deductible major medical plan) and the employee is enrolled in both, the fact that the benefits are limited under the HRA does not cause it to violate PPACA if the major medical coverage is in compliance with all the applicable health insurance reform provisions.
152. If we offer our employees an HRA that allows them to purchase coverage on the individual market, will the HRA be considered integrated with that individual market coverage and therefore satisfy the annual limit and/or preventive care requirements? No. An employer-sponsored HRA plan cannot be integrated with individual market coverage or with an employer plan that provides coverage through individual policies and therefore it would violate the prohibition on annual dollar limits and the requirement to provide certain preventive services at 100%.
An HRA is integrated with a group health plan coverage that provides minimum value only if ALL the following conditions are met:
1. The HRA is available only to employees who are actually enrolled in the nonHRA group health plan coverage;

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2. Any employee receiving the HRA is actually enrolled in a group health plan that provides minimum value;
3. Under the terms of the HRA, an employee (or former employee) is permitted to permanently opt out of and waive future reimbursements from the HRA at least annually, and, upon termination of employment, either the remaining amounts in the HRA are forfeited or the employee is permitted to permanently opt out of and waive future reimbursements from the HRA.
If an HRA is integrated with coverage that does not meet minimum value, then the same requirements described above apply but the HRA must be limited to reimbursement of only one or more of the following: co-payments; co-insurance; deductibles; and premiums under the non-HRA coverage, as well as medical care
(as defined under Code § 213(d)) that does not constitute essential health benefits.
153. If we offer to reimburse our employees for individual or Marketplace coverage premiums, will that arrangement satisfy the annual limit requirements?
No. Your reimbursements cannot be integrated with individual market coverage.
Therefore it would violate the prohibition on annual dollar limits because it would impose an annual dollar limit up to the cost of the individual market coverage.
154. We have a lot of minimum wage employees who can’t afford our health plan so we offer them a “mini-med” plan that has a $75,000 annual maximum. Will we have to raise that maximum?
Maybe not. HHS has introduced a program for health plans and/or insurers to request a waiver from the restricted annual limit requirements of PPACA for so-called
“limited benefit” or “mini-med” plans until 2014. Under the program, the plan or insurer can request a waiver from the annual limit requirements if complying with the annual limit requirement would result in a significant decrease in the access to such benefits or if it would result in a significant increase to the cost of the coverage.
The application for waiver must be filed at least 30 days before the beginning of the plan or policy year. In the case of a plan or policy year that begins before November
2, 2010, the application must be submitted at least 10 days before the beginning of the plan or policy year. For calendar year plan years, the application must be filed by December 1, 2010. No new applications will be accepted by CMS after September
22, 2011.
It is important to note however, that this waiver only applies to the annual limit restriction. All the other health insurance reform provisions of PPACA apply to limited benefit or mini-med plans on the same basis as any other group health plan or policy.
155. One of our plan options is a stand-alone Health Reimbursement Arrangement
(HRA) where we fund the account with $1,500 each year. Will we have to seek a waiver from the restricted annual limit requirement for our HRA?
No. HHS has issued guidance clarifying that until 2014, stand-alone HRAs that were in effect prior to September 23, 2010 are not required to apply for an annual limit waiver. Starting January 1, 2014, stand-alone HRAs as a plan option will no longer be viable except in certain limited situations such as retiree coverage.

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156. How do we extend an annual limit waiver for our 2012 plan year?
If your plan or your insurer received a waiver of the restricted annual limit for the plan years beginning on or after September 23, 2010 but before September 23, 2011, you must complete the Waiver Extension form to extend the Waiver into the next plan year. In addition, you must complete a signed attestation certifying that:
1. The plan or policy was in existence prior to September 23, 2010;
2. Compliance with the interim final regulations would result in a “significant decrease in access to benefits” or a “significant increase in premiums;” and
3. The plan understands and will comply with the requirement to provide an annual notice to participants informing them that the plan does not meet the minimum annual limit for essential benefits and has been granted a waiver.
4. The Waiver Extension Form and the Attestation are available at the CMS website at: http://cciio.cms.gov/programs/marketreforms/annuallimit/index.html
You or your insurer must submit the Waiver Extension form and attestation by e-mail to AnnualLimitExtension@cms.hhs.gov (use “Waiver Extension” as the subject of the e-mail) no later than September 22, 2011.
In addition, applicants for a Waiver Extension must re-submit the information described above on an annual basis by the end of each calendar year (Annual Limit
Update). Specifically, the first Annual Limit Update must be submitted by December
31, 2012 and the second Annual Limit Update must be submitted by December 31,
2013.
157. When does the waiver program end?
If you filed an application for a waiver and updated it each year as required, your plan’s waiver applies through the end of the plan year that begins in 2013.
158. Do we have to tell employees if we have been granted a waiver?
Yes. If your plan is approved for the waiver, you must provide a notice informing current and eligible participants that your plan does not meet the minimum annual limits for essential benefits and has received a waiver of the requirement. The notice is also required to include the dollar amount of the annual limit along with a description of the plan benefits to which the limit applies. In addition, the notice is required to state that the waiver was granted for only one year. For plans or issuers that were approved for a waiver for plan or policy years that begin before February
1, 2011, or that will receive approvals for plan or policy years that begin before
February 1, 2011, the notice had to be provided to current and eligible participants and subscribers within 60 days of December 9, 2010.
For applicants for waivers covering plan or policy years that begin on or after
February 1, 2011, the notice had to be provided to eligible participants and subscribers as part of any informational or educational materials, and also in any

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plan or policy documents evidencing coverage that are sent to enrollees (e.g., summary plan descriptions).
Effective for plan years starting after June 17, 2011, HHS has determined that each waiver recipient – whether via a Waiver Extension or a new waiver application– will be required to distribute an updated annual notice to eligible participants and subscribers. The Annual Notice must be provided to eligible participants and subscribers in plan or policy materials that describe the terms of coverage (e.g., summary plan descriptions) for each plan year (in the individual market, policy year) for which the waiver applies.
The June 17, 2011 guidance and model language for this notice can be found on the HHS website at: http://cciio.cms.gov/resources/files/06162011_annual_limit_guidance_20112012_final.pdf Rescissions
159. PPACA prohibits “rescissions”. What does this mean and how will it affect our plan? Rescissions are defined as a cancellation of coverage that has a retroactive effect.
Rescissions are prohibited unless the termination is due to fraud, or an intentional misrepresentation of a material fact, and are permitted by the written terms of the plan. Therefore, effective for plan years starting on or after September 23, 2010, your group health plan will not be permitted to terminate coverage retroactively under any circumstances unless the employee performs an act of fraud, or the employee intentionally misrepresents a material fact and the plan has been drafted or amended to provide that such misrepresentations will result in a termination of coverage.
Retroactive cancellation of coverage due to a failure to pay timely premiums is not considered a rescission.
160. We have several locations and sometimes we are not immediately notified by supervisors or managers when an employee loses eligibility for plan coverage when they are reassigned to a part time position. We can still terminate coverage retroactively in those cases, right?
Yes, as long as you did not continue withholding contributions from the employee’s paycheck and paying claims. If you continued to withhold contributions and provide coverage, then the coverage can only be terminated prospectively.
Example. Joe has coverage under the plan as a full-time employee. The employer reassigns Joe to a part-time position and Joe is no longer eligible for coverage. The plan mistakenly continues to provide health coverage, collecting premiums from
Joe’s paycheck and paying claims submitted by Joe. After a routine audit, the plan discovers that Joe is no longer eligible. The plan rescinds Joe’s coverage effective as of the date he changed from a full-time employee to a part-time employee.
Conclusion. The plan cannot rescind Joe’s coverage because there was no fraud or an intentional misrepresentation of material fact. The plan may only cancel coverage for Joe prospectively.

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161. We only reconcile our bill or data feed for eligible employees and dependents once a month. Can we still retroactively terminate employees and dependents off our coverage on that reconciliation back to the end of the previous month?
If you cover only active employees and families (and COBRA participants) and the individual who is no longer eligible for coverage pays no premiums for coverage after the termination (subject to COBRA), then it will not be considered a rescission, but rather a retroactive elimination of coverage back to the date of termination, due to delay in administrative recordkeeping.
162. What if we have an employee who notifies us of his final divorce from his spouse. Are we allowed to terminate the coverage of the spouse retroactively to the date of the divorce?
If your plan does not cover ex-spouses (other than under COBRA) and the COBRA premium is not paid by the employee or ex-spouse, then you are allowed to retroactively terminate coverage back to the date of divorce without it being an improper rescission. Of course, COBRA may require coverage to be offered for up to 36 months, if the COBRA premium is paid.

Patient
Protections
163. What are the special rules that will apply to our HMO option regarding the choice of primary care physicians (PCP)?
The new rules on PCPs are effective for plan years starting on or after
September 23, 2010 but only apply to nongrandfathered plans. If your HMO option is not grandfathered, you must allow participants or beneficiaries to elect a PCP including:  Designating any participating primary care physician who is available to accept the individual; and
 Designating any participating physician who specializes in pediatrics who is available as a child’s PCP.
164. We read that HMOs cannot require females to get authorization for OB/GYN services. How does that work?
This new rule applies only to nongrandfathered plans. If your HMO option is not grandfathered, it cannot require an authorization or a referral from the HMO or a
PCP for a female seeking OB/GYN services from a participating health care professional (i.e. physician, physician assistant, midwife, etc.) who specializes in
OB/GYN care.
165. Do we have to notify the employees enrolled in or enrolling in the HMO of these new rules?
Yes. If your nongrandfathered HMO plan requires the designation of a PCP, you must provide a notice informing each employee of the following:
 The plan requirements for electing a PCP;
 That any participating primary care physician who is available to accept the participant can be designated as a PCP;

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 That any participating physician who specializes in pediatrics can be designated as a PCP for a child;
 The plan may not require authorization or referral for OB/GYN services provided by a participating professional who specializes in OB/GYN care.
This notice must be included in the plan’s SPD or any other similar description of the benefits under the plan. The DOL has issued a model notice for this purpose which can be downloaded in
Word
format from their website at: http://www.dol.gov/ebsa/healthreform/ 166. There are new rules for emergency room services. How will they affect our plan? These rules apply only to nongrandfathered plans. If your plan is not grandfathered, it must provide coverage for emergency room services in the following manner:
 Without the need for any prior authorization determination, even if the emergency services are provided on an out-of-network basis;
 Without regard to whether the health care provider furnishing the emergency services is a participating network provider with respect to the services; and
 If the emergency services are provided out of network, without imposing any administrative requirement or limitation on coverage that is more restrictive than the requirements or limitations that apply to emergency services received from in-network providers.
Also, if the emergency services are provided out of network, the copays or coinsurance amounts imposed cannot exceed the amounts imposed for in network emergency room services.

Preventive Care
167. Our plan currently provides coverage for preventive services but we apply copays and deductibles to those services. I’ve heard we will have to eliminate these cost-sharing provisions. Is that true?
The Act does require new plans to provide first dollar coverage to certain specified preventive services and immunizations for plan years beginning on or after
September 23, 2010, but this requirement does not apply to grandfathered plans.
168. We may have one plan option that is not grandfathered. What are the preventive services that the plan will have to cover without cost-sharing?
 Evidence-based items or services that have a rating of A or B in the current recommendations of the United States Preventive Services Task Force;
 Immunizations for routine use in children, adolescents, and adults as recommended by the Advisory Committee on Immunization Practices of the Centers for Disease Control;
 With respect to infants, children, and adolescents, evidence-informed preventive care and screenings provided for in comprehensive guidelines supported by the Health Resources and Services Administration; and

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 With respect to women, evidence-informed preventive care and screenings provided for in comprehensive guidelines supported by the Health
Resources and Services Administration.
A list of the required services can be found on the HHS website at: https://www.healthcare.gov/what-are-my-preventive-care-benefits/#part=1 169. Does the list of women’s evidence-informed preventive care and screenings include coverage for contraception?
Yes. Beginning with plan years starting on or after August 1, 2012, nongrandfathered plans will have to provide coverage with no cost-sharing for all FDA approved contraceptive methods, sterilization procedures, and contraceptive education and counseling for all women with reproductive capacity.
The full list of covered women’s preventive services can be found on the HHS website here: http://www.hrsa.gov/womensguidelines\.
170. We are a church that believes contraception is contrary to our religious tenets so we do not currently cover them. Will we have to change our plan to add coverage for contraceptives?
No. Group health plans sponsored by religious employers, and group health insurance coverage provided in connection with such plans, are exempt from the requirement to cover contraceptive services.
A religious employer is defined as an employer that organized and operated as a non-profit entity and is referred to in §6033(a)(3)(A)(i) or §6033(a)(3)(A)(iii) of the
Internal Revenue Code of 1986, as amended. Section 6033(a)(3)(A)(i) and (iii) of the
Code refers to churches, their integrated auxiliaries, and conventions or associations of churches, as well as to the exclusively religious activities of any religious order.
171. We are a religiously-affiliated organization (not a church) that currently excludes contraception because it is contrary to our religious beliefs. How does this rule apply to us?
Plans of certain nongrandfathered religiously-affiliated employers (schools, hospitals, charities, etc.) that are not “religious employers” as defined, are accommodated under an enforcement safe harbor until your first plan year starting on or after January 1, 2014. To qualify for the safe harbor, you must meet all of the following criteria:
 Your organization is organized and operates as a nonprofit entity.
 From February 10, 2012, onward, your group health plan has consistently not covered all or some subset of recommended contraceptive services, consistent with any applicable state law, because of the religious beliefs of the organization.
 Your group health plan (or another entity on behalf of the plan, such as a health insurance issuer or third party administrator) provides to participants a notice indicating that some or all contraceptive services will not be covered under your plan for the first plan year beginning on or after August
1, 2012.

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 You self-certify that you satisfy the three criteria described above and you document your self-certification.
A model self-certification and employee notice for use before January 1, 2014 is available at the HHS website here: http://cms.gov/CCIIO/Resources/Regulationsand-Guidance/Downloads/preventive-services-guidance-6-28-2013.pdf
172. Once the safe harbor expires, will we have to provide contraceptive coverage at that time?
Not necessarily. Effective with plan years starting on or after January 1, 2014, there is an ongoing accommodation for plans of nongrandfathered, religiously-affiliated employers (schools, hospitals, charities, etc.) that meet the following criteria:
1. The organization opposes providing coverage for some or all of the contraceptive services required to be covered on account of religious objections;
2. The organization is organized and operates as a nonprofit entity;
3. The organization holds itself out as a religious organization;
4. The organization self-certifies that it satisfies criteria 1-3 above and specifies those contraceptive services for which the organization will not establish, maintain, administer, or fund coverage, and makes such certification available for examination upon request; and
5. The organization or plan administrator furnishes each insurer or TPA with a copy of the self-certification described in (4) above prior to the beginning of the first plan year that the accommodation applies.
Once you have furnished your self-certification to your insurer, they will expressly exclude contraceptives from your coverage and separately provide contraceptive coverage to your plan participants and beneficiaries without imposing any cost sharing requirement (such as a premium, copayment, coinsurance, or a deductible).
In addition, they are prohibited from imposing any premium, fee, or other charge on you or your group health plan. The insurer of the contraceptive coverage will be required to provide to plan participants and beneficiaries a written notice of the availability of the contraceptive coverage, separate from but concurrent with (to the extent possible) materials you distribute in connection with enrollment or your annual open enrollment.
For self-funded plans, if you provide your self-certification to your TPA and the TPA agrees to enter into or remain in a contractual relationship with you, the TPA must provide or arrange payments for contraceptive services by either providing direct payments for contraceptive services for plan participants and beneficiaries on its own, or by arranging for an insurer or other entity to provide payments for contraceptive services for your plan. They cannot impose any cost-sharing requirements (such as a premium, fee, copayment, coinsurance, or a deductible) on your group health plan or the plan participants or beneficiaries. The TPA will be required to provide to plan participants and beneficiaries a written notice of the availability of the contraceptive coverage, separate from but concurrent with (to the

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extent possible) materials you distribute in connection with enrollment or your annual open enrollment.
A model self-certification form - EBSA Form 700 - for use on or after January 1,
2014 is available at the DOL website: http://www.dol.gov/ebsa/pdf/preventiveserviceseligibleorganizationcertificationform.pdf. 173. We are a religiously-affiliated, non-profit organization that believes providing a self-certification to our TPA makes us complicit in providing contraception.
Are we required to provide the self-certification to our TPA?
No. In a decision issued on July 3, 2014, the U.S. Supreme Court ruled that a religiously-affiliated non-profit college was not required to provide the selfcertification to their TPA. Instead, they only needed to provide a letter to HHS declaring their religious objection to the contraceptive mandate in order to avoid being penalized for not providing contraception coverage. In response to the
Supreme Court decision, regulations have been issued allowing you to notify HHS of your objection to providing coverage for some or all contraceptive instead of providing it to the TPA.
A model notice for informing HHS of your objection to providing contraceptive coverage is available at: http://www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/Model-Notice-8-22-14.pdf.
After you have notified HHS of your objection, the Department of Labor (working with the Department of Health and Human Services), will send a separate notification to your plan’s TPA informing them that HHS has received your notice and describing the obligations of the TPA to provide or arrange separate contraceptive coverage for plan participants and beneficiaries without imposing cost-sharing requirements.
174. If we provide the self-certification to our TPA, are they required to provide or arrange for contraception coverage for our participants or beneficiaries?
No. The TPA is under no obligation to provide or arrange the contraceptive coverage, but if they refuse to provide contraceptive coverage, they are prohibited from entering into or remaining contracted with you or your plan to provide administrative services.
175. Are there any other exemptions from the contraceptive mandate?
Yes. The U.S. Supreme Court ruled on June 30, 2014 that the contraceptive mandate as applied to closely-held, for-profit corporations with “sincerely-held religious beliefs” against contraceptives violates the Religious Freedom Restoration
Act (RFRA). Therefore, closely-held, for-profit corporations are not required to comply with the contraceptive mandate if complying means the mandate violates the owner’s sincerely held religious beliefs. Instead, the insurer or TPA would be required to provide or arrange separate contraceptive coverage for plan participants and beneficiaries without imposing cost-sharing requirements.
176. If we have to cover contraceptives, can we cover only oral contraceptives?
No. The guidelines require you to cover the full range of FDA-approved contraceptive methods including, but not limited to, barrier methods, hormonal methods, and

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implanted devices, as well as patient education and counseling, as prescribed by a health care provider. However, your plan is permitted to use reasonable medical management techniques to control costs and promote efficient delivery of preventive services. 177. Can we cover only the generic versions of prescribed contraceptive drugs or impose cost-sharing on brand name drugs?
You may cover a generic drug without cost-sharing and impose cost-sharing for equivalent branded drugs. To use this approach, your plan must accommodate any individual for whom the generic drug (or a brand name drug) would be medically inappropriate, as determined by the individual's health care provider, by having a mechanism for waiving the otherwise applicable cost-sharing for the branded or nonpreferred brand version.
Also, if a generic version is not available, or would not be medically appropriate for the patient as a prescribed brand name contraceptive method (as determined by the attending provider, in consultation with the patient), then your plan or must provide coverage for the brand name drug without cost-sharing (but also subject to reasonable medical management).
178. Do we have to cover over-the-counter contraceptives?
Contraceptive methods that are generally available OTC must be covered only if they are an FDA-approved method and they are and prescribed for a woman by her health care provider.
179. Do we have to cover contraceptives for men?
No. The preventive care guidelines do not include contraception for men.
180. Does our nongrandfathered option have to provide 100% coverage for both innetwork and out-of network services on the list?
No. You are only required to eliminate cost sharing provisions on in-network providers. You are permitted to impose cost-sharing on covered preventive services that are delivered by out-of-network providers.
If your plan does not have in its network a provider who can provide a particular preventive service, then your plan must cover the item or service when performed by an out-of-network provider and not impose cost-sharing with respect to the item or service.
181. Our nongrandfathered option has a limit on well baby visits per year. Can we keep that or other limits on the applicable preventive services?
Yes. Nothing in the regulations prevents you from using reasonable methods to determine the frequency, method, treatment, or setting for an item or service on the list as long as it doesn’t conflict with specific recommendations in the guidelines.
Reasonable medical management techniques may generally limit or exclude benefits based on medical necessity or medical appropriateness using prior authorization requirements, concurrent review or similar practices.

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182. What if an employee goes to their doctor for an office visit but also gets one of the recommended preventive services at the same time. Can we still apply a copay to the office visit charge?
It will depend on the situation:
 If a preventive service is billed separately from the office visit and the primary purpose of the visit is not for preventive purposes, then you may impose cost-sharing requirements with respect to the office visit.
 If a preventive service is not billed separately from the office visit and the primary purpose of the office visit is for preventive services, then you may not impose cost-sharing requirements with respect to the office visit.
 If a preventive service is not billed separate from the office visit and the primary purpose of the office visit is not for preventive purposes, then you may impose cost-sharing requirements with respect to the office visit.
183. Some of the recommended preventive services include things like aspirin or other over-the-counter medications. Is our plan required to cover those items?
Aspirin and other over-the-counter recommended items and services must be covered without cost-sharing only when prescribed by a health care provider.
184. The list of required preventive services requires us to cover tobacco-use counseling and provide tobacco cessation interventions. For employees who use tobacco products, what services are we expected to provide as preventive coverage? You may use reasonable medical management techniques to determine the frequency, method, treatment, or setting for a recommended preventive service (to the extent not specified in the recommendation or guideline). So, you would be in compliance if, for example, your plan covers without cost-sharing and without requiring individuals to get prior authorization:
1. Screening for tobacco use; and,
2. For those who use tobacco products, at least two tobacco cessation attempts per year. For this purpose, covering a cessation attempt includes coverage for:
 Four tobacco cessation counseling sessions of at least 10 minutes each
(including telephone counseling, group counseling and individual counseling); and
 All FDA-approved tobacco cessation medications (including both prescription and over-the-counter medications) for a 90-day treatment regimen when prescribed by a health care provider.
185. What happens when there are changes to the recommendations or guidelines for covered preventive services?
If something new is added to the recommendations or guidelines, your plan will not have to cover it until the plan year that begins on or after one year after the date the recommendation or guideline is issued.

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If a recommendation or guideline is dropped, your plan will not be required to provide coverage after the recommendation or guideline is dropped.

Internal Claim and Appeal
Process and
External Review
186. What are the new claims and appeals processes and how will they apply?
Starting with the first plan year beginning on or after September 23, 2010, both insured and self-funded plans that are not grandfathered must implement new claims and appeal procedures and an external review process. Nongrandfathered plans
(and insurers) will have to incorporate the current ERISA claims and appeals requirements and update them based on additional changes in PPACA. In addition, adverse benefit determinations will be subject to an external review process.
187. Our plan is a governmental plan that is not subject to ERISA and does not follow the current ERISA guidelines. Will we have to update our internal claim and appeal process?
Yes, if your plan loses its grandfathered status. Because PPACA applies to all group health plans, you would have to incorporate the current ERISA claims and appeals processes as updated by PPACA for your plan.
This same rule will apply for church plans that are not currently subject to the ERISA claims and appeals process.
188. What changes did PPACA make to ERISA’s current claims and appeals rules?
The changes that have been made are:
1. An adverse benefit determination now includes any rescission of coverage;
2. The plan must provide, free of charge, any new or additional evidence or rationale used by the plan in connection with the claim determination. This evidence must be provided in advance to give the participant a reasonable opportunity to respond prior to the review date;
3. The plan must ensure that all claims and appeals are reviewed in a manner designed to ensure the independence and impartiality of the persons involved in making the decision;
4. The plan must provide notices of adverse benefit determinations to enrollees in a culturally and linguistically appropriate manner;
5. Additional content requirements apply for notices to claimants identifying the claim involved, including, for example, the denial code, a description of the plan’s available internal appeals and external review processes, and contact information for any office of health insurance consumer assistance;

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6. The regulations emphasize completely following a full and fair process of review.
Accordingly, failure to strictly adhere to the review requirements (except for errors that are minor and are nonprejudicial and attributable to good cause outside the plan’s control) will allow the participant to initiate an external review and pursue any available remedies under applicable law, such as judicial review.
On September 20th, 2010 the DOL announced a delay in enforcement of #4, #5 and
#6 above until July 1, 2011, for group health plans that are working in good faith to implement the new standards.
On March 18, 2011, the DOL announced a further delay in enforcement of #4 and
#6 until the first day of the first plan year starting on or after January 1, 2012. For the requirements of #5 (e.g. denial codes, description of the plan’s internal appeals and external review process, disclosure of the availability of an office of consumer assistance) the effective date has been changed from July 1, 2011 to the first day of the first plan year starting on or after July 1, 2011.
Note: Requirements in the interim final regulations including making urgent care claim determinations within 24 hours, providing diagnosis and treatments codes in all adverse determination notices, providing adverse benefit determinations in a culturally and linguistically appropriate manner, and requiring strict adherence to the internal appeals and external review process were dropped or significantly modified on June 24, 2011.
189. Are we required to include diagnosis and treatment codes in our adverse benefit determination notices?
No. However, plans are required to provide notification to claimants of their right to request the inclusion of diagnosis and treatment codes (and their meaning) in all adverse benefit determination notices.
190. What must our plan do to ensure our adverse benefit determination notices are provided in a culturally and linguistically appropriate manner?
If you have employees living in a county where 10% or more of the population residing in that county are literate only in the same non-English language, your plan must:  Provide a customer assistance process (such as a telephone hotline) with oral language services in the non-English language;
 Include in any adverse benefit determination notice a one-sentence statement in the non-English language describing the plan’s language assistance services; and
 Provide a translation of adverse determination notices upon request.
Information on all counties meeting the 10% threshold will be made available at: http://www.dol.gov/ebsa/healthreform and http://cciio.cms.gov\.
191. If my plan is insured, will I have to do anything?
No. The claims and appeals regulations also apply to insurers and it will be up to the insurer to provide claims and appeals processes that comply with the requirements.

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192. How will the external review process apply to my plan?
Your plan will have to comply with either a State external review process or a new
Federal external review process.
If your plan is insured, a State external review process will apply, if the State has a process that complies with minimum standards established under PPACA. If no process exists or the State process does not meet the minimum standards, then the
Federal external review process will apply.
For self funded plans, the Federal process will apply in most cases. However, the
State process will apply to self funded plans in states where the state’s own external review process is binding on plans such as MEWAs or plans that are not subject to
ERISA such as church and governmental plans.
193. How will the Federal external review process work?
Self-funded ERISA plans may choose to participate in the Federal external review process administered by HHS agreement through the Office of Personnel
Management or engage in the private accredited IRO process for plans subject to
ERISA and/or the Code (see below). Alternatively, self-funded ERISA plans can voluntarily comply with a state external review process if it’s made available.
All insured plans and all self-insured nonfederal governmental health plans in States whose external review processes are found not to meet NAIC guidelines must also participate in a Federally-administered external review process. Plans and issuers may choose to participate in the Federal external review process administered by
HHS agreement through the Office of Personnel Management (the HHSadministered process) or engage in the private accredited IRO process for plans subject to ERISA and/or the Code.
194. Our self funded ERISA plan year begins on January 1, 2011, and we will be making plan changes that will result in a loss of grandfathered status. If there is no Federal external review process available by that date, how will we comply with the requirement?
Because the Federal process will not be ready by January 1, there are interim “safe harbor” guidelines you will have to follow. These include:
1. Allow at least 4 months for a claimant to file a request for external review.
2. Within 5 business days, complete a preliminary review of a request for external review to determine if the individual is or was covered under the plan at the time the service was incurred, whether the claimant has exhausted the plan’s internal appeal process, and whether the claimant has provided all the information and forms required to process the external review.
3. Within one day after completing the preliminary review, the plan must notify the claimant in writing of the outcome of the preliminary review. If you determine the claimant is not eligible for the external review process, the notice must include the reason for ineligibility. If the request for review is not complete, the notice must include the information needed to complete the request.

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4. Assign an independent review organization (IRO) to conduct the external review.
195. Do we have to hire an independent review organization (IRO) to handle our external review process until the federal process is available?
Yes, in most cases. Under the safe harbor, you would have to contract with at least two IROs by January 1, 2012 and three IROs by July 1, 2012 that are accredited by
URAC for assignments under the plan and then you must randomly rotate claims assignments among the IROs. In addition, you will have to have specific provisions in your contract with each IRO to ensure their compliance with all the steps of the external review process. A list of the required contract provisions can be found in
DOL
Technical
Release
2010-01 at the
DOL
website here: http://www.dol.gov/ebsa/pdf/ACATechnicalRelease2010-01.pdf.
196. Is there any alternative to hiring three IROs for our self-funded plan?
Maybe. Because the safe harbor is just a guideline, plans that do not strictly comply with all the standards set forth in the technical release will be subject to a facts and circumstances analysis. Thus, a plan that does not satisfy all of the standards of the technical release’s safe harbor may in some circumstances nonetheless be considered to be in compliance with the guidance.
For example, one of the standards set forth in the technical release requires selfinsured plans to contract with independent review organizations (IROs) and to rotate claims assignments among them (or to incorporate other independent, unbiased methods for selection of IROs, such as random selection). However, a self-insured group health plan’s failure to contract with at least two (or three) IROs does not mean that the plan has automatically violated the safe harbor. Instead, a plan may demonstrate other steps taken to ensure that its external review process is independent and without bias.
Another alternative is that you may choose to voluntarily comply with the provisions of that State external review process if the State chooses to expand access to their
State external review process to self funded plans.
197. Our plan is a self-funded nonfederal governmental plan. What’s the process for participating in the Federally-administered external review process administered by HHS?
You must submit the following information regarding your election of a Federal external review process to HHS via email at ExternalAppeals@cms.hhs.gov by the earlier of January 1, 2012 or the date by which such plans and issuers use the
Federal external review process:
1. Contact information for the plan administrator, including name, mailing address, telephone number, facsimile number, and electronic mail address.
2. A statement as to whether you will be complying with the HHS-administered process or the private accredited IRO process.
You must also notify HHS as soon as possible if any of the above information changes at any time after it is first submitted.

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198. Does the external review process apply to all adverse benefit determinations?
For plans subject to a state external review process (e.g. an insured plan), the state will determine the scope of claims subject to that state’s external review process.
For self-funded plans subject to the federal external review process, the external review process only applies to claims that involve:
1. Medical judgment (e.g. experimental, medical necessity) as determined by the external reviewer; or
2. Rescission of coverage.
The enforcing agencies have reserved the right to expand the scope of claims eligible for external review starting in 2014 but they indicated they will give sufficient advance notice to enable plans to comply if any new rules are issued at that time.
199. Are there any model notices we can use to develop our self-funded plan’s adverse benefit determination notices?
Yes. The following model notices are available at the DOL website:
 Model Notice of Adverse Benefit Determination
 Model Notice of Final Internal Adverse Benefit Determination
 Model Notice of Final External Review Decision
Updated model notices can be downloaded from the DOL website at: http://www.dol.gov/ebsa\. 200. Will the new requirements for internal and external claims and appeals processes apply to my life or disability coverage?
No. The new changes under PPACA only apply to health insurers and group health plans. Cost-Sharing Limits
201. Is it true that the maximum deductible we can have on our plan is
$2,000/$4,000?
When PPACA was enacted, it included a provision limiting the maximum deductible amounts to $2,000/$4,000 for nongrandfathered, insured plans in the small group market effective January 1, 2014. On April 1, 2014 however, the deductible limit provision was repealed back to the original enactment date of PPACA. As a result, the deductible limits are no longer applicable to the small group insurance market.
202. Are there any other cost-sharing limits we need to be aware of?
Yes. For plan years starting on or after January 1, 2014, the out-of-pocket maximums for nongrandfathered plans (including both insured and self funded plans of large and small employers) cannot exceed the self-only and family out-of-pocket maximums applicable to HSA-qualified high deductible health plans (HDHP). The annual out-of-pocket maximums for qualified HDHPs for 2014 are $6,350 for self-

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only coverage and $12,700 for family coverage. For plan years starting after 2014, these amounts will be indexed by HHS using a specific methodology as described in PPACA. For 2015, the amounts are $6,600 and $13,200. The out-of-pocket maximum is a total cost-sharing limit for essential health benefits. The out-of-pocket maximum includes deductibles, coinsurance, copayments, or similar charges and any other required expenditure that is a qualified medical expense with respect to essential health benefits covered under the plan. The out-of-pocket maximum does not include premiums, costs for non-essential health benefits, balance billing amounts for non-network providers, or expenditures for non-covered services.
203. Do the out-of-pocket cost sharing limits also have to apply to our out-ofnetwork benefits?
No. Cost-sharing amounts paid by the participant for services obtained from out-ofnetwork providers do not have to count towards the out-of-pocket maximum limits.
204. We have a separate pharmacy benefit manager for our self-funded medical plan with a separate prescription drug out-of pocket maximum. Will we have to coordinate the two benefits so that the overall out-of-pocket maximum limits are not exceeded?
If your plan is nongrandfathered, the two processes will need to be coordinated which may require regular communications between your service providers.
However, under a transition rule for plans that utilize more than one service provider to administer benefits that are subject to the annual limitation on out-of-pocket maximums, the out-of-pocket rule will be satisfied for the first plan year starting on or after January 1, 2014 if both of the following conditions are satisfied:
1. The plan complies with the out-of-pocket requirements with respect to its major medical coverage (excluding, for example, prescription drug coverage); and
2. To the extent the plan includes an out-of-pocket maximum on coverage that does not consist solely of major medical coverage (for example, if a separate out-of-pocket maximum applies to prescription drug coverage), the separate outof-pocket maximums cannot exceed the same out-of-pocket dollar amounts that apply to the major medical coverage.
205. Can we divide the annual limit on out-of-pocket costs across multiple categories of benefits (e.g. medical and Rx), rather than reconcile those claims under a single out-of-pocket maximum across multiple service providers?
Yes. You are permitted to use separate out-of-pocket limits for different categories of benefits, provided that the combined amount of any separate out-of-pocket limits does not exceed the annual limitation on out-of-pocket maximums for that year.
206. We have a separate pharmacy benefit manager for our self-funded medical plan but our prescription drug benefit does not have an out-of-pocket maximum.
Will we have to add one for 2014 that complies with the maximum out-of-pocket limit? No. If your prescription drug benefit is administered by a separate service provider, and it currently has no out-of-pocket limit, you will not be required to add one for

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2014, as long as your major medical coverage complies with the out-of-pocket requirement. For plan years starting in 2015 and after, the two processes will need to be coordinated so that the combined major medical and prescription drug out-ofpocket maximum does not exceed the statutory limits.

Summary of
Benefits and
Coverage (SBC)
207. Will we have to provide any other new notices or disclosures as a result of these bills?
Yes. Group health plans and insurers will have to provide a new four-page “Summary of Benefits and Coverage” (SBC) describing the benefits and limitations of the coverage available under your plan as well as simulated coverage example calculations for two common benefit scenarios - having a baby and managing diabetes. In addition, the summary must include:
 Contact information – such as a telephone number for customer service and an internet address – for obtaining a copy of the insurance policy or certificate;  An internet address (or similar contact information) for obtaining a list of network providers;
 An internet address linking individuals to information about their prescription drug coverage if a formulary is used;
 An internet address linking individuals to a uniform glossary defining commonly used medical insurance terms; and
 For plan years beginning on or after January 1, 2014, a statement about whether the plan provides minimum essential coverage and minimum value requirements.
You may provide the SBC as a stand-alone document or in combination with other summary materials (for example, an SPD), if the SBC information is intact and prominently displayed at the beginning of the materials (such as immediately after the Table of Contents in an SPD) and in accordance with the timing requirements for providing an SBC. The SBC must: 1) use terminology understandable by the average plan enrollee; 2) not exceed four double-sided pages in length; and 3) not include print smaller than 12-point font.
The SBC must be provided in addition to the current SPD that is already required under ERISA.
208. We have three plan options, will we have to provide a separate SBC for each option? Yes. A separate SBC must be created and distributed for each benefit option offered under your plan. An SBC for each option must be provided to any individual who is eligible for those options. If a newly eligible employee is eligible for all three options, then you must provide the employee an SBC for each option.

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209. Is there a deadline for providing SBCs to our newly eligible employees?
Yes. For participants and beneficiaries who enroll or re-enroll in group health coverage through an open enrollment period (including re-enrollees and late enrollees), an SBC must be provided by the first day of the first open enrollment period that begins on or after September 23, 2012.
For participants and beneficiaries who enroll in group health plan coverage other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees), you must provide the SBC starting on the first day of the first plan year that begins on or after September 23, 2012.
The SBC must be distributed to newly eligible employees as part of any written enrollment/application materials that are distributed by your plan. Or, if your plan does not distribute written application materials for enrollment, the SBC must be distributed no later than the first date the participant is eligible to enroll in coverage.
210. We have a self-funded PPO option but we also have an insured HMO option.
Will our insurer help us with creating the SBC?
Yes. Your health insurer must provide the SBC to you for your insured HMO option though you may be responsible for distributing the SBC to your employees and their beneficiaries. For your self-funded option, as the plan administrator you will be responsible for creating and distributing the SBC to your employees and beneficiaries. You are also allowed to hire a third party to create and/or distribute the SBC as long as it’s provided in a timely fashion and in accordance with the SBC form and content rules.
211. When will our insurer provide us with the SBCs so we can distribute them to our employees?
You should contact your insurer for information on when they will be available for distribution. If you request information from any insurer, the insurer is required to provide you with an SBC no later than 7 business days following your request. If you subsequently apply for coverage with that insurer, they must provide a second SBC as soon as practicable after receiving your application but in no event later than 7 business days following receipt of the application. If there is a change in the SBC before the coverage is offered or becomes effective, an updated SBC must be provided no later than the first day of coverage.
When you renew with your insurer (for example, in a succeeding policy year), the insurer must provide you with a new SBC when the policy is renewed.
212. After our employee’s initial enrollment, at what other times does the SBC have to be distributed to participants and beneficiaries?
You will have to provide the SBC in several circumstances including:
 Within 90 days of enrollment pursuant to a HIPAA special enrollment opportunity. Page 69 | © Gallagher Benefit Services, Inc. 2014

 At open enrollment, if you require participants and beneficiaries to actively elect to maintain coverage, or provide them with the opportunity to change coverage options, you must provide the SBC at the same time you distribute open enrollment materials. If there is no requirement to renew
(sometimes referred to as an "evergreen" election), and no opportunity to change coverage options, renewal is considered to be automatic and the
SBC must be provided no later than 30 days prior to the first day of the new plan or policy year.
 Upon request, as soon as practicable, but in no event should it be sent later than seven business days following the request.
213. What happens if negotiations with our insurer are not completed until we are already within 30 days of the renewal date?
If the policy, certificate, or contract of insurance has not been issued or renewed before such 30-day period, the SBC must be provided as soon as practicable but in no event later than 7 business days after issuance of the new policy, certificate, or contract of insurance, or the receipt of written confirmation of your intent to renew, whichever is earlier.
214. If we have more than one plan option, does that mean we have to provide every eligible employee with a new SBC for each option every year at open enrollment?
Not necessarily. You are required to provide a new SBC automatically at open enrollment, but only for the benefit option in which a participant or beneficiary is enrolled. You do not have to automatically provide SBCs for benefit options in which the participant or beneficiary is not enrolled. However, if a participant or beneficiary requests an SBC with respect to another benefit option (or more than one other benefit option) for which the participant or beneficiary is eligible, the SBC (or SBCs) must be provided as soon as practicable but in no event later than 7 business days following the employee’s request.
215. Are we required to provide a separate SBC for each coverage tier (e.g., selfonly coverage, employee-plus-one coverage, family coverage, etc.) within a benefit option?
No. You may combine information for different coverage tiers in one SBC provided the appearance is understandable, the coverage examples are completed assuming the cost sharing (e.g., deductible and out-of-pocket limits) for the self-only coverage tier, and this assumption is noted on the coverage examples.
216. Do we have to send each employee and dependent an SBC or can we just send it to the employee?
If an employee/participant and any beneficiaries are known to reside at the same address, you can send a single notice to that address. However, if you know that a spouse or dependent’s address is different than the employee/participant’s address, you must send a separate SBC to the spouse or dependent at their last known address. Page 70 | © Gallagher Benefit Services, Inc. 2014

217. Our coverage is structured in a way that is different than contemplated by the
SBC templates (e.g. different network or drug tiers, or in denoting the effects of a health flexible spending account, health reimbursement arrangement, or wellness program). How do we describe those benefits in the SBC?
To the extent your plan has terms that are required to be described in the SBC template that cannot reasonably be described in a manner consistent with the template and instructions, you must accurately describe the relevant plan terms while using your best efforts to do so in a manner that is still consistent with the instructions and template format as reasonably possible.
218. What if we have carved out a certain benefit, such as carving out the pharmacy benefit to a pharmacy benefit manager (“PBM”)?
The DOL says that you can contract with another party (e.g., the PBM) to assume responsibility to:
1. Complete the SBC,
2. Provide the required information to you so you can complete a portion of the
SBC, or
3. Deliver an SBC in accordance with the final regulations.
If you contract this responsibility to the vendor, the following conditions must also be satisfied: 4. You monitor the vendor’s performance under the contract;
5. If you learn of a violation of the final regulations and have the information to correct it, you correct the violation as soon as practicable; and
6. If you have knowledge of a violation of the final regulations and you don’t have the information to correct it, you must communicate with participants and beneficiaries regarding the lapse and begin taking significant steps as soon as practicable to avoid future violations.
219. Do we have to provide an SBC for our dental or vision coverage?
You will not have to provide an SBC for your dental or vision coverage if they are limited scope HIPAA excepted benefits. Excepted benefits are those dental and vision benefits that are either provided under a separate policy or contract of insurance or are not an integral part of the group health plan (i.e. employees can waive the dental or vision).
220. Are we required to provide SBCs to individuals who are COBRA qualified beneficiaries? Yes. While a qualifying event will not usually trigger an SBC, during an open enrollment period, any COBRA qualified beneficiary who is receiving COBRA coverage must be given the same rights to elect different coverage as are provided to similarly situated non-COBRA beneficiaries. In this situation, a COBRA qualified

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beneficiary who has elected coverage has the same rights to receive an SBC as a current employee. There are also limited situations in which a COBRA qualified beneficiary may need to be offered coverage that is different than the coverage he or she was receiving before the qualifying event and this may also trigger the right to an SBC.
221. Where possible, we provide our plan communications to employees using electronic media (e.g. internet posting, email). Can the SBC be distributed electronically? Yes. The SBC can be provided in paper format or it can be provided electronically.
To provide it electronically to participants already covered under the plan, the disclosure must comply with the DOL’s ERISA regulations for electronic disclosures.
With respect to participants and beneficiaries who are eligible but not enrolled for coverage, the SBC may be provided electronically if:
1. The format is readily accessible;
2. The SBC is provided in paper form free of charge upon request; and
3. In a case in which the electronic form is an Internet posting, you timely notify the individual in paper form (such as a postcard) or email that the SBC documents are available on the Internet, you provide the Internet address, and you notify the individual that the documents are available in paper form upon request.
222. Can the SBC be provided electronically through our online enrollment system? Yes. SBCs may be provided electronically to participants and beneficiaries in connection with their online enrollment or online renewal of coverage under the plan.
SBCs also may be provided electronically to participants and beneficiaries who request an SBC online.
In either case, the individual must have the option to receive a paper copy upon request. 223. Our plan is a governmental plan that is not subject to ERISA. Do we still have to comply with the ERISA electronic disclosure regulations?
Governmental plans can provide the SBC electronically if either the substance of the provisions of the DOL electronic disclosure rules are met, or if the provisions governing electronic disclosure in the individual health insurance market in your state are met.
224. We have several employees who are fluent only in a non-English language. Do we have to provide a translated version of the SBC to them?
Under some circumstances, you (or the insurer) will be required to provide a
“culturally and linguistically appropriate” notice to individuals who are only fluent in a non-English language. To satisfy this requirement, certain support services such as a telephone customer service hotline that can answer questions in the non-English

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language must be made available if notices are being sent to a participant or beneficiary in a county where the U.S. Census Bureau has determined that 10% or more of the population in that county is literate only in a non-English language.
In addition, SBCs sent to those counties must include a statement, prominently displayed, in the applicable non-English language clearly indicating how to access the language services provide by the plan or insurer. Sample language for this statement is available on the model notice of adverse benefit determination at: http://www.dol.gov/ebsa/IABDModelNotice2.doc. A translated SBC in the applicable non-English language must be provided upon request. To help plan sponsors meet the language requirements, HHS has provided written translations of the SBC template, sample language, and uniform glossary in
Spanish,
Tagalog,
Chinese,
and
Navajo
at: http://cciio.cms.gov/resources/other/index.html#sbcug. Current county-by-county data can be http://www.cciio.cms.gov/resources/factsheets/clas-data.html. accessed

at:

225. If we make mid-year changes to our plan that require us to change the information in the SBC, do we have to send out a new SBC?
No. However, if you make a mid-year material modification in any of the terms of the plan or coverage that is not reflected in the most recently provided SBC, you must provide notice of the modification to enrollees not later than 60 days prior to the date on which such modification will become effective. Of course, providing an updated
SBC reflecting the modification no later than 60 days prior to the effective date of the change will also satisfy your obligation.
You are required to comply with this 60-day advance notice requirement for any midyear changes you make after the SBC requirement is effective for your group health plan. Like the SBC, the 60-day advance notice can be provided in paper format or electronically if the disclosure complies with the DOL’s regulations for electronic disclosures. 226. Will we also have to send a Summary of Material Modification (SMM) to the plan participants if we have sent out the SBC advance notice?
No. If you provide the advance notice of a material modification in a timely manner, the notice will also satisfy your obligation to provide a Summary of Material
Modification (SMM) as required under ERISA.
227. Will there be model notice/templates we can use to fulfill the SBC obligation?
Yes. The final regulations include sample templates and documents that can be used for the first year of applicability. Updated materials for subsequent years will be issued at a later date.
You can view or download the following templates and documents on the DOL website: Page 73 | © Gallagher Benefit Services, Inc. 2014

 Summary of Benefits and Coverage Template (in both pdf and Word format)  Sample Completed Summary of Benefits and Coverage
 Instructions for Completing the SBC - Group Health Plan Coverage
 Why This Matters language for "Yes" Answers
 Why This Matters language for "No" Answers
 HHS Information for Simulating Coverage Examples
 Uniform Glossary of Coverage and Medical Terms
The address is: http://www.dol.gov/ebsa/healthreform (scroll down to “Templates,
Instructions, and Related Materials”).
228. Have there been any changes to the SBC template or instructions for our selffunded plan in the second year of applicability?
The only change to the SBC template and the completed sample SBC is the addition of information to indicate whether your plan provides minimum essential coverage and whether the plan’s share of the total allowed costs of benefits provided under the plan meets the minimum value requirement. You should continue to complete the SBC template consistent with the original instructions for completing the SBC, except for the following instruction modifications to the Important Questions chart that appears on page 1 of the SBC:
 In the Answers column, you should respond “No,” where the template asks, “Is there an overall annual limit on what the plan pays?”, as plans and issuers are generally prohibited from imposing annual limits on the dollar value of essential health benefits for plan years beginning on or after
January 1, 2014. In the alternative, the regulators have stated that they will not take any enforcement action against a plan for removing the entire row in the Important Questions chart on page 1 of the SBC (with the question: “Is there an overall annual limit on what the plan pays?”) during the second year of applicability.
 In the Why This Matters column, you must include the following language:
“The chart starting on page 2 describes any limits on what the plan will pay for specific covered services, such as office visits.”
Additionally, as applicable, you should continue to include information regarding annual or lifetime dollar limits on specific covered benefits as required in the chart starting on page 2 of the SBC (in the Limitations & Exceptions column), as described in the instructions for completing the SBC.
The updated SBC documents authorized for coverage starting on or after January 1,
2014 and before January 1, 2015 can be found at the links below:
 SBC Template: www.dol.gov/ebsa/correctedsbctemplate2.doc
 Sample Completed SBC: www.dol.gov/ebsa/CorrectedSampleCompletedSBC2.doc Page 74 | © Gallagher Benefit Services, Inc. 2014

229. Has any of the safe harbor or enforcement relief for SBCs changed for the second year of applicability?
The regulators have extended the safe harbors and other enforcement relief that are related to the requirement to provide an SBC and a uniform glossary for the first year of applicability.

90-Day Waiting
Period Limit
230. We currently have a 180-day waiting period before coverage is effective. When will that have to be changed?
For plan years starting on or after January 1, 2014, your waiting period cannot be longer than 90 days.
231. Can we change our waiting period to three months instead of 90 days?
No. Because three consecutive months in some cases may result in a waiting period that is more than 90 days, using three months instead of 90 days is not permitted.
All calendar days are counted toward the 90-day limit beginning on the employee’s start date, including weekends and holidays.
232. Our plan currently has a 90 day waiting period and then coverage is effective on the first day of the month following 90 days. Will that satisfy the requirement?
No. Except for a limited exception for certain "variable hour" employees (see below), you are not permitted to delay the effective date of coverage to the first day of the month following 90 days.
233. We currently have a 6-month waiting period and our plan year will not start until March 1, 2014. Can we apply the full 6-month waiting period to an employee hired in late 2013 or before March 1 of 2014?
No. For individuals who are in their waiting period before March 1st (the effective date of the 90-day limit for your plan), then beginning on March 1, 2014, your 6month waiting period can no longer apply because the waiting period would exceed
90 days.
Example: Prior to March 1, 2014, your plan provides that full-time employees are eligible for coverage after a 6-month waiting period and employee Adam begins work as a full-time employee on November 1, 2013.
Conclusion: The first day of Adam’s waiting period is November 1, 2013. Beginning
March 1, 2014, your plan may not apply a waiting period that exceeds 90 days.
Accordingly, Adam must be given the opportunity to elect coverage that begins no later than March 1, 2014 (which is only 121 days after Adam’s start date) because otherwise, on March 1, 2014, the plan would be applying a waiting period that exceeds 90 days. Note: your plan would not be required to make coverage effective for Adam before March 1, 2014.

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234. We currently require new employees to complete an orientation period before becoming permanent employees and eligible for coverage. Are we required to include the orientation period as part of the waiting period?
You are permitted to condition eligibility on among other things, satisfying a reasonable and bona fide employment-based orientation period of no more than one month during which you and the employee would evaluate whether the employment situation was satisfactory for each party, and standard orientation and training processes would begin. If you condition eligibility on an employee’s having completed a reasonable and bona fide employment-based orientation period of one month or less, the maximum 90-day waiting period could then begin on the first day after the orientation period.
For purposes of the length of the orientation period, one month is determined by adding one calendar month and subtracting one calendar day, measured from an employee’s start date in a position that is otherwise eligible for coverage. For example, if an employee’s start date in an otherwise eligible position is May 3, the last permitted day of the orientation period is June 2. Similarly, if an employee’s start date in an otherwise eligible position is October 1, the last permitted day of the orientation period is October 31. If there is not a corresponding date in the next calendar month upon adding a calendar month, the last permitted day of the orientation period is the last day of the next calendar month. For example, if the employee’s start date is January 30, the last permitted day of the orientation period is February 28 (or February 29 in a leap year). Similarly, if the employee’s start date is August 31, the last permitted day of the orientation period is September 30.
235. If we require new full-time employees to complete a one-month orientation period plus satisfy our 90-day waiting period, are we automatically exempt from having to pay an employer mandate penalty for that 120-day period?
No. The final regulations clarify that compliance with the 90-day waiting period/orientation period final regulations does not ensure compliance with the employer mandate rules. Those rules state that you will not be subject to a penalty for the first three full months of employment if you provide affordable, minimum value coverage to newly-hired full-time employees by the first day of the fourth full calendar month of employment. Therefore, if you have a one-month orientation period, you may comply with both the 90-day waiting period/orientation period rules and the employer mandate by offering coverage no later than the first day of the fourth full calendar month of employment. However, you may not be able to impose the full one-month orientation period and the full 90-day waiting period without potentially becoming subject to an assessable payment under the employer mandate. For example, if an employee is hired as a full-time employee on January 6, and you offer coverage May 1st (the first day of the fourth month after the start date), you comply with both provisions and would not be subject to an assessable payment under the employer mandate. However, if you start coverage May 6th, which is 121 days after the date of hire, you may be subject to an assessable payment under the employer mandate. Page 76 | © Gallagher Benefit Services, Inc. 2014

236. What happens if our new employee is in their waiting period but has not yet reached 90 days when the new plan year begins on March 1, 2014?
You could continue the waiting period until that employee’s waiting period has reached 90 days.
Example: Prior to March 1, 2014, your plan provides that full-time employees are eligible for coverage after a 6-month waiting period and employee Shawn starts work as a full-time employee on February 15, 2014.
Conclusion: The first day of Shawn’s waiting period is February 15, 2014. Beginning
March 1, 2014, your plan may not apply a waiting period that exceeds 90 days.
Accordingly, Shawn must be given the opportunity to elect coverage that begins no later than May 16, 2014 (which is only 91 days after Shawn’s start date) because otherwise, the plan would be applying a waiting period that exceeds 90 days after
March 1, 2014.
237. Part-time employees are not eligible for our plan but there are situations where a part-time employee is promoted to full-time status. Assuming an employee worked as a part-time employee for more than 90 days, would we have to allow him to enroll immediately?
No. A waiting period is defined as the period that must pass before coverage becomes effective for an employee who is otherwise eligible to enroll. Because the employee was not eligible to enroll as a part-time employee, a 90-day waiting period can be applied commencing on the date the individual becomes a full-time employee.
238. If we implement a 90-day waiting period but an employee fails to complete the enrollment forms in a timely fashion and coverage is delayed a month, will that violate the law?
No. As long as your employee had the opportunity to elect coverage that would begin on a date that does not exceed the 90-day limit, you will not be in violation of the law merely because the employee took additional time to elect coverage.
239. Only full-time employees working 30 or more hours per week are eligible for our plan. Sometimes we have new hires with variable work schedules where it cannot be immediately determined if they will regularly work 30 hours per week.
How can we handle those situations without violating the waiting period rules?
You may take a reasonable period of time to determine whether the employee works enough hours to meets the plan’s eligibility criteria, which may include a look-back measurement period that is no more than 12 months long. If in reviewing the measurement period, you determine the employee has worked the requisite hours to be eligible for coverage, then up to a 90-day waiting period can be applied but in no case can the coverage start later than 13 months plus a fraction of a month from the employee’s start date.
Example: Under your group health plan, only employees who work full time (defined under the plan as regularly working 30 hours per week) are eligible for coverage.
Jerry begins working on November 26, 2014. Jerry’s hours are reasonably expected to vary, with an opportunity to work between 20 and 45 hours per week, depending on shift availability. Therefore, you cannot determine at Jerry’s start date that he is

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reasonably expected to work full time. Under the terms of the plan, variable hour employees such as Jerry are eligible to enroll in the plan if you determine they are full time after a look-back measurement period of 6 months. You then make coverage effective no later than the first day of the first calendar month after a 90-day waiting period, if the applicable enrollment forms are received. Jerry’s 6-month measurement period ends May 25, 2015. Jerry is determined to be full time and you notify him of his plan eligibility. If Jerry then elects coverage by completing his enrollment form on August 28, 2015, his first day of coverage will be September 1,
2015.
Conclusion: In this Example, because Jerry’s coverage becomes effective no later than 13 months from his start date, plus the time remaining until the first day of the next calendar month, the plan is in compliance with the requirement. The measurement period is 12 months or less (and is, therefore, permissible) because you may use a reasonable period of time to determine whether Jerry is full time and the waiting period you apply after the end of the measurement period is 90 days or less (and is, therefore, permissible).
Jerry:

Jerry completes enrollment forms Aug 28, 2015.
Coverage effective Sept 1, 2015.

2014

2015
Look-Back
Measurement Period
(≤ 12 months)
Nov 26, 2014-May 25, 2015
Jerry averages 30 hpw.
Coverage is offered.

Waiting Period
(90 days)
May 26, 2015-Aug 31, 2015

240. In addition to covering full-time employees working 30 or more hours per week, part-time employees also become eligible for coverage when they have completed a cumulative 1,200 hours of service. Will this have to be changed to comply with the 90-day rule?
No. A cumulative hours of service condition with respect to part-time employees is permitted as long as the amount of cumulative hours worked required for eligibility is less than or equal to 1,200 hours. Accordingly, coverage for part-timers under your plan must begin no later than the 91st day after a part-time employee has worked
1,200 hours. In addition, the cumulative hour requirement can only be applied one time. Re-application of the requirement to the same individual each year is prohibited. Page 78 | © Gallagher Benefit Services, Inc. 2014

241. We have employees covered by a multiemployer plan operating under a collective bargaining agreement that allows employees to earn eligibility for coverage by working hours for multiple contributing employers over a quarter.
Is that allowed?
If the employee earns eligibility by aggregating hours worked in a quarter across multiple contributing employers, and then retains coverage through the next full quarter, regardless of whether the employee has terminated employment, it would be considered to be a design that accommodates a unique operating structure and not designed to avoid compliance with the 90-day waiting period limit.

Clinical Trials
242. Our plan is not grandfathered so what will we have to do to comply with the clinical trial mandate starting in 2014?
Under the clinical trial mandate, if your plan is providing coverage to “qualified individuals”, then starting with any plan year that begins on or after
January 1, 2014, the plan:
1. May not deny the qualified individual participation in an approved clinical trial with respect to the treatment of cancer or another life-threatening disease or condition; 2. May not deny (or limit or impose additional conditions on) the coverage of routine patient costs for items and services furnished in connection with participation in the trial; and
3. May not discriminate against the individual on the basis of the individual's participation in the trial.
243. How is a “qualified individual” defined?
A “qualified individual” is defined as a participant or beneficiary who is eligible to participate in an approved clinical trial according to the trial protocol with respect to the treatment of cancer or another life-threatening disease or condition, and either:
1. The referring health care professional is a provider participating in the trial and has concluded that the individual's participation in such trial would be appropriate; or
2. The participant or beneficiary provides medical and scientific information establishing that the individual's participation in such trial would be appropriate.
244. Will we have to provide coverage for the investigational item, device or service? No. Your plan is only required to cover the patient’s routine costs. Routine patient costs would include any items and services consistent with the coverage provided under your plan that is typically covered for individuals who are not enrolled in a clinical trial. Your plan would NOT have to cover:
1. The investigational item, device, or service, itself;

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2. Any items or services that are not used in the direct clinical management of the patient but rather, are provided in connection with data collection and analysis needs; or
3. A service that is clearly inconsistent with widely accepted and established standards of care for a particular diagnosis.
245. How will we know if a trial is an approved trial?
An approved clinical trial is defined as a phase I, phase II, phase III, or phase IV clinical trial that is conducted in relation to the prevention, detection, or treatment of cancer or other life-threatening disease or condition and is any of the following:
1. The study or investigation is federally approved or funded by certain governmental entities or departments;
2. The study or investigation is conducted under an investigational new drug application reviewed by the Food and Drug Administration; or
3. The study or investigation is a drug trial that is exempt from having such an investigational new drug application.
The health care provider participating in the trial should be able to verify that it’s an approved trial.
246. Can we require employees or dependents that are qualified individuals to use our HMO’s in-network providers?
You can require the employee to use an in-network provider only if the in-network provider is participating in the trial and will accept the individual as a participant in the trial.
If the employee or dependent is participating in an approved clinical trial that is conducted outside the State in which the qualified individual resides (and therefore is outside the network), then the plan would have to cover the routine medical costs associated with the trial if the plan otherwise covers routine out-of-network services.

Nondiscrimination
Rules for Insured
Plans
247. We only offer health insurance to our executives. Will we be able to continue this plan?
Yes, if the plan is a fully insured “grandfathered” plan. For insured plans that have lost grandfather status, a new nondiscrimination rule applies.

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248. Our insured plan is not grandfathered. Will we have to comply with the new nondiscrimination rule?
Yes. PPACA’s nondiscrimination rule for insured plans that have lost grandfather status prohibits discrimination in favor of highly compensated individuals using rules similar to those in Code Section 105(h) that apply to self-funded group health plans.
249. When will we have to comply with this rule?
The rule was supposed to apply for plan years beginning on or after
September 23, 2010. However, on December 22, 2010, the IRS and Departments of
Labor and Health and Human Services announced that compliance with the new nondiscrimination provision will not be required (and thus, any sanctions for failure to comply will not apply) until after regulations or other administrative guidance has been issued. In order to provide insured group health plan sponsors time to implement any changes required as a result of any regulations or other guidance, the Departments anticipate that the future guidance will not apply until plan years beginning a specified period after issuance of the regulations.
250. What are the nondiscrimination rules under Code §105(h) that will apply to our insured plans if they lose grandfathered status?
Under the current Code §105(h) rules, self funded plans must not discriminate in favor of highly compensated employees (HCEs). Until we have regulations on this new provision, it is not clear how the nondiscrimination rules will apply to insured plans. At this time we only know that the rules will be “similar” to the current rules under Code §105(h). Under 105(h), a plan is considered nondiscriminatory only if it satisfies both the eligibility and benefit tests summarized below:
Eligibility Test
Satisfy at least one of the following nondiscriminatory participation requirements:
 At least 70% of all nonexcludable (see below) employees must actually participate in the plan; or
 If at least 70% of all nonexcludable employees are eligible to participate, then 80% or more of the eligible employees actually participate in the plan; or  The plan must benefit a classification of employees that the IRS has determined does not discriminate in favor of HCEs using standards that are applied under Code §410(b)
There are certain employees who can be excluded from consideration when determining if the plan passes the eligibility tests described above, if they are not eligible for coverage and:
 Have not completed at least 3 years of service at the beginning of the plan year.  Have not attained age 25 at the beginning of the plan year.
 Are part-time or seasonal employees.
 Are covered under a collective bargaining agreement if the benefits are subject to good faith bargaining.

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 Are nonresident aliens who receive no income from sources within the US.
Benefits Test
Under the subjective nondiscriminatory benefits test, the types and amounts of benefits provided to highly compensated individuals must be provided to all participants. The rule also implies that contributions must be the same for each participating employee. In addition:
 Maximum benefit levels cannot vary based on age, years of service, or compensation.  Waiting periods cannot be shorter for HCEs.
 Benefits cannot discriminate in actual operation (e.g. making exceptions for just HCEs or their family members).
251. How do we know which of our employees are considered highly compensated employees? A “highly compensated employee” is defined as any employee who is any of the following:  One of the five highest paid officers; or
 A shareholder who owns more than 10% in value of the employer's stock; or  Among the highest paid 25% of all employees (other than excludable employees (described above) who are not participants, and not including retired participants).
252. What are the penalties if we violate the nondiscrimination rule for insured, nongrandfathered plans?
An insured group health plan failing to comply with the nondiscrimination requirements is subject to an excise tax of $100 per day per individual discriminated against for each day the plan does not comply with the requirement.

Account-Based
Plans
Updated: 11/19/14

253. Will there be any changes to my healthcare flexible spending accounts (health
FSAs)?
Yes. Healthcare FSAs will no longer be permitted to reimburse employees for expenses incurred on or after January 1, 2011, for over-the-counter medications
(except insulin) unless the individual obtains a prescription for the drug or medicine.
Effective immediately, reimbursements will be permitted for the health care expenses of the employee’s children until the end of the year in which the child turns age 26 on a tax-favored basis regardless of whether the child qualifies as the employee's tax dependent. The child no longer has to meet certain requirements including student status, financial support, or other dependency requirements.

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Starting in 2013, the maximum contribution to a healthcare FSA will be capped at
$2,500 per year. That amount will be indexed annually. For 2014 it remained at
$2,500 but was increased to $2,550 for plan years starting in 2015.
254. Our FSA plan year does not start on January 1, 2011. Will my employees be able to change their election amounts mid-plan year in anticipation of the limitations for OTC reimbursements coming on January 1, 2011?
No. Mid-plan year election changes will not be allowed due to the change in the reimbursements for over-the-counter medications. Employees will still be entitled to reimbursement with a prescription. Otherwise, employees can use those election amounts for reimbursement on other qualified expenses.
255. What would qualify as a prescription for over-the-counter medications?
A written or electronic order that meets the legal requirements of the state in which the medication is purchased is sufficient if its written by any individual who is legally authorized in that state to issue a prescription.
256. Can an FSA (or HRA or HSA) still be used to reimburse employees for overthe-counter items that are not drugs or medicines?
Yes. Items that are not drugs or medicines such as crutches, bandages, blood sugar tests, or contact solutions are still reimbursable if they qualify as medical care.
257. Our FSA plan uses an electronic debit card. Can that still be used to purchase over the counter drugs or medications that have a prescription?
Yes, but only if certain criteria are met. The IRS has indicated that it will not challenge the use of debit cards for purchasing over-the-counter drugs or medications purchased through January 15, 2011. After January 15, 2011, debit cards may continue to be used to purchase over-the-counter medicines if prior to the purchase: 1. The prescription for the over-the-counter medicine or drug is presented (in any format) to the pharmacist;
2. The over-the-counter medicine or drug is dispensed by the pharmacist in accordance with applicable law and regulations pertaining to the practice of pharmacy; 3. An Rx number is assigned;
4. The pharmacy or other vendor retains a record of the Rx number, the name of the purchaser (or the name of the person for whom the prescription applies), and the date and amount of the purchase in a manner that meets IRS recordkeeping requirements; 5. All of these records are available to the employer or its agent upon request; and

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6. The debit card system has been programmed so that it will not accept a charge for an over-the-counter medicine or drug unless an Rx number has been assigned. If these requirements are met, the debit card transaction will be considered fully substantiated at the time and point-of-sale.
You should contact your TPA or debit card vendor for specific guidance on how these purchases will be handled.
Updated: 11/19/14

258. Our health care FSA plan year is not on a calendar year basis. It starts on July
1. How do we implement the new FSA limit for non-calendar year plans?
The limit on health FSA salary reduction contributions is effective for plan years beginning after December 31, 2012. Thus, the rule for your plan is effective for the plan year beginning on July 1, 2013.

Updated: 11/19/14

259. Because our FSA plan is not on a calendar year basis, will we have to track employee contributions over two plan years to determine if the employee exceeds the maximum in a calendar year?
No. The limit will apply on a plan year basis, not a calendar year basis. Therefore, you just have to ensure that employee’s health FSA elections do not exceed the limit for the plan year.

Updated: 11/19/14

260. We have several married couples where both spouses work for us. Can they each elect health FSA coverage up to the maximum?
Yes. The limit on salary reduction contributions to a health FSA applies on an employee-by-employee basis. If each spouse is eligible to elect salary reduction contributions under your plan, then each spouse may elect to make salary reduction contributions up to the maximum limit to his or her health FSA.

Updated: 11/19/14

261. We use a flex credit system where we contribute flex credits to each employee’s health FSA. Will those credits count towards the $2,500 maximum?
It depends. The limit applies only to an employee’s salary reduction contributions and not to employer non-elective contributions. So if you contribute non-cashable flex credits to your employee’s health FSA, each employee may still elect to make salary reduction contributions of up to $2,500 (indexed annually) for that plan year.
However, if the employee may elect to receive those flex credits as cash or as a taxable benefit, the flex credits are counted toward the maximum limit.

Updated: 11/19/14

262. If we adopted the $500 health FSA carryover provision, will that change the amount our employees can elect to contribute to their FSAs?
No. Employees with carryover amounts from the previous plan year would still be able to elect up to $2,500 (indexed annually) in health FSA salary reductions for the current plan year.

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Updated: 11/19/14

263. We are considering changing our FSA plan year from a January 1 basis to a fiscal year basis beginning July 1 and may have to run a short plan year. Do we have to adjust the maximum amount for the short plan year?
Yes. If you run a short plan year for a valid business purpose that begins after 2012, the $2,500 limit (indexed annually) must be prorated based on the number of months in that short plan year. However, if a principal purpose of changing from a calendar year to a fiscal year is to delay the application of the $2,500 limit, the plan year change does not satisfy the valid business purpose requirement and the plan year remains the plan year that was in effect prior to the attempted change.

Updated: 11/19/14

264. Our health FSA has a 2.5 month grace period. If an employee carries unused contributions into the FSA grace period, do those amounts count towards the new plan year’s election limit?
No. Unused salary reduction contributions that are carried over into the grace period do not count against the $2,500 limit (indexed annually) applicable for the subsequent plan year.
265. If we have to reduce our health FSA maximum, do we need to amend our plan document to reflect the change?
Yes. Your cafeteria plan must be amended to reflect the new maximum limit. The amendment to conform your cafeteria plan to the new limit must be adopted on or before December 31, 2014, and may be made effective retroactively if necessary, provided that your cafeteria plan operates in accordance with the IRS rules for plan years beginning after December 31, 2012.
266. Can we continue to offer our FSA plan to our part-time employees who are not eligible for our health plan?
No. Because your FSA is not a HIPAA “excepted benefit” for the part-time employees, it would be subject to PPACA’s health insurance reforms and would fail to meet the preventive services requirement. In order to be an “excepted benefit”, your health FSA must meet two conditions:
1. Other group health plan coverage (e.g. major medical coverage), not limited to dental or vision only coverage, must be made available for the year to the class of health FSA participants by reason of their employment; and
2. The arrangement is structured so that the maximum benefit payable to any participant in the class for a year cannot exceed two times the participant's salary reduction election under the arrangement for the year (or, if greater than two times, cannot exceed $500 plus the amount of the participant's salary reduction election). Because your part-time employees are not eligible for your health plan, it would fail to meet #1 above.

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267. Can we offer our FSA plan to union employees that are not offered our major medical plan but are offered coverage under their union plan?
The answer is not clear. Because the union employees are not eligible for your major medical plan, it appears your health FSA would fail to be a HIPAA excepted benefit.
But if you make required contributions to the union plan on behalf of your union employees as a result of collective bargaining, it’s possible that arrangement could qualify as an offer of coverage by you by reason of the union member’s employment.
While not answering the question directly, in an informal discussion with IRS representatives, they did point out that under the employer mandate regulations, coverage under a union plan can satisfy the employer’s requirement to offer coverage if the employer is making contributions to a union plan under a collective bargaining agreement.
Until further guidance is issued, you may want to discuss your situation with your legal counsel.
268. Will there be any changes to my Health Reimbursement Arrangement
(“HRA”)?
Employer and employee contributions to Health Reimbursement Arrangements
(HRAs) will be included in the calculation of health plan costs for purposes of the
"Cadillac Plan Tax" when it goes into effect for fiscal years beginning January 1,
2018.
HRAs will no longer be permitted to reimburse employees for expenses incurred on or after January 1, 2011 for over-the-counter medications (except insulin) unless the individual obtains a prescription for the drug or medicine.
Effective immediately, reimbursements from an HRA will be permitted for the health care expenses of the employee’s children until the end of the year in which the child turns age 26 on a tax-favored basis regardless of whether the child qualifies as the employee's tax dependent. The child no longer has to meet certain requirements including student status, financial support, or other dependency requirements.
269. If we offer our current employees an HRA that allows them to purchase coverage on the individual market, will the HRA be considered integrated with that individual market coverage and therefore satisfy the annual limit or preventive care requirements?
No. An employer-sponsored HRA plan cannot be integrated with individual market coverage or with an employer plan that provides coverage through individual policies and therefore the HRA would violate the prohibition on annual dollar limits and the requirement to provide certain preventive services at 100%.
270. Will we be allowed to replace our current retiree coverage with an HRA that allows our retirees to purchase coverage on the individual market or at a
Marketplace?
Yes. If you offer the HRA on a stand-alone, retiree-only basis, then it is not subject to PPACA’s health insurance reforms and can be used to help retirees purchase individual or Marketplace coverage.

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However, because the stand-alone HRA is considered an employer-sponsored plan, and would constitute minimum essential coverage under the individual mandate, any early retirees who are not eligible for Medicare that elect the HRA would not be eligible for premium tax credits at a Marketplace for any month in which funds are retained in the early retiree’s HRA (including amounts retained in the HRA during periods of time after you as the employer has ceased making contributions).
271. We have a location in San Francisco where we offer a stand-alone HRA to our employees to satisfy the San Francisco Health Care Security Ordinance. Will we be able to continue that arrangement?
As of January 1, 2014, the answer appears to be no. Your HRA would violate the prohibition on annual dollar limits after that date.
272. Some of our employees have HRAs that have accrued significant balances.
Will those amounts have to be forfeited?
Not necessarily. Unused amounts credited before January 1, 2014 consisting of amounts credited before January 1, 2013, and amounts that are credited in 2013 under the terms of an HRA as in effect on January 1, 2013, may be used after
December 31, 2013 to reimburse medical expenses in accordance with the plan terms without causing the HRA to fail to comply with the annual dollar limit prohibition. If the HRA terms in effect on January 1, 2013 did not prescribe a set amount or amounts to be credited during 2013 or the timing for crediting such amounts, then the amounts credited may not exceed those credited for 2012 and may not be credited at a faster rate than the rate that applied during 2012.
273. Will there be any changes to our Health Savings Accounts (“HSA”)?
Employer and employee contributions to Health Savings Accounts (HSAs) will be included in the calculation of health plan costs for purposes of the "Cadillac Plan
Tax" when it goes into effect for fiscal years beginning January 1, 2018.
Also, the tax on distributions from a health savings account that are not used for qualified medical expenses increased to 20% (from 10%) of the disbursed amount effective for taxable years beginning January 1, 2011.
HSAs are no longer permitted to reimburse employees for expenses incurred on or after January 1, 2011 for over-the-counter medications (except insulin) unless the individual obtains a prescription for the drug or medicine.
However, the rules for distributions from an HSA remain subject to the current rules.
To treat a distribution as nontaxable, the child must be a tax dependent of the employee. Page 87 | © Gallagher Benefit Services, Inc. 2014

Medical Loss
Ratio/Rebate
274. Insurers are required to follow new minimum medical loss ratio (MLR) guidelines. Will this affect our plan?
Insurers are required to track and report to HHS their MLR, which is the proportion of premium revenues spent on medical claims and quality improvement. Insurers in the large group market must have a medical loss ratio of at least 85%. The medical loss ratio for insurers in the small group market must be at least 80%. If the insurer fails to meet these standards, the insurance companies will be required to provide a rebate to their policyholders.
Insurers must provide the rebates to the group policyholder (usually the employer) through lower premiums or in other ways that benefit the participants.
275. If our insurer has to pay a rebate, when will we receive it?
The MLR percentage is calculated on a calendar year basis. If a rebate is payable, it must be paid by August of the following year. The first insurer rebates must be paid by August 1, 2012 for the 2011 calendar year.
For rebates payable for the 2014 calendar year and later, the rebate must be paid no later than September 30 of the following year.
276. If we receive a rebate, are there guidelines or limits on how we can spend the money? If you receive a rebate, how you can use it will vary by your plan type:
 ERISA Plans - To the extent that distributions, such as premium rebates, are considered to be plan assets, they become subject to the requirements of Title I of ERISA. Therefore, plan sponsors will have to determine if the rebate is a plan asset and to what extent the rebate is attributable to participant contributions. The DOL has issued Technical Release 2011-04 that gives specific instructions to plan sponsors of ERISA plans regarding their responsibilities under ERISA concerning rebates.
 Nonfederal Governmental Plans - The employer must use the amount of the rebate that is proportionate to the total amount of premium paid by all participants under the policy (1) to reduce subscribers’ portion of the annual premium for the subsequent policy year for all subscribers covered under any group health policy offered by the plan; (2) to reduce subscribers’ portion of the annual premium for the subsequent policy year for only those subscribers covered by the group health policy on which the rebate was based; or (3) to provide a cash refund only to subscribers that were covered by the group health policy on which the rebate is based. The reduction in premium or cash rebate may, at the option of the policyholder, be: 1) divided evenly among the participants; 2) divided based on each participant’s actual contribution to premiums; or 3) apportioned in a manner that reasonably reflects each participant’s contributions.
 Church Plans - Rebates may only be paid to the employer if the insurer receives written assurance from the employer that the amount of the

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rebate that is proportionate to the total amount of premium paid by all participants under the policy will be used for the benefit of current participants using one of the options described above for nonfederal governmental plans. Otherwise, the issuer must distribute the rebate directly to the participants of the group health plan.
There are special rules for rebates paid in the case of a terminated plan.
277. The rebate we received for our ERISA plan is less than the amount we paid out of our general assets towards the cost of coverage. Are we allowed to keep the whole amount?
You could keep the whole amount of the rebate only if it is less than the total amount you paid for the year AND your plan document was drafted to provide that insurer refunds or rebates will be used first to offset your contributions.
278. What if our ERISA plan document is silent as to premium rebates or refunds?
If there are no provisions in your plan document or other written instruments governing your plan, then you must determine what portion of the refund are plan assets under ERISA’s general standards of fiduciary conduct. Once the amount of the rebate that is plan assets is determined, you have a fair amount of leverage in determining both how that money will be used and exactly which individuals will receive the rebate, provided that the money is used for the exclusive benefit of participants and beneficiaries. This includes returning the rebate to participants in cash, using it to offset future employee contributions, or to make enhancements to future benefits.
279. We use a VEBA trust to fund our plan where both the employer and employee contributions are deposited into the trust. Can we get our portion of the rebate back? No. For insured plans that are funded solely by trust assets, the whole amount of the rebate is plan assets and must be returned to the trust or to plan participants.
280. Are former employees who were covered under our ERISA plan last year entitled to a share of an MLR rebate?
Maybe. If you decide that part of the rebate is plan assets that must be returned to participants, then that should also include former participants. However, under DOL guidelines, you don’t have to share the rebate with former participants if you find that the cost of tracking down and distributing the rebate to them approximately equals or exceeds the proceeds that would be paid to them.
If you choose to issue a rebate directly to participants, you should weigh the costs of whether to include former participants in the distribution to determine if those costs approximate or exceed the cost of the proceeds.
281. Are our COBRA participants entitled to a share of an MLR rebate?
The statutory and regulatory language on MLR rebates refers to “enrollees,”
“participants” and “subscribers,” which generally includes COBRA qualified

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beneficiaries. Therefore, it is likely that, COBRA qualified beneficiaries should receive the same share of any MLR distribution that is provided to similarly-situated active employees. Also, because a plan should include only the net cost of the active rate (insurance rate less experience rebates) in determining the applicable COBRA premium, an MLR rebate should reduce the COBRA applicable premium for your insured group health plan.
282. If we receive a rebate for our PPO option but not our HMO option, would we have to apply the portion of the rebate that is plan assets to the PPO plan only
(since that’s where the rebate came from) or could the enhancement be applied to the HMO plan?
The rebate should only be used for the plan option that created the rebate.
283. As a governmental plan, are we required to track down former participants and return their portion of the rebate to them?
No. For governmental and church plans, the rebate amount attributable to employee contributions must be returned to the participants that are in the plan at the time the rebate is received.
284. Is there a timeframe under which our ERISA plan must use MLR refunds?
Yes. ERISA fiduciary duty rules, including the trust requirements for plan assets, govern the treatment of MLR rebates from insurers. However, the DOL will not enforce ERISA’s trust requirement under certain circumstances, including if the portion of the rebate that is plan assets is used within three months of its receipt.
In addition, directing the insurer to hold and apply the rebate to future benefit enhancements you have adopted would also avoid the need for a trust.
Conversely, if you receive the rebate and the portion that is plan assets is not used up within three months, the money will be subject to ERISA trust requirements.
285. Must our ERISA plan issue refunds or provide premium reductions to participants in proportion to whatever each individual employee actually paid
(for example, based on employee-only versus family coverage or salarydependent employee contributions)?
Not necessarily. Absent plan document terms that specifically describe the disposition of the rebate, the DOL has indicated that acceptable methods may include:  Dividing the rebate evenly among participants,
 Dividing the rebate based on each participant’s actual contribution to premium, or
 Apportioning the rebate in a manner that reasonably reflects each participant’s contribution to premium (e.g. single vs. family coverage).
It is up to you to decide which of these options is the most “reasonable, fair and objective” in consideration of the plan’s contribution structure and other circumstances. Page 90 | © Gallagher Benefit Services, Inc. 2014

286. If we have to return a portion of the refund to participants will it be taxable to them? For cash refunds, if your employees pay their contribution on a pretax basis, then the rebate payment will be taxable income for the employee. If the employee contributions were initially paid with after-tax dollars, the refund will not be subject to federal taxes unless the participant deducted the premium payments on their individual Form 1040.
If you use the refund for a contribution holiday or contribution reduction for your plan participants, to the extent that a premium refund will result in less contributions for an employee to pay for benefits and more money paid as taxable take-home pay, that increased income is taxable. For example, if an employee makes $500 per week and the pre-tax contribution is $50, the employee is only taxed on $450. However, if the employer receives a rebate and determines that it must return $50 to employee as a premium holiday for that week, then the employee's taxable income for that week is $500, not $450. In other words, the $50 the employer paid gets taxed only because it was not salary-reduced on a pretax basis from the employee's pay.
The IRS has issued a comprehensive set of FAQs addressing the federal tax consequences to employees when a MLR rebate stems from a group health insurance policy. The FAQs can be accessed at the IRS website here: http://www.irs.gov/newsroom/article/0,,id=256167,00.html. 287. If the plan asset portion of the MLR rebate can be classified as de minimis, does that mean the employer can use the money for purposes other than specified under the plan document, MLR rules or ERISA’s fiduciary rules?
No. If you determine that the administrative cost of reducing the employee contributions or paying cash to participants would be equal to or greater than the cost of the rebate amount itself, then you would still have to use the money for another allowable purpose such as enhancing the benefits for the plan participants.
288. What types of things would be considered benefit enhancements?
Examples of benefit enhancements include lowering the plan deductible, increasing the plan cost-sharing payment, reducing office visit copays, increasing a benefit limit, etc. Generally this would entail using the portion of the rebate that is plan assets to pay the increased premium associated with the benefit enhancement. For example, if the amount to be returned to participants is $10,000, and the insurer indicates that for $10,000 they would reduce the deductible for all participants in the plan option that generated the rebate from $500 to $250, then that may be an appropriate use of the rebate.
289. Instead of returning money back to participants, can we instead use the rebate to fund a wellness program for our employees?
Providing wellness incentives is not explicitly allowed or prohibited as a "benefit enhancement" under the MLR rules. If you determine that distributing payments to participants is not cost-effective (e.g. the payments are of de minimis value or give rise to tax consequences to the participants) then there is a possibility that paying

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for biometric screenings or other wellness screenings for plan participants may be prudent and appropriate.

Wellness Programs
290. We have a wellness program that provides a reward of 20% of the cost of coverage for employees that meet certain wellness standards. Will we be able to keep that program?
Yes, you are still allowed to provide wellness incentives (or surcharge) such as premium discounts and additional benefits to individuals who participate in a “healthcontingent” wellness program that requires your employees to satisfy a standard related to a health factor. In fact, effective with plan years starting on or after January
1, 2014, the Act increases the maximum reward to 30% (up from 20%) of the cost of coverage for employees who participate in a health-contingent wellness program.
In addition, effective with plan years starting on or after January 1, 2014, the maximum reward or surcharge for a health-contingent wellness program designed to prevent or reduce tobacco use is increased to 50% of the cost of coverage.
291. Can we combine a health-contingent wellness program incentive that is 30% of the cost of coverage for meeting a non-tobacco based standard with another
50% incentive for meeting a tobacco-based standard?
No. The total combined maximum incentive cannot exceed 30% of the cost of coverage if the plan does not have a tobacco-based standard and 50% of the cost of coverage if the wellness program includes a tobacco-based incentive.
292. Is it true we can get a grant to help us pay for a wellness program?
It depends. The Act includes grants for up to five years for small employers (less than 100 employees who work 25 or more hours per week) that establish new wellness programs. Small employers with existing wellness programs as of March
23, 2010 are not eligible for grants under this provision.
Guidance on the availability of these grants and how to obtain them has not yet been published. Other
293. We have several employees who waive our group health plan coverage. Will waivers be permitted under the new law?
Yes. However, employers with more than 200 full-time employees that offer health coverage to employees must automatically enroll new full-time employees in one of the plans offered and to continue the enrollment of current employees in the health benefits plan offered through the employer.
Any automatic enrollment program must include adequate notice to employees of the enrollment and the opportunity for the employee to waive the coverage in which they were automatically enrolled.

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The Act indicates this rule is effective as of the date of enactment (3/23/10) but will not apply until regulations are issued by the Department of Labor. The DOL has indicated that guidance will not be ready to take effect until after 2014.
294. If we want to offer coverage to same-sex spouses, does our insurer have to offer that coverage?
Yes. PPACA requires health insurers offering non-grandfathered coverage in the group market (including qualified health plans offered through the Marketplace) to guarantee the availability of coverage, and cannot employ marketing practices or benefit designs that discriminate on the basis of certain specified factors, including an individual’s sexual orientation. So if an insurer offers a plan that provides coverage to opposite-sex spouses, it must, at the employer’s request, also offer that same coverage to same-sex spouses if the marriage was entered into in a jurisdiction that authorizes same-sex marriage.

IRS REPORTING
295. Will we have to report anything to the government regarding our plan’s coverage or contributions?
Yes. You will be required to report the aggregate cost of your employer-sponsored health coverage on your employee’s W-2.
There are also two new IRS and employee reporting requirements that apply for coverage provided starting in 2015 with the first filings due in 2016 (these reporting requirements were delayed for one year from their original effective date in
2014/2015). The first reporting requirement under Code § 6055 applies to any entity that provides “minimum essential coverage” (MEC) to an individual. Minimum essential coverage includes any employer-sponsored group health plan sponsored by an employer except for coverage that is limited to HIPAA excepted dental or vision benefits. The information you report to the IRS will, in part, allow the IRS to determine which individuals had MEC that satisfies the individual coverage mandate.
The second reporting requirement under Code §6056 applies to applicable large employers (i.e. those with 50 or more full-time employees (including full-time equivalents)). The §6056 reporting is needed by the IRS for the administration of the penalties under the employer mandate as well as the administration of the premium tax credit program that helps individuals and families afford health insurance coverage purchased through a Marketplace Exchange.

W-2 Reporting
296. Is it true we will have to make changes to what we report on our employee’s
W-2?
Yes. You will be required to report the aggregate cost of employer sponsored health coverage on your employees’ W-2. The amount to be reported on the W-2 is NOT included in the employee’s gross income.

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Originally, the effective date of this change was taxable year 2011. However, the IRS issued guidance on October 12, 2010 delaying the effective date of the reporting requirement to taxable year 2012 (i.e. W-2s issued in 2013 covering the 2012 taxable year). The guidance made the reporting requirement optional for benefits provided in tax year 2011.
On March 29, 2011 and January 2, 2012, the IRS issued further guidance that includes a delay in the W-2 reporting requirement until further guidance is issued for the following employers:
1. Employers filing fewer than 250 W-2s for the previous calendar year (for example, employers filing fewer than 250 W-2s for taxable year 2011 will not be required to report the cost of coverage on the 2012 W-2);
2. Employers sponsoring self-funded plans that are not subject to federal COBRA continuation coverage such as self-funded church plans; and
3. Federally recognized Indian tribal governments and tribally chartered corporations that are wholly owned by a Federally recognized Indian tribal government. The Form W-2 includes code DD that should be used to report the aggregate cost of employer sponsored health coverage in Box 12 on your employees’ Form W-2.
297. What coverages are included in the amount that we must report on the W-2?
The aggregate cost of your health coverage is the total cost of coverage provided to the employee under all your employer-sponsored coverage including:
 Medical coverage
 Dental and vision, unless HIPAA excepted stand-alone plans (i.e., coverage offered under a separate policy, certificate or contract of insurance or coverage employees may waive separately)
 Prescription drug coverage
 Executive physical benefits
 On-site clinics*
 EAPs that provide medical care*
 Wellness programs that provide medical care*
 Medicare supplemental policies
 Health Care FSA – employer contributions only (e.g., “seed” or match)
 Hospital or other fixed indemnity insurance or specified illness insurance if the employer makes any contribution towards the cost of the fixed indemnity or specified illness insurance or allows employees to purchase the coverage on a pre-tax basis under a §125 plan
*See below for more details and exceptions

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298. Our EAP and wellness programs are considered group health plans but the cost is so little we don’t charge a premium to COBRA qualified beneficiaries to access them. Do we still have to include their cost in the aggregate reportable cost? No. The cost of coverage provided under an EAP, wellness program, or on-site medical clinic that qualifies as a group health plan subject to COBRA does not have to be included in the aggregate reportable cost if you do not charge COBRA qualified beneficiaries to access those benefits. However, if you charge a COBRA premium for such coverage, then it must be included in the aggregate reportable cost on the
W-2.
299. We offer an EAP to our employees that our long-term disability insurer provides for no additional cost as an add-on to the LTD benefits. Do we still have to include it in the aggregate reportable cost?
No. Group health plan coverage provided as an add-on or value-added program does not have to be reported if the EAP portion of the program providing the health benefits is only incidental in comparison to the portion of the program providing the disability benefits.
300. We are a church plan and our medical plan is self-funded and our dental and vision are excepted benefits so we are not required to report them. Do we still have to report the cost of our EAP or wellness program?
No. Because your plan is not subject to COBRA or any other federal continuation coverage requirement you do not have to report the cost of coverage provided under an EAP, wellness program, or on-site medical clinic, even if they qualify as group health plans.
301. We are a controlled group of corporations comprised of a number of member employers. Do we have to aggregate all the W-2 we filed for all of our member employers to determine if we filed less than 250 W-2s in the preceding year?
No. The exemption for employers that filed fewer than 250 W-2s applies separately to each member employer of your controlled group.
302. Is there coverage we don’t have to include in the reporting?
Yes. Your reporting should not include:
 Long Term Care, accident, or disability income benefits
 Health reimbursement arrangements (delayed until further notice)
 Specific disease, indemnity, etc. coverage if not excludable from employee’s gross income
 Specified illness or disease policies such as cancer policies where the full premium is paid by the employee on an after-tax basis
 Hospital (or other) Indemnity insurance policies where the full premium is paid by the employee on an after-tax basis
 Archer MSA or HSA contributions of the employee or the employee’s spouse  Employee salary reduction contributions to a Health FSA

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 Referral-only EAP
303. What value should we use for the costs that must be reported?
If your plan is insured, you can use the premium charged by the insurer as the reportable amount. If your plan is self-funded, you may calculate the reportable cost using the COBRA applicable premium (minus the 2% admin fee).
304. Our insurer charges us a composite rate for all covered employees. Do we report the same amount for every employee?
Yes. Where the insurer is charging a single composite rate for all employees, you can use that composite rate to calculate the reportable cost.
305. We are an S corporation and our 2% or greater shareholder-employees are required to include the value of group health plan premium payments we make on their behalf in their income. Would we still have to also report this cost in Box
12 of their W-2?
No. Payments or reimbursements of health insurance premiums for a 2% or greater shareholder-employee of an S corporation do not have to be reported in Box 12 on the W-2 if the individual is required to include the premium payments in gross income. 306. What do we do when an employee terminates employment in the middle of the year? You may apply any reasonable method of reporting the cost of coverage for an employee who terminated employment during the calendar year, provided that the method is used consistently for all employees receiving coverage who terminate employment during the year. For example, calculating the total cost per month and then multiplying it by the number of covered months is a reasonable method.
Under the transition rules that apply until future guidance, if the terminated employee requests aW-2 before the end of the calendar year, the employer is not required to report any amount of health benefits on that W-2.
307. What amount do we report if there is a cost or coverage change in the middle of the year?
The reportable cost must reflect the increase or decrease in cost for the periods to which the increase or decrease applies.
If an employee changes coverage during the year (e.g. terminates coverage, changes plan options, adds or drops dependents) the reportable cost must take into account the change in coverage by reflecting the different reportable costs for the coverage elected by the employee for the periods the employee had coverage.
If the change in coverage in the middle of a month where costs are determined on a monthly basis, an employer may use any reasonable method to determine the reportable cost for such period, such as using the reportable cost at the beginning of the period or at the end of the period, or averaging or prorating the reportable costs,

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provided that the same method is used for all employees with coverage under that plan. 308. What happens if the employee notifies us of a coverage change that may have an effect on the aggregate reportable cost for the previous year? For example, if one of our employees notifies us of a divorce in January that occurred in the preceding year and would reduce the cost of the employee’s coverage for that year? The aggregate reportable cost for a calendar year reported on Form W-2 may be based on the information available to you as of December 31 of the calendar year.
Therefore, if an employee notifies you of a coverage change in the subsequent calendar year that has a retroactive effect on his or her coverage for the prior year, you are not required to include it in the calculation of the aggregate reportable cost for that prior year. In addition, you are not required to furnish a Form W-2c if a Form
W-2 has already been provided for a calendar year, before this type of notification
(for example, if a Form W-2 is provided to employees on January 15, and an employee notifies you of a retroactive change on January 20).
309. We contribute to a multiemployer plan for our union employees. Do we have to report that contribution or the value of the multiemployer plan coverage on the union employee’s W-2?
No. Neither the amount you contribute nor the cost of the coverage provided to an employee under a multiemployer plan must be included when determining the aggregate reportable cost that must be reported on the W-2.
310. Do we have to provide a W-2 that includes the aggregate cost of our health plan coverage to retirees covered by our plan that don’t receive any other compensation from us?
No. You are not required to issue a Form W-2 to an individual to whom you are not otherwise required to issue a Form W-2.

§6055 – Minimum
Essential Coverage
Reporting
311. If our plan is insured, do we still have to file the §6055 return?
No. Your insurer is responsible for filing the §6055 return.
312. If we provide minimum essential coverage to our employees under a selffunded plan, who is responsible for the §6055 reporting?
The plan sponsor that establishes and maintains the plan must file the §6055 report.
So if minimum essential coverage is provided under your self-funded plan, you must file a §6055 annual return with the IRS for every primary insured employee covered under the plan.

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313. What information will we have to include on the Code §6055 return for our selffunded plan?
Your §6055 return must include the following information:
 The name, address, and EIN of the employer sponsoring the plan;
 The name, address, and taxpayer ID number (generally the social security number(“SSN”)) of the employee or former employee;
 The name and SSN of each other covered individual;
 The months during which each individual was enrolled in coverage during the calendar year for at least one day.
314. What if we are not able to get the spouse’s or children’s social security number
(SSN)?
You can provide the dates of birth in lieu of SSNs but only if you are informed that an individual does not have an SSN or you are unable to obtain an SSN after making reasonable efforts to obtain it.
To demonstrate reasonable efforts, you are required to request the SSNs from covered individuals at the time their relationship with the individual begins – for employers, this means either when the employee was hired, when the individual enrolls in coverage, or when dependents are added to the plan. If the covered individual does not provide the SSN, you must, on or before December 31 of the first year of coverage, request that the SSN be provided (January 31 of the following year if the relationship begins in December). If the covered individual fails to provide the
SSN, then you must make a second request the following year. If the covered individual fails or refuses, you can then use the individual’s date of birth without making any additional efforts to obtain the SSN. You should document your efforts to obtain missing SSNs.
For example, if you make an unsuccessful initial solicitation for an SSN in June 2015, you must make the first annual solicitation by December 31, 2015. The second annual solicitation must be made by December 31, 2016, to have acted in a responsible manner. Assuming that request is also unsuccessful, you would not be penalized if your §6055 reporting submitted in early 2017 reported a date of birth in place of the SSN for the individual in question.
315. We are a parent of a controlled group of corporations comprised of a number of member employers and our plan covers employees of all the member employers. Do we have to file the §6055 return on behalf of the other employer members? No. Your plan is treated as being sponsored by more than one employer and each member employer is responsible for filing the return for its own employees.
However, one member of your controlled group may assist you and/or the other members by filing returns and furnishing the employee statements on behalf of all the employer members of the controlled group.

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316. What forms should we use to file the §6055 return?
Updated: 11/19/14

If you are a large employer, you can use Form 1095-C, along with transmittal Form
1094-C. Employers that are not applicable large employers (e.g., small self-funded employers) can use Form 1095-B, along with transmittal Form 1094-B. If you are both a large employer and have a self-funded plan, Form 1095-C can be used to satisfy both the §6055 and §6056 reporting requirements (see the Section below on the §6056 reporting requirements).
The IRS has released drafts of the §6055 forms and instructions, which are available here:  1094-B: http://www.irs.gov/pub/irs-dft/f1094b--dft.pdf
 1095-B: http://www.irs.gov/pub/irs-dft/f1095b--dft.pdf
 B Form Instructions: http://www.irs.gov/pub/irs-dft/i109495b--dft.pdf
317. What is the deadline for filing the §6055 return?
The return must be filed on or before February 28th of the year following the calendar year in which you provided minimum essential coverage, regardless of your plan year. The return can be filed electronically and high-volume filers (those that file 250 or more §6055 returns during the calendar year) must file electronically. If filing electronically, you have an additional month until March 31st to file the report.
318. Can our TPA file the §6055 report on our behalf?
Generally, yes, but the regulations do not allow you to transfer the liability for reporting failures to your TPA or any other third party.
However, governmental employers that maintain self-funded health plans may enter into a written agreement with another governmental unit, or an agency or instrumentality of a governmental unit, designating the other governmental unit, agency, or instrumentality as the person responsible for the §6055 return with the
IRS and for providing the statement to the employees.
The designated agency must be part of the same governmental unit as the government employer. For example, a state health department may designate the state personnel agency to file the required return and statements. The designated agency must accept the designation, and the agreement must be in writing. In the absence of such a designation, the government employer that maintains the selfinsured group health plan will remain the responsible party under §6055.
319. Do we have to provide reporting on HSAs, HRAs or FSAs?
No. HSAs are not minimum essential coverage and reporting is not required for
HRAs or FSAs that supplement group health plans that are providing minimum essential coverage.
In addition, you do not have to file a §6055 report for the following:
 On-site medical clinic;

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 Wellness programs that offer reduced premiums or cost-sharing under a group health plan;
 Coverage that supplements your primary health plan; or
 Coverage that supplements government provided coverage such as
Medicare.
320. Do we file a §6055 return for employees that are offered our coverage but waive it? No.
321. If my §6055 filing is incorrect due to retroactive enrollment of a baby or some other circumstance that occurs at the end of the year, will I be required to file a corrected return with the IRS?
Yes, when information on the form filed with the IRS becomes incomplete or incorrect, you are required to file a corrected return.
322. Do we have to provide a copy of the §6055 return to our employees?
Yes. You will have to provide a copy of the form filed with the IRS or a substitute statement that includes the information that was included on the return and a phone number of the person that has been designated as your contact person to each employee named in your §6055 return. You do not need to provide a copy to those employees who were not eligible for the coverage or waived the coverage.
323. Is the deadline for employee reporting the same as the IRS reporting deadline?
No. The statement to your employees must be furnished to them on or before
January 31 of the year following the calendar year in which you provide them with minimum essential coverage, regardless of your plan year. The IRS return is due on or before February 28th (March 31st if filing electronically) of the year following the calendar year in which minimum essential coverage was provided.
324. Do we have to mail the form to the employee or can we provide it electronically? Either method is allowed. You can satisfy your obligation by sending the statement by first class mail to the primary insured employee’s last known permanent address, or, if no permanent address is known, to the individual’s temporary address.
You can send the statement electronically if the employee has specifically consented to receiving the statement electronically in a manner that reasonably demonstrates that the recipient can access the statement in the electronic format in which it will be furnished. Prior to, or at the time of consenting, you must provide a conspicuous disclosure to the employee that includes all of the following:
1. The statement will be furnished on paper if the employee does not consent to receive it electronically;

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2. The consent applies to each statement required to be furnished after the consent is given until it is withdrawn or only to the first statement required to be furnished following the date of the consent;
3. The employee can request a paper copy of the statement and the procedure for obtaining a paper copy of their statement after giving the consent and whether a request for a paper statement will be treated as a withdrawal of consent;
4. The employee may withdraw a consent by writing (electronically or on paper) to the person or department whose name, mailing address, telephone number, and email address is provided in the disclosure statement;
5. There may be conditions under which you will cease furnishing statements electronically to the employee and what those condition are (e.g. if the employee terminates employment);
6. The employee must update their contact information and the procedures for updating that information; and
7. A description of the hardware and software required to access, print, and retain the statement, and if applicable, the date when the statement will no longer be available on your web site. You must also advise the employee that the statement may be required to be printed and attached to a Federal, State, or local income tax return.
If you change the hardware or software required to access the statement that creates a material risk that the employee will not be able to access a statement, you must, prior to changing the hardware or software, notify the employee. The notice must describe the revised hardware and software required to access the statement and inform the employee that a new consent to receive the statement in the revised electronic format must be provided. After implementing the revised hardware or software, you must then obtain the new consent from the employee to receive the statement electronically.
325. If one of our employees dies during the year, do we still have to provide the statement for that employee?
Yes. Statements must be provided to deceased individuals if they had any months of coverage during the prior year because the individual’s estate may be liable for penalties if the estate is not able to establish coverage under the individual mandate.
New: 11/19/14

326. Are we subject to penalties if we fail to file the required information in a timely manner? If you fail to timely file complete and accurate returns under §6055 (i.e., Forms 1095B or 1095-C) with the IRS, or fail to timely furnish a correct statement to responsible individuals, then you could be subject to a penalty of $100 per return with a maximum of $1,500,000 for a calendar year. However, penalties may be reduced if corrective action is taken within 30 days and may even be waived if the failure to file timely or accurately is due to reasonable cause and not due to willful neglect.

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Relief from these penalties is available in 2016 for returns filed and statements furnished for coverage in 2015 if you can show that you have made good faith efforts to comply. No relief will be provided if you cannot show a good faith effort to comply with the requirements or you fail to timely file the return or furnish a statement.

§6056 – Applicable
Large Employer
Reporting
327. We are a large employer so we will also have to file the Code §6056 return.
What information will we have to include on the Code §6056 return?
If you employ an average of at least 50 full time employees (including full-time equivalents), you are considered a large employer and must file a §6056 annual return with the IRS for every full-time employee. Your return must show:
 Your employer’s name, the date, and the employer’s EIN and the calendar year for which the information is reported;
 The name and telephone number of your contact person;
 A certification as to whether you offered your full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under your plan by calendar month;
 The number of full-time employees for each calendar month during the calendar year, by calendar month;
 For each full-time employee, the months during the calendar year for which minimum essential coverage under the plan was available;
 For each full-time employee, the employee’s share of the lowest cost monthly premium for self-only coverage providing minimum value offered to that full-time employee under your plan, by calendar month; and
 The name, address, and taxpayer identification number (SSN) of each fulltime employee during the calendar year and the months, if any, during which the employee was covered under your plan.
The return will also include indicator codes (rather than having you provide specific or detailed information) for you to report the following information:
 Whether the coverage offered to your full-time employees and their dependents provides minimum value and whether the employee had the opportunity to enroll his or her spouse in the coverage;
 The total number of employees, by calendar month;
 Whether an employee’s effective date of coverage was affected by a permissible waiting period;
 Whether you had no employees during a particular month;
 Whether you are part of a controlled group, and, if applicable, the name and EIN of each employer member of the controlled group;
 If an appropriately designated person is reporting on your behalf that is a governmental unit for purposes of §6056, the name, address, and identification number of the appropriately designated person;

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 If you are a contributing employer to a multiemployer plan, whether you are subject to an employer mandate penalty due to your contributions to the multiemployer plan; and
 If a third party is reporting on behalf of your aggregated employer group, the name, address, and identification number of the third party.
328. If we are subject to both the §6055 and §6056 reporting because we are a large employer with a self-funded plan, can we combine the filings to streamline the process? Yes. The IRS will be providing a single combined form for reporting the information required under both §6055 and §6056.
329. We offer coverage to all of our full-time employees. Is there an easier way to satisfy the §6056 reporting requirement?
Yes. The final rule provides for several alternatives to the general method that you can use under certain circumstances. First, you can report simplified §6056 information and use a simplified statement for your employees as long as you made a “qualifying offer” of health insurance to a full-time employee for all months during the year in which the employee was a full-time employee. A qualifying offer of insurance is one that provides minimum value at a cost of 9.5% or less of the federal poverty level for employee-only coverage, and also offered minimum essential coverage to the employee’s spouse and dependents. Once the IRS issues the return forms, it is expected that you will be able to use a code indicating that you have made a qualifying offer to some or all of your full-time employees.
A second alternative, which will be available only for 2015, applies if you made a qualifying offer of coverage to 95% of your full-time employees and their spouses and dependents. It allows you to provide your employees with a simplified statement informing the employee of the coverage provided and that the employee was not be eligible for premium tax credit for any months in which the qualifying offer was made.
Lastly, if you offer coverage to at least 98% of your employees – including full-time and part-time employees - you will not be required to determine for §6056 reporting purposes whether your employees are full-time or part-time employees and will not be required to provide a total count of your full-time employees. To qualify for this alternative method, you must certify that you have offered coverage to at least 98% of your employees included in the report and that the coverage offered is both affordable and provides minimum value.
330. We are a parent of a controlled group of corporations comprised of a number of member employers and our plan covers employees of all the member employers. Do we have to file the §6056 return on behalf of the other employer members? No. Each employer member with full-time employees that is the common-law employer of the employee is responsible for the filing with respect to its full-time employees even though the determination of whether you are a large employer is made at the aggregated group level.

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However, employer members of your controlled group without any full-time employees are not required to file the §6056 report.
331. We contribute to a multiemployer plan on behalf of our union employees. Are we required to file returns under §6056?
Yes, however, the multiemployer plan may file the return with respect to the employees that it covers and assist you in providing the statements to those employees. For any employees you provide coverage to under your own plan, you will be responsible for the reporting and for providing a statement to the covered employees. New: 11/19/14

332. Does §6056 apply to nonprofit and/or governmental employers?
Yes, §6056 applies to all applicable large employer regard to whether the employer is tax-exempt or a governmental employer (including the United States, states and their subdivisions, and Indian tribal governments).
333. Can our TPA file the §6056 report on our behalf?
Generally, yes, but the regulations do not allow you to transfer the liability for reporting failures to your TPA or any other third party.
However, a large employer that is a governmental unit or any agency or instrumentality may appropriately designate another person that is part of, or related to, the same governmental unit as the large employer to report on its behalf.
The designation must be in writing, must be signed by both the large employer member and the designated person, and must include the name, address, and employer identification number of the designated person. The designation must contain information identifying the category of full-time employees (which may be full-time employees eligible for a specified health plan, or in a particular job category, as long as the specific employees covered by the designation can be identified) for which the designated person is responsible for reporting under §6056 on behalf of the large employer. If the designated person is responsible for reporting under §6056 for all full-time employees of a large employer, the designation must indicate that is the case. The designation must contain language that the designated person agrees and certifies that it is the appropriately designated person under §6056(e), and an acknowledgement that the designated person is responsible for reporting under
§6056 on behalf of the large employer and subject to the requirements of §6056.
The designation must also include the name and employer identification number of the large employer.
For example, a political subdivision of a state may designate the state, another political subdivision of the state, or an agency or instrumentality of the state as the designated person for purposes of § 6056 reporting. The person designated might be the governmental unit that operates the relevant health plan or the governmental unit that does other information reporting on behalf of the designating governmental unit. If the written designation is accepted by the designee and is made before the filing deadline, the designated governmental unit is the designated entity responsible for §6056 reporting.

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334. What forms should we use to file the §6056 return?
Updated: 11/19/14

The filing may be made on IRS Form 1095-C for every full-time employee. The return will be filed with a single transmittal form, Form 1094-C. Form 1095-C can be used to satisfy both the §6055 and §6056 reporting requirements. If you are a large employer that provides insured coverage, you are required to complete only the section of Form 1095-C that reports the information required under Section 6056.
The IRS has released drafts of the combined §6055/6056 forms and instructions, which are available here:
 1094-C: http://www.irs.gov/pub/irs-dft/f1094c--dft.pdf
 1095-C: http://www.irs.gov/pub/irs-dft/f1095c--dft.pdf
 C Form Instructions: http://www.irs.gov/pub/irs-dft/i109495c--dft.pdf
335. What is the deadline for filing the §6056 return with the IRS?
The return must be filed with the IRS on or before February 28th of the year following the calendar year in which you provided minimum essential coverage regardless of your plan year. The return can be filed electronically and high-volume filers (those that file 250 or more §6056 returns) must file electronically. If filing electronically, you have an additional month until March 31st to file the §6056 report.
336. Do we file a §6056 return for full-time employees that are offered our coverage but waive it?
Yes.
337. Do we file a §6056 return for full-time employees that are not offered our coverage? Yes.
338. If I am a large employer but all my employees are part-time employees, will I be required to report pursuant to §6056?
No. Applicable large employers without any full-time employees are not subject to the Section 6056 reporting requirements.
339. Do we have to provide a copy of the §6056 return to our full-time employees?
Yes. You will have to provide a written statement only to each full-time-employee named in your §6056 return that includes the name, address and contact information of the entity that filed the return and the information in the return pertaining to that individual. You can either provide a copy of the return filed with the IRS or a substitute statement that includes the information that was included on the return.
340. What is the deadline to provide the reporting to my employees?
The statement to your full-time employees must be furnished to them on or before
January 31 of the year following the calendar year in which you provide them with minimum essential coverage.

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341. Do we have to mail the form to the employee or can we provide it electronically? Either method is allowed. You are permitted to mail it separately to the employee to the employee’s last known permanent address or, if no permanent address is known, to the employee’s temporary address. Alternately, it can be included in the same mailing with one or more of the other required information returns such as the combined §6055 and §6056 employee statement and the Form W-2.
You can send the statement electronically if the employee has specifically consented to receiving the statement electronically in a manner that reasonably demonstrates that the recipient can access the statement in the electronic format in which it will be furnished. Prior to, or at the time of consenting, you must provide a conspicuous disclosure to the employee that includes all of the following:
1. The statement will be furnished on paper if the employee does not consent to receive it electronically;
2. The consent applies to each statement required to be furnished after the consent is given until it is withdrawn or only to the first statement required to be furnished following the date of the consent;
3. The employee can request a paper copy of the statement and the procedure for obtaining a paper copy of their statement after giving the consent and whether a request for a paper statement will be treated as a withdrawal of consent;
4. The employee may withdraw a consent by writing (electronically or on paper) to the person or department whose name, mailing address, telephone number, and email address is provided in the disclosure statement;
5. There may be conditions under which you will cease furnishing statements electronically to the employee and what those condition are (e.g. if the employee terminates employment);
6. The employee must update their contact information and the procedures for updating that information; and
7. A description of the hardware and software required to access, print, and retain the statement, and if applicable, the date when the statement will no longer be available on your web site. You must also advise the employee that the statement may be required to be printed and attached to a Federal, State, or local income tax return.
If you change the hardware or software required to access the statement that creates a material risk that the employee will not be able to access a statement, you must, prior to changing the hardware or software, notify the employee. The notice must describe the revised hardware and software required to access the statement and inform the employee that a new consent to receive the statement in the revised electronic format must be provided. After implementing the revised hardware or software, you must then obtain the new consent from the employee to receive the statement electronically.

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INDIVIDUAL
RESPONSIBILITY
342. Won’t my employees be required to obtain their own health insurance coverage? All individuals will be required to have health insurance starting in 2014, with exception for individuals who are incarcerated, not legally present in the United
States or who maintain religious exemptions. Employees and their dependents covered under your group health plan will satisfy the individual mandate. If your plan year renews at a time other than January 1, your eligible employees and their dependents cannot be penalized if they don’t have coverage for the period in 2014 prior to the start of your 2014 plan year. If you don’t offer group health plan coverage to your employees and they wish to avoid penalties, they will be required to buy the coverage themselves, either through a Marketplace or in the individual market unless they have other coverage (e.g. a spouse’s plan or Medicare or Medicaid).
Individuals who are required to have health insurance and do not have health insurance will be required to pay a penalty, which will vary based on income levels and will be phased in over three years from 2014 through 2016. In 2016, the minimum penalty will be $695, and the maximum penalty will be $2,085.
If you offer group health plan coverage to your employees but it does not provide a required level of coverage or the cost of the coverage you offer is determined to be unaffordable, they may be able to purchase subsidized insurance through the exchanges. 343. What types of coverage will allow our employees to satisfy the individual mandate? Individuals must have coverage that is deemed to be “minimum essential coverage”.
That includes any of the following:
 Employer-sponsored health coverage including COBRA coverage and retiree coverage (does not include dental-only or vision-only coverage).s
 Coverage purchased in the individual market, including a qualified health plan offered by the Health Insurance Marketplace (also known as an
Affordable Insurance Exchange).
 Medicare Part A coverage and Medicare Advantage plans.
 Most Medicaid coverage.
 Children's Health Insurance Program (CHIP) coverage.
 Certain types of veterans health coverage administered by the Veterans
Administration.
 TRICARE.
 Coverage provided to Peace Corps volunteers.
 Coverage under the Nonappropriated Fund Health Benefit Program.
 Refugee Medical Assistance supported by the Administration for Children and Families.

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 Self-funded health coverage offered to students by universities for plan or policy years that begin on or before Dec. 31, 2014 (for later plan or policy years, sponsors of these programs may apply to HHS to be recognized as minimum essential coverage).
 State high risk pools for plan or policy years that begin on or before Dec.
31, 2014 (for later plan or policy years, sponsors of these programs may apply to HHS to be recognized as minimum essential coverage).
 Foreign coverage.
 Other health coverage recognized by HHS as minimum essential coverage. In addition, for 2014 only, the following limited coverages will count as minimum essential coverage:
 Family planning services Medicaid.
 Tuberculosis-related services Medicaid.
 Pregnancy-related Medicaid.
 Emergency medical conditions Medicaid.
 Section 1115 demonstration projects.
 Coverage for medically needy individuals.
 “Space available care” in a facility of the uniformed services.
 “Line-of-duty care” for individuals not on active uniformed services duty.
344. Are our foreign employees working in the United States subject to the individual mandate?
It will depend on the circumstances. The individual mandate applies to all foreign nationals who are in the United States long enough during a calendar year to qualify as resident aliens for tax purposes. Foreign nationals who live in the United States for a short enough period that they do not become resident aliens for federal income tax purposes are not subject to the individual shared responsibility payment even though they may have to file a U.S. income tax return.
The IRS has more information available on when a foreign national becomes a resident alien for federal income tax purposes on their website here: http://www.irs.gov/taxtopics/tc851.html 345. Does the individual mandate apply to our employees who are U.S. citizens working in other countries?
Yes. However, U.S. citizens who live abroad for a calendar year (or at least 330 days within a 12 month period) are treated as having minimum essential coverage for the year (or period). These are individuals who qualify for the foreign earned income exclusion under Internal Revenue Code §911. If they qualify, they need take no further action to comply with the individual mandate. See IRS Publication 54 for further information on the §911 exclusion.
In addition, all bona fide residents of the United States territories (Puerto Rico,
Guam, American Samoa, the U.S. Virgin Islands, and the Northern Mariana Islands)

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are treated by law as having minimum essential coverage. They are not required to take any action to comply with the individual shared responsibility provision.
346. What happens if one of our employees has a gap in coverage during the year?
Individuals who have a short gap in coverage for less than a continuous three-month period will not be penalized during the gap in coverage. However, this exemption may only be used once per year. If an individual has a continuous period gap that is three or more months, none of the months in the period will be exempt from the penalty. 347. If our plan year starts on July 1, 2014, will our employees be penalized for the period of no coverage between January 1st and July 1st because they didn’t enroll in our plan for the plan year starting on July 1, 2013?
No. An employee who is eligible to enroll in your non-calendar year plan with a plan year beginning in 2013 and ending in 2014 (the 2013-2014 plan year) will not be liable for a penalty for the months beginning in January 2014 and continuing through the month in which the 2013-2014 plan year ends.
348. We have several Medicare eligible employees. How will these bills affect their
Medicare coverage?
The Act makes several improvements to Medicare including:
 Provides a $250 rebate to Medicare beneficiaries who reach the Part D coverage gap in 2010 (Effective January 1, 2010);
 Phases down gradually the beneficiary coinsurance rate in the Medicare
Part D coverage gap from 100% to 25% by 2020;
 For brand-name drugs, require pharmaceutical manufacturers to provide a
50% discount on prescriptions filled in the Medicare Part D coverage gap beginning in 2011, in addition to federal subsidies of 25% of the brandname drug cost by 2020 (phased in beginning in 2013);
 For generic drugs, provide federal subsidies of 75% of the generic drug cost by 2020 for prescriptions filled in the Medicare Part D coverage gap
(phased in beginning in 2011);
 Between 2014 and 2019, reduce the out-of-pocket amount that qualifies an enrollee for catastrophic coverage.
On the other hand, changes to the provider reimbursement levels and Medicare
Advantage programs could reduce access to providers or coverage options for
Medicare beneficiaries.

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TAXES AND
SUBSIDIES
Cadillac Plans
349. Okay, I’ve been hearing all about these “Cadillac plans”. What are they?
A “Cadillac Plan” is determined based on the cost of the coverage provided. The cost of a plan with single coverage that exceeds $10,200 annually, or family coverage that exceeds $27,500 annually, will be considered a “Cadillac Plan” beginning in
2018. At that time, coverage with a cost that exceeds those amounts will be subject to a 40% excise tax on the value of coverage that exceeds the above amounts. The tax is imposed on insurers for insured plans.
If employer health care costs increase more than 55% between 2010 and 2018 as measured under the Blue Cross/Blue Shield standard benefit option (or a similar option) under the Federal Employees Health Benefits Plan, the 2018 threshold amounts are subject to a one-time adjustment.
The threshold amounts are increased by $1,650 for individual coverage and $3,450 for family coverage for retired individuals age 55 and older who are not eligible for
Medicare and for plans where the majority of employees covered by the plan are engaged in a high-risk profession or are employed to repair or install electrical or telecommunications lines. Employers may reduce the cost of coverage when applying the tax if the employer’s age and gender demographics are not representative of the age and gender demographics of a national risk pool. Much more guidance is expected on these provisions.
350. What professions would be classified as high-risk professions under the
Cadillac tax?
High-risk professions include:
 law enforcement officers (as such term is defined in section 1204 of the
Omnibus Crime Control and Safe Streets Act of 1968),
 employees in fire protection activities (as such term is defined in section
3(y) of the Fair Labor Standards Act of 1938),
 individuals who provide out-of-hospital emergency medical care (including emergency medical technicians, paramedics, and first-responders),
 individuals whose primary work is longshore work (as defined in section
258(b) of the Immigration and Nationality Act (8 U.S.C. 1288 (b)), determined without regard to paragraph (2) thereof), and
 individuals engaged in the construction, mining, agriculture (not including food processing), forestry, and fishing industries.
This also includes employees who are retired from a high-risk profession if the employees were in one of the above high-risk professions for at least 20 years during the employee’s employment.

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351. Do I pay the excise tax or does the insurance carrier/TPA pay it? How do they know the amount?
The tax would apply to your fully insured and self funded group health plans, but not to any plans sold in the individual market, except for coverage eligible for the deduction for self-employed individuals. Although the issuer of the fully-insured plan is required to pay the tax, it is the employer’s responsibility to calculate the amount of benefits that are subject to the tax and calculate the tax. For multi-employer plans, the plan sponsor is required to calculate the tax. If your plan is self-funded, you (as either the plan administrator or employer) would be responsible to both calculate and pay the tax.
352. What coverages should we be including when we are determining the aggregate cost of group health plan coverage for our employees?
The group health plan costs that should be considered in the calculation include:
 Medical and prescription drug;
 Dental and vision unless provided under a separate policy, certificate or insurance contract;
 Employee and employer contributions to a health FSA;
 Employer contributions to an HRA;
 Employer contributions to an HSA, including employee contributions made on a salary-reduction basis under your §125 plan;
 Hospital indemnity or specified illness policies purchased by employees on a pre-tax basis; or
 On-site clinic (unless limited to treating employees with minor illnesses or injuries or rendering first-aid in cases of accidents occurring during work hours). 353. How do we calculate the cost of our plan?
The cost of the coverage will be determined using your plan’s COBRA rate. For the account-based plans, it will be the amounts contributed to the accounts.
354. If the tax is based on the cost of individual and family coverage but we use four tiers for our COBRA rates, how should we determine the cost of coverage?
You will have to calculate separate individual and family COBRA premiums for purposes of the Cadillac tax, even if for actual COBRA purposes, you use four-tiered
COBRA rates.
355. Do the cost thresholds remain the same after 2018 or are they adjusted each year for changes in the cost-of-living?
For each calendar year after 2018, the self-only and family dollar amounts will be increased under a cost-of-living adjustment.
356. When do I have to start paying the excise tax on these so-called “Cadillac plans”? This new tax will be effective for taxable years beginning January 1, 2018.

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Small Business
Premium
Tax Credit
357. As a small employer with only 21 employees, will we be eligible for any assistance to help us provide coverage to our employees?
It depends. Effective January 1, 2010, premium subsidies are available for small employers with fewer than 25 full-time equivalent employees and average annual wages of $50,000 or less that purchase coverage for employees and pay at least
50% of the cost. Additional premium subsidies are available for employers with 10 or less full time equivalent employees and average annual wage of $25,000 or less.
For 2014, the average annual wage thresholds increased to $25,400 and $50,800.
The IRS has more information about the credit, including tax tips, guides and answers to frequently asked questions available on their website at: http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-SmallEmployers. 358. How much is the tax credit?
For 2010 through 2013, the tax credit is 35% of the employer’s contribution towards health premiums. Starting in 2014, the maximum credit will increase to 50% of premiums paid, but the credit will only be available if you purchase coverage through a SHOP Marketplace.
The tax credits are reduced if the number of your full time employees exceeds 10 or if average annual wages exceed $25,000.
Note: On November 27, 2013, HHS announced that online enrollment through the
SHOP Marketplace in states that are using the federally-facilitated exchange has been delayed until 2015. However, for small businesses in those states that want to qualify for the tax credit for 2014, you will still be able to enroll your employees in a certified SHOP plan through an agent, broker, or insurer that offers a certified SHOP plan and has agreed to conduct enrollment according to HHS standards that apply for the Marketplace. In addition, if you want your employees' coverage to begin on
January 1, 2014, the current enrollment deadline has been extended to December
23, 2013 from December 15, 2013.
359. Does it include dental or vision?
Yes. The credit can also apply to dental or vision; long-term care, nursing home care, home health care, or community-based care; coverage only for a specified disease or illness; hospital indemnity or other fixed indemnity insurance; and Medicare supplemental health insurance.
360. Can premiums we paid in 2010, but before the new health reform legislation was enacted, be counted in calculating the credit?
Yes. In computing the credit for a tax year beginning in 2010, you may count all premiums paid in 2010.

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361. We are a tax-exempt organization. Can we qualify for the tax credit?
Yes. The tax credit is available to you if you’re an organization described in Code section 501(c) that is exempt from tax under Code section 501(a). The tax credit is
25% of your contribution towards health premiums. However, the amount of the credit cannot exceed the total amount of income and Medicare (i.e., hospital insurance) tax you are required to withhold from your employees’ wages for the year and your share of Medicare tax on your employees’ wages.
Starting in 2014, the maximum credit will increase to 35% of premiums paid, but the credit will only be available if you purchase coverage through a SHOP Marketplace.
Note: On November 27, 2013, HHS announced that online enrollment through the
SHOP Marketplace in states that are using the federally-facilitated exchange has been delayed until 2015. However, for small businesses in those states that want to qualify for the tax credit for 2014, you will still be able to enroll your employees in a certified SHOP plan through an agent, broker, or insurer that offers a certified SHOP plan and has agreed to conduct enrollment according to HHS standards that apply for the Marketplace. In addition, if you want your employees' coverage to begin on
January 1, 2014, the current enrollment deadline has been extended to December
23, 2013 from December 15, 2013.
362. Can we claim the credit if we had no taxable income for the year?
Yes. For a tax-exempt employer, the credit is a refundable credit so even if you have no taxable income, you may receive a refund.
363. How do we claim the tax credit?
The credit is claimed on your company’s annual income tax return with an attached
Form 8941, Credit for Small Employer Health Insurance Premiums, showing the calculation of the credit.
A tax-exempt small business claims the credit by filing the Form 990-T, Exempt
Organization Business Income Tax Return, with an attached Form 8941 showing the calculation of the claimed credit. Filing Form 990-T with an attached Form 8941 is required for a tax-exempt eligible small business to claim the credit, even if it is not otherwise required to file Form 990-T.
364. Is there a limit on the amount of years a small business can claim the tax credit? Yes. Starting in 2014, the credit will be available to eligible small employers for two consecutive taxable years.
365. How do we determine how many full time equivalent employees (FTE) we have for purposes of the tax credit?
The number of FTEs is determined by dividing the total hours for which you paid wages to your employees during the year (but not more than 2,080 hours for any employee) by 2,080. The result, if not a whole number, is then rounded to the next lowest whole number.

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Example: For the 2010 tax year, an employer pays 5 employees wages for 2,080 hours each, 3 employees wages for 1,040 hours each, and 1 employee wages for
2,300 hours.
The employer’s FTEs would be calculated as follows:
Total hours not exceeding 2,080 per employee is the sum of:
a. 10,400 hours for the 5 employees paid for 2,080 hours each (5 x 2,080)
b. 3,120 hours for the 3 employees paid for 1,040 hours each (3 x 1,040)
c. 2,080 hours for the 1 employee paid for 2,300 hours (lesser of 2,300 and 2,080)
This adds up to 15,600 hours.
15,600 divided by 2,080 = 7.5, rounded to the next lowest whole number = 7.
366. How do we determine the amount of our average annual wages?
The amount of your average annual wages is determined by first dividing (1) the total wages paid by the employer to employees during your tax year; by (2) the number of the your full time equivalent employees for the year. The result is then rounded down to the nearest $1,000 (if not otherwise a multiple of $1,000). For this purpose, wages means wages as defined for FICA purposes (without regard to the wage base limitation). Example: For the 2010 tax year, an employer pays $224,000 in wages and has 10
FTEs. The employer’s average annual wages would be: $22,000 ($224,000 divided by 10 = $22,400, rounded down to the nearest $1,000).
367. Do we have to count our seasonal employees when determining the number of full time equivalent employees we have or the amount of our average annual wages? No. Seasonal employees (i.e. workers who perform labor or services for no more than 120 days during the taxable year and retail workers employed exclusively during holiday seasons) are excluded when determining if you have less than 25 full time equivalent employees for purposes of the small business premium tax credit and from the calculation of the employer's annual wage level for purposes of the credit.

Early Retiree
Reinsurance
Program
368. I heard that the federal government will subsidize my company’s retiree medical coverage costs? Is that true? Starting when?
Yes. Until the exchanges take effect in 2014, the federal government has created a temporary Early Retiree Reinsurance Program for employers providing health coverage to retirees (and to the eligible spouses, surviving spouses, and dependents of such retirees) between the ages of 55 and 64 who are not eligible for Medicare.
In order to receive benefits under the Program, you needed to apply for the program no later than May 5, 2011.

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The Program will reimburse eligible plans for a retiree’s claims equal to 80% of costs incurred between $15,000 (the “cost threshold”) and $90,000 (the “cost limit”) for plan years that start prior to October 1, 2010. The cost threshold and cost limits will be indexed annually.
To qualify for the reinsurance program, you must have a program in place to generate cost savings for participants with chronic and high-cost conditions. Any payments received must be used to reduce plan or participant costs such as deductibles, co-insurance, or other out-of-pocket costs. The payments cannot be used as general revenue for the employer receiving the payments.
On May 5, 2010, HHS released interim final regulations to implement the Early
Retiree Reinsurance Program. On June 29, 2010, HHS started accepting applications for the Early Retiree Program. HHS stopped accepting new applications on May 5, 2011. Applications are processed on a first-come, first-served basis.
Claims are reimbursed as well on a first-come, first-served order, based on the date the completed claim is submitted.
 To receive assistance, you must have your applications approved by HHS, document claims, attest that policies and procedures are in place to protect against fraud, waste, and abuse, and implement programs and procedures that have or have the potential to generate cost savings for participants with chronic and high-cost conditions.
 Claims incurred between the start of the plan year and June 1st,2010 are credited towards the $15,000 threshold, but only medical expenses incurred after June 1, 2010 are eligible for reimbursement.
 Your spending on retiree coverage is expected to remain level – payments should be used to offset premium increases or reduce participant costs.
 The program for “chronic and high cost conditions” applies to participants with conditions where $15,000 or more is likely to be incurred during plan year.  Your plan will be subject to audits to assure fiscal integrity.
369. When will the cost threshold and cost limit amounts be indexed?
Those amounts will be adjusted based on the federal government’s fiscal year of
October 1 – September 31. CMS announced that, for plan years that start on or after
October 1, 2011, the cost threshold is increased to $16,000, and the cost limit is increased to $93,000.
The original ERRP cost threshold ($15,000) and cost limit ($90,000) will continue to apply to plan years that start before October 1, 2011.
370. How and when will we know if our application for the Early Retiree Reinsurance
Program has been certified?
On August 31, 2010, HHS started notifying Account Managers and Authorized
Representatives of a plan sponsor via email that their application has been approved. The Account Manager and Authorized Representative will also receive a registration email from HHS' ERRP Center (errpnotice@errp.gov) inviting them to register for the ERRP Secure Website at: http://errp.gov/

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In addition, HHS has posted an interactive map and alphabetical list of the employers that have been accepted to date. The website for the map and list is: http://www.healthcare.gov/news/factsheets/early_retiree_reinsurance_program.htm l
371. We received notification that our application has been approved and we already have claims that are eligible for reimbursement. How do we submit the claims? You will use the ERRP Secure Website at http://errp.gov/ to register your plan’s
Account Manager and Authorized Representative, view and change application information; submit summary cost data, claims line-item data, and other information; and request ERRP reimbursements. You will also be allowed to assign the individuals and/or vendors responsible for submitting information on behalf of your plan and add or remove individuals, or designees, associated with an application.
372. When does the Early Retiree Reinsurance Program end?
PPACA appropriated funding of $5 billion for the Early Retiree Reinsurance
Program. Once the $5 billion in funding is exhausted the program will end (unless additional funding is appropriated by Congress). On December 9, 2011, CMS announced that any Claim List or Summary Cost Data submitted that includes a claim incurred date of January 1, 2012 or later will be denied in its entirety.
On February 17, 2012, CMS announced that the program had received requests for reimbursement that exceed the $5 billion in funding appropriated.
373. Is there anything we have to do to close out our participation in the ERRP program? Yes. If you requested and received an ERRP reimbursement, you MUST submit, for each applicable plan year, an error-free Claim List and corresponding
Reimbursement Request on or before April 27, 2012, (extended from March 30,
2012) that substantiates any amounts that have been reimbursed. This final report must be filed for each plan year and regardless of any other claim documentation that has been submitted. If you fail to submit the required Claim List by the deadline, then the reimbursed amounts will be deemed to be unsubstantiated, and CMS will initiate a process to recoup such amounts from you.
374. Is there a deadline for using ERRP reimbursement funds?
Yes. You are expected to use reimbursement funds for a permissible purpose as soon as possible, but not later than December 31, 2014.
375. Will we have to tell our employees if we are participating in the early retiree reinsurance program?
Yes. You must provide a notice to plan participants notifying them that, because you are participating in the ERRP with respect to the plan, you may be using the reimbursements to reduce plan participants’ premium contributions, copayments, deductibles, co-insurance, or other out-of-pocket costs, and therefore they may experience changes to the benefits under the plan.

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A model notice and instructions on the manner and timing of delivering the notice can be downloaded from the ERRP
Secure
Website at: http://www.errp.gov/download/Notice_to_Plan_Participants.pdf

Patient-Centered
Outcomes Research
Institute Fee
(aka “PCORI” or
“CER” fee)
376. What is the Patient-Centered Outcomes Research (PCORI or CER) fee?
PPACA established the Patient-Centered Outcomes Research Institute. Funded by the Patient-Centered Outcomes Research Trust Fund, the institute will assist patients, clinicians, purchasers and policy-makers in making informed health decisions through the dissemination of comparative clinical effectiveness research findings. The trust fund will be funded in part by fees paid by health insurers and plan sponsors. The fee is imposed for each plan year ending on or after October 1, 2012, and before October 1, 2019.
Updated: 11/19/14

377. How much is the fee?
For plan years ending before October 1, 2013, the fee is $1 multiplied by the average number of lives covered under the plan for the plan year. For plan years that end on or after October 1, 2013 but before October 1, 2014, the fee is $2 multiplied by the average number of lives covered under the plan for the plan year. The fee amount will be indexed annually starting in 2014. For policy years and plan years ending on or after October 1, 2014, and before October 1, 2015, the adjusted applicable dollar amount is $2.08 per covered life.
378. If our medical plan is insured, is there anything we have to do?
For insured plans, the insurer will be responsible for all the CER fee requirements including reporting on and paying the fee.
379. We sponsor a self-funded health plan. How will we pay the fee?
You must pay and report the fee on IRS Form 720, “Quarterly Federal Excise Tax
Return”. The Form 720 can be filed and paid electronically or submitted on-line using an approved transmitter software. The fee is due once a year (not quarterly), which will be due by July 31 of each year. Your payment and return will cover the plan year that ended during the preceding calendar year. For example, for applicable plan years that end in 2012, the first due date for filing Form 720 is July 31, 2013.
Information on paying the fee electronically through the Electronic Federal Tax
Payment System (EFTPS) can be found here: https://www.eftps.gov/eftps/.

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380. Our plan is not subject to ERISA. Do we still have to pay the PCORI fee?
Yes. The fee applies to church and governmental plans that are not subject to ERISA on the same basis it applies to ERISA plans.
381. We sponsor a single self-funded plan that covers employees of three other employer members of our controlled group. Is each employer member responsible for their own fee?
No. The fee is imposed on the plan sponsor of the plan, not each participating employer member.
382. If we have two plan options, one is a self-funded PPO option and the other is an insured HMO option. Will there be two fees for our arrangement?
Yes. For the insured plan option, the insurer will report and pay the fee. For the selffunded plan option, you will have to report and pay the fee.
383. Can we hire our TPA to file the return on behalf of our self-funded plan?
No. There is no way for a third party to file Form 720 on behalf of the plan sponsor.
The IRS indicated that the costs of establishing such a third-party payer program would outweigh the benefits given the limited period over which the fee will apply.
384. Can we use plan assets from our plan trust or employee contributions to pay the PCORI fee?
No. The fee is imposed on the plan sponsor, not the plan. As such, paying the PCORI fee generally is not a permissible expense of the plan for purposes of ERISA.
385. Our self-funded plan includes prescription drug benefits managed by a pharmacy benefit manager. We will have to pay two separate fees?
No. A single self-funded plan that provides two or more separate health benefits will only be assessed a single fee. Even if the prescription drug benefits are provided under a separate plan, you will still only pay a single fee as long as each plan operates on the same plan year basis.
386. We also sponsor a health care FSA and provide dental and vision benefits. Will we have to pay a separate fee for them?
The fee does not apply to HIPAA-excepted health FSAs and according to the final regulations, it does not apply to limited-scope dental or vision benefits that are offered separately from the medical benefits. An example from the regulations illustrates this point:
Example 1: Plan Sponsor D sponsors and maintains three separate plans to provide certain benefits to its employees – Plan 501, Plan 502, and Plan 503. Plan 501 is a calendar year plan that provides accident and health benefits on a self-funded basis to employees of Plan Sponsor D. Plan 502 is a calendar year HRA that can be used to pay for qualified accident and medical expenses for employees of Plan Sponsor
D and their eligible dependents. Plan 503 provides dental and vision benefits for employees of Plan Sponsor D and eligible dependents on a self-funded basis.

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Conclusion: Because Plan 501 and Plan 502 provide accident and health coverage and are maintained by Plan Sponsor D for the benefit of its employees, Plans 501 and 502 are applicable self-funded health plans that are subject to the fee. Because dental and vision benefits are excepted benefits, Plan 503 is not an applicable selffunded health plan subject to the fee.
387. We offer a health reimbursement arrangement (HRA) that is integrated with a high deductible health plan. Do we have to pay separate fees for each plan?
An HRA is not subject to a separate fee if the HRA is integrated with another selffunded plan that provides major medical coverage as long as you are the plan sponsor for both plans and they both have the same plan year.
However, if the HRA is integrated with an insured major medical plan, then the insurer will pay the fee for the major medical plan and you will be responsible for reporting and paying the fee for the HRA. You may treat each employee’s HRA as covering a single covered life. You are not required to include in your count of covered lives any spouse, dependent, or other beneficiary of the employee.
388. We don’t offer a major medical plan but we offer a stand-alone HRA to help our employees pay for their health care expenses. Will we have to pay the fee for the
HRA?
Yes. If you only sponsor a stand-alone HRA or FSA, you will have to pay the fee for that HRA or FSA. However, you may treat each employee’s health HRA or FSA as covering a single covered life. You are not required to include in your count of covered lives any spouse, dependent, or other beneficiary of the employee.
389. Will the fee apply to our EAP or wellness program if they provide limited medical benefits?
Even though they may be considered group health plans, the fee will not apply for an EAP, disease management program, or wellness program if the program does not provide significant benefits for medical care or treatment.
390. We have employees working and living overseas that are covered under a separate expatriate plan. Does this fee apply to that coverage?
No. The fee does not apply to any group insurance policy or self-funded plan if the facts and circumstances show that the policy or plan is designed specifically to cover primarily employees who are working and residing outside of the United States.
Individuals (and their dependents) would be deemed to be living outside the United
States if the address you have on file for the primary insured person is outside the
United States.
391. For our self-funded plan, how do we determine the average number of lives covered under our plan for the plan year?
For any plan year that begins before July 11, 2012 and ends on or after October 1,
2012, you can use any reasonable method for determining the average number of covered lives for the plan year.

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For subsequent plan years, you can choose one of three alternative methods to determine the average number of lives covered under the plan for the plan year:
 Actual Count Method – add the total number of lives covered for each day of the plan year and divide that total by the number of days in the plan year.  Snapshot Method – add the total number of lives covered on one date in each quarter, or more dates if an equal number of dates are used for each quarter, and divide that total by the number of dates on which the count was made. For this purpose, the date or dates for each quarter must be the same (for example, the first day of the quarter, the last day of the quarter, the first day of each month, etc.) or, each date used for the second, third, and fourth quarters must be within three days of the date in that quarter that corresponds to the date used for the first quarter, and all dates used must fall within the same policy year or plan year. There are two methods you can use under the snapshot method for counting the number of covered lives: o Snapshot Factor Method – The sum of the number of participants with employee-only coverage on the designated date, plus the product of the number of participants with coverage other than employee-only coverage on the date multiplied by 2.35; or

o

Snapshot Count Method – The actual number of lives covered on the designated date.

 5500 Method – add together the number of participants (i.e. employees or former employees) covered at the beginning of the plan year and the number of participants covered at the end of the plan year, as reported on the Form 5500 filed for the applicable self-funded health plan for that plan year. If your plan only offers employee-only coverage, then you would add the number of participants covered at the beginning of the plan year to the number of participants covered at the end of the plan year and then divide by two.
You must use the same method of calculating the average number of lives covered under the plan consistently for the duration of the plan year. However, you may use a different method from one plan year to the next.
392. Do we include COBRA qualified beneficiaries in our count?
Yes. The fee applies to individuals covered as COBRA qualified beneficiaries.
393. Do we have to count covered retirees and their dependents when calculating the fee?
Yes. The fee applies to retiree coverage whether provided under an active employee plan or a stand-alone, retiree-only plan.

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Transitional
Reinsurance
Program
394. What is the transitional individual market reinsurance fee?
A transitional reinsurance program will be established in each State to help stabilize premiums for coverage in the individual market during the benefit years 2014 through
2016. Under this provision, all health insurers and self-funded group health plans providing minimum value (MV) major medical benefits must make contributions for each individual covered by your plan to support reinsurance payments to individual market insurers that cover high-cost individuals. HHS and the Department of the
Treasury have developed an MV calculator for insured large group or self-funded plans to use to determine whether a plan provides the minimum 60% value. You can access the calculator and methodology at: http://cciio.cms.gov/resources/regulations/index.html. Insurers will report and pay the fee for insured plans and self-funded plans will report and pay the fee on an annual basis beginning in 2014.
395. How much is the reinsurance fee?
For 2014, the first year of the program, the fee will be $5.25/month or $63/year per covered life. The fee for 2015 is $44, and in 2016, it’s expected to be approximately
$26.
In addition, States are permitted to assess additional fees on insurers (but not selffunded ERISA plans) if they need to collect additional contributions to pay for the cost of the program.
396. So for our insured plan option, the insurer will pay the fee?
Yes. Health insurers will be responsible for calculating the fee and remitting it to
HHS. However, the insurer is not prohibited from passing the cost of the fee on to their policyholders through higher premiums or assessments.
Updated: 11/19/14

397. If our plan is self-funded, will the TPA be responsible for the cost of the fee?
No. As plan sponsor, you are liable for the cost of the fee. Your TPA can however assist you with determining the number of covered lives your plan has or can accept the responsibility to file and pay the fee on your behalf. Otherwise, you will pay the fee directly to HHS. By November 15th of each year of the program starting in 2014
(delayed until December 5th for 2014 only), you will have to report to HHS the number of covered lives subject to the fee. HHS will then notify you of your contribution amount. You would then pay your reinsurance contributions in two installments to HHS. The first of the two installments each year must be paid by
January 15th of the following year and would include the reinsurance contribution amounts ($52.50 for 2014) allocated to reinsurance payments and administrative expenses. The second installment ($10.50 for 2014) would cover the portion of the reinsurance contribution amount allocated to the payments for the U.S. Treasury and

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would have to be paid at by November 15th of the following calendar year. For 2015, the fee will be paid in installments of $33 and $11.
If your TPA is willing to report and transfer your contributions to HHS, you should work with your TPA to determine the timing of the collection of the fee and revise your TPA administrative services agreement to include the rights and obligations of each party to pay and remit the assessment.
If your plan is self-funded and self-administered (i.e. your plan does not use a TPA for core administrative functions such as claim processing (including the adjudication of appeals) or plan enrollment functions, it is exempt from the requirement to pay the fee for 2015 and 2016 (but not 2014).
Updated: 11/19/14

398. How will we pay the fee for our self-funded plan?
HHS will implement a streamlined process for the collection of reinsurance contributions. You, or your TPA on behalf of your plan, can complete all required steps for the reinsurance contributions process on the website Pay.gov including registration, submission of the annual enrollment count and supporting documentation, and schedule the remittance of your contributions. At this time, the website is only accepting payments via an electronic Automated Clearing House
(ACH) financial transaction.
After registering and creating a user profile, you, or your TPA on your behalf, will be required to complete a form called the “ACA Transitional Reinsurance Program
Annual Enrollment and Contributions Submission Form”. The form requires you to provide basic company and contact information. You will then select the type of payment based on how you prefer to make your contribution. Next, you will add your plan’s annual enrollment count. The form will auto-calculate the contribution amounts. You must then upload your supporting documentation in .CSV format for the applicable benefit (calendar) year no later than November 15th. To complete the submission, you will also submit payment information and schedule the two payment dates for remittance of the contributions.
CMS has released an Annual Enrollment and Contributions Submission Form User
Manual to assist you in completing the process.
399. What if we are already registered on Pay.gov for another purpose?
If you are already registered on Pay.gov, you do not need to create a new account.
You can use your existing account to carry out the reinsurance process.

Updated: 11/19/14

400. What type of supporting documentation will we have to provide?
You must upload supporting documentation for the enrollment count you provided.
The supporting documentation must be a .CSV format and must not exceed 2MB.
CMS has released the following materials to assist you in completing the supporting documentation:  Supporting Documentation .csv File Template – This template is an MS
Excel workbook that allows users to enter, validate and convert

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Contributing Entity information into a Comma Separated Value (.csv) file format.  Supporting documentation .csv File Template User Manual
New: 11/19/14

401. Do we need to include company-level information in the Supporting
Documentation file?
The Supporting Documentation requires you to include company-level information that identifies each Contributing Entity and its Annual Enrollment Count among other data. Information on each covered life should NOT be submitted. The Supporting
Documentation contains one (1) row for each Contributing Entity. Therefore, if you are a single Contributing Entity submitting your own Annual Enrollment Count, you should have one (1) row of data within the Supporting Documentation.
402. Is the Automated Clearing House (ACH) process at Pay.gov the only way to pay the reinsurance contributions payment for the 2014 benefit year?
Yes. HHS is implementing a streamlined approach to complete the contributions process through Pay.gov. Presently, an Automated Clearing House (ACH) process via Pay.gov is the only method being accepted for reinsurance contributions payment for the 2014 benefit year.
403. Will we be able to pay the full amount in one payment rather than two installments? Yes, as long as the full payment is made by the January 15th deadline.
404. Can we use plan assets from our plan trust or employee contributions to pay the reinsurance fee?
Yes. The Department of Labor has advised that paying reinsurance contributions would constitute a permissible expense of the plan for purposes of ERISA because the payment is required by the plan.
405. Our plan is not subject to ERISA. Do we still have to pay the reinsurance fee?
Yes. The fee applies to church and governmental plans that are not subject to ERISA on the same basis it applies to ERISA plans.
406. We sponsor a single self-funded plan that covers employees of three other employer members of our controlled group. Is each employer member responsible for their own fee?
No. The fee is imposed on the plan, not each participating employer member.
However, if each employer member maintained their own separate group health plan, then each employer member’s plan would be responsible for paying the fee.
407. Does the fee apply to just medical or does it also apply to our health FSA, dental and/or vision coverage?
The fee does not apply to health FSAs, dental, or vision coverage because they do not provide major medical benefits.

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408. We offer a health reimbursement arrangement (HRA) that is integrated with a high deductible plan. Does the fee apply separately to our HRAs?
No. An HRA that is integrated with a group health plan is excluded from reinsurance contributions because it is integrated with major medical coverage though the reinsurance contributions generally will be required for the high deductible plan.
409. We offer a stand-alone, retiree-only HRA that allows our retirees to purchase their own individual coverage. We will have to pay the fee for this plan?
No. A retiree-only HRA that reimburses expenses only until the account balance is exhausted is not considered to provide major medical coverage. Therefore, it is exempt from making reinsurance contributions.
410. Will the fee apply to our EAP or wellness programs if they provide only limited medical benefits?
No. An employee assistance plan, disease management program, or wellness program that does not provide comprehensive major medical coverage is not subject to the fee.
The fee also does not apply to coverage that is limited in scope such as hospital indemnity or specified illness polices.
411. We have employees working and living overseas that are covered under a separate expatriate major medical insurance policy. Does the individual market reinsurance fee apply to that coverage?
No. The reinsurance fee does not apply to insured expatriate health coverage as long as it’s limited to primary insureds who reside outside of their home country for at least six months of the plan year and any covered dependents.
412. Does this fee apply to plans sponsored by Indian Tribal Governments?
In most cases, yes. A plan offered by a Tribe to employees (or retirees or dependents) because of a current or former employment relationship is subject to the fee.
Conversely, plans (whether fully insured or self-insured) offered by a Tribe to Tribal members and their spouses and dependents (and other persons of Indian descent closely affiliated with the Tribe) in their capacity as Tribal members (and not in their capacity as current or former employees of the Tribe or their dependents) would not be subject to the fee.
Updated: 11/19/14

413. For our self-funded plan, how will the average number of covered lives be determined? To determine the number of covered lives under a self-funded group health plan for purposes of the reinsurance fee, a plan must use one of the following methods:
 Actual Count Method - Add the total number of lives covered for each day of the first nine months of the calendar year and divide that total by the number of days in the first nine months; or

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 Snapshot Count Method - Add the total number of lives covered on any date (or more dates, if an equal number of dates are used for each quarter) during the same corresponding month in each of the first three quarters of the calendar year, and divide that total by the number of dates on which a count was made. For this purpose, the same months must be used for each quarter (for example January, April and July) and the date used for the second and third quarter must fall within the same week of the quarter as the corresponding date used for the first quarter; or
 Snapshot Factor Method - Add the total number of lives covered on any date (or more dates, if an equal number of dates are used for each quarter) during the same corresponding month in each of the first three quarters of the calendar year (provided that the date used for the second and third quarters must fall within the same week of the quarter as the corresponding date used for the first quarter), and divide that total by the number of dates on which a count was made, except that the number of lives covered on a date is calculated by adding the number of participants with self-only coverage on the date to the product of the number of participants with coverage other than self-only coverage on the date and a factor of 2.35. For this purpose, the same months must be used for each quarter (for example, January, April, and July); or
 Form 5500 Method - Use the number of lives covered for the benefit year calculated based upon the “Annual Return/Report of Employee Benefit
Plan” filed with the Department of Labor (Form 5500) for the last applicable time period. If your plan covers more than self-only coverage, then the number of covered lives equals the sum of the total participants covered at the beginning and the end of the benefit year, as reported on the Form
5500. If your plan offers only self-only coverage, then the number of covered lives equals the sum of the total participants covered at the beginning and end of the benefit year, as reported on the Form 5500, divided by 2.
If the outcome of any of the counting methods is a fraction, you must round to the nearest hundredths (two decimal points).
414. We have a 7/1 plan year. In 2014, we moved from a fully insured plan (7/1/2013
- 6/30/2014) to a self-funded plan effective 7/1/2014. Since the transitional reinsurance fee is a calendar year fee – who is responsible for payment and how do we calculate and pay the fee for 2014?
Both you and the insurer would be responsible for paying a portion of the fee based on the portion of the year your covered lives were enrolled in the self-funded and fully-insured plans. The counting methods (except for the Form 5500 method) calculate covered lives based on enrollment in the first nine months of the calendar year and account automatically for partial years. So you will have to separately pay pro-rated fees based on the portion of the nine-month measurement period that your plan is self-funded using one of the approved methods. The insurer will also have to pay a pro-rated share of the fee for the portion of the year your plan was insured.
For example, if your self-funded plan had 500 covered lives on the first day of its new plan year of 7/1/14, and uses the snapshot count method on the first day of each

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quarter for the first three quarters of the year, you would use 0 lives for the count on
1/1 and 4/1, and 500 for 7/1 and then divide by three. Thus, you will pay approximately 33% of the cost of the fee for the year (assuming the covered lives count was relatively steady for the year). Meanwhile the insurer, if using the same method, would have covered lives counts on 1/1 and 4/1 while the plan was insured but would count 0 lives on 7/1 and divide by three. Therefore, they would pay approximately 66% of the fee for the year.
New: 11/19/14

415. We switched our plan from insured to self-funded in the middle of the third quarter of 2014. Can we use either of the Snapshot” counting methods in our situation? Yes, but you can't pick count dates in that quarter where you could report zero covered lives. For example, if you switched to self-funded on September 1st (that is,
62 days into the third quarter), you would not be permitted to use a date of July 1st or August 1st as the count date for the third quarter because this would not properly reflect the number of covered lives under the self-funded plan in the third quarter.
However, you would be entitled to reduce your count of covered lives for the third quarter by 62/92, the proportion of the quarter during which your self-funded plan had no enrollment.
416. If there is a reduction in the number of covered lives in the fourth quarter of the year, can we exclude those lives from our annual enrollment count?
No. You must submit an annual enrollment count no later than November 15th of
2014, 2015, and 2016, as applicable. The permitted counting methods calculate covered lives based on enrollment only in the first 9 months of a calendar year.
417. Do we count our employees or retirees that are covered by both our group health plan and Medicare?
You count them only if your group health coverage is the primary payer of medical expenses (and Medicare is the individual’s secondary payer). For example, a working 68-year-old employee enrolled in your group health plan would be counted for purposes of reinsurance contributions if your plan is the primary payer to
Medicare. However, a 68-year-old retiree enrolled in your group health plan for whom
Medicare is the primary payer would not be counted.
If a covered individual is eligible for Medicare due to end-stage renal disease or disability, then a reinsurance contribution would be required only if your plan is the primary payer to Medicare for that individual.
418. Do we include COBRA qualified beneficiaries in our count?
Yes. The fee applies to individuals covered as COBRA qualified beneficiaries.

Updated: 11/19/14

419. Our self-funded plan includes a self-funded prescription drug benefit managed by a pharmacy benefit manager. Will we have to pay two separate fees?
No. Two or more self-funded group health plans that collectively provide major medical coverage for the same covered lives are treated as a single self-funded group health plan.

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420. Our major medical plan is insured but our prescription drug coverage is carved-out on a self-funded basis. Will we have to pay two fees?
No. Where the major medical coverage is the insured coverage, the insurer is liable for the fee.
421. We have two plan options. One is a self-funded PPO option and the other is an insured HMO option. Who will pay the fees for each option?
For your HMO option that is insured, the insurer will be responsible for the reinsurance contribution associated with that coverage option. For the self-funded
PPO, you will be responsible for the reinsurance contribution associated with that coverage option.
New: 11/19/14

422. What do we need to do if we discover that the Form we submitted is wrong after the payment date has passed and the contribution was paid?
If you discover that data entered on the Form is incorrect after remitting payment, you will need to contact CMS at reinsurancecontributions@cms.hhs.gov to provide a disclosure of this error. You should include the following in the email: Pay.gov tracking ID, Taxpayer Identification Number, and Gross Annual Enrollment Count.
When submitting this information, use the subject line of ‘Discrepancy Disclosure' to ensure it is routed properly.
423. Will the 2015 and 2016 timing of the reinsurance contribution submission process be similar to 2014?
Yes. HHS anticipates that the contribution submission schedule for the 2015 and
2016 benefit years will be similar to the schedule for the 2014 benefit year.

New: 11/19/14

424. Can we deduct the cost of the reinsurance fee as a business expense?
Yes. Sponsors of self-funded health plans that pay Reinsurance Program fees may treat the fees as ordinary and necessary business expenses, subject to any applicable disallowances or limitations under the Code.

Health Insurer Fee
425. Are there any other taxes or fees we need to be aware of?
Yes. Beginning in 2014, a fee is imposed on insurers providing health insurance for any U.S. health risk during the calendar year in which the fee is due. Each year, the fee will be apportioned to the insurers based on each insurer’s relative market share of net health insurance premiums written for the prior year. The insurer must pay the fee no later than September 30 of each calendar year based on their prior year’s collected premium. They have indicated that the cost of the fee will be assessed to each policyholder.
Insurance coverage for long term care, disability, accidents, specified illnesses, hospital indemnity or other fixed indemnity insurance, benefits for medical care that are secondary or incidental to other insurance benefits, and Medicare supplemental health insurance are excluded.

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426. Is our self-funded health plan subject to this fee?
No. Employers that sponsor self-funded health plans are not subject to the fee.
427. Will this fee apply to our insured dental and vision coverage?
Yes. Dental and vision insurance coverage is subject to the fee, even if they are limited in scope and HIPAA excepted benefits.
428. If we have an EAP or wellness program that provides limited medical services, will the fee apply to those benefits?
Coverage provided under an EAP, a disease management plan, or a wellness plan will not be considered health insurance, and therefore will not be subject to the fee, if they do not provide “significant benefits in the nature of medical care or treatment”.
429. Does the fee apply to our insured retiree coverage?
Yes. There are no exceptions for coverage provided on an insured basis to retired employees. 430. We purchase travel insurance for employees that are travelling overseas. Will the fee apply to this coverage?
Travel insurance coverage that provides benefits for sickness or accidents occurring during travel is not subject to the fee provided that the medical benefits are not offered on a stand-alone basis and are incidental to the other benefits provided under the policy such as cancellation of a trip or event, loss of baggage or personal effects, damages to accommodations or rental vehicles, etc.
Coverage which provides comprehensive major medical protection for travelers with trips lasting 6 months or longer is subject to the fee.

Medicare Part D
Drug Subsidy
431. Will I still be allowed to deduct the Medicare Part D retiree drug subsidies I receive from the federal government? Will the subsidies still even be available?
The Act does not change the subsidy program, so the Medicare Part D retiree drug subsidies will still be available to you. However, the Act will eliminate the tax deduction starting in 2013 if you receive Part D drug subsidy payments. This will only affect employers subject to corporate taxes. Public entities, not-for-profit and religious entities are not affected by this change.
Even though the deduction is not eliminated until 2013, it will likely require immediate changes to your financial statements.

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Other
432. Will my employees see any other tax increases?
Yes. Starting in 2013, employees with income in excess of $200,000 and couples filing jointly with incomes in excess of $250,000 will see an increase of 0.9% in their
Medicare tax. However, you will only be required to withhold the additional FICA taxes on amounts exceeding these thresholds for employees to whom you pay in excess of $200,000. There is no employer match when you are withholding the additional Medicare Tax. More information on the Medicare tax increase can be found on the IRS website here: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-andAnswers-for-the-Additional-Medicare-Tax Starting in 2013, the Medicare tax (a total of 3.8%) will also be applied to net investment income for individuals or couples meeting the above income thresholds.
The tax is not withheld from wages by employers but employees may request that additional income tax be withheld from their wages. For individuals, the tax will be reported on, and paid with, the Form 1040. For estates and trusts, the tax will be reported on, and paid with, the Form 1041.
Also effective January 1, 2013, the threshold floor for deductibility of medical expenses on individual income tax returns is increased from 7.5% of Adjusted Gross
Income (AGI) to 10%. The AGI floor for those 65 and older (and their spouses) remains at 7.5% through 2016.

MISCELLANEOUS
433. Will reform reduce my health insurance costs?
This is the $64,000 question. Some economists believe there may be small reduction to health insurance costs due to competition from the exchanges. Insurance company analysts and lobbyists believe costs will go up because the individual mandate will not drive enough new insureds into the system to offset the added costs related to guaranteed issuance of policies and elimination of preexisting condition exclusions. 434. Are there any other requirements that I should know about that aren’t getting as much media attention?
New Voluntary Long Term Care Program: The Community Living Assistance
Services and Supports (CLASS) program was intended to create a new, national, voluntary long-term care benefit that would provide a cash benefit to participants if they became unable to perform at least two activities of daily life.
The program was scheduled to be effective January 1, 2011 but on
October 14, 2011, HHS Secretary Kathleen Sebelius notified Congress that there was no "viable path forward for CLASS implementation” to ensure solvency of the program. She also indicated that it would be suspended indefinitely.

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New Nutritional Labeling Guidelines: The Act requires chain restaurants with 20 or more locations and food sold from vending machines to display the nutritional content of each standard item on the menu or menu board, (including drive-through menu boards), or in close proximity to the vending machine selection buttons. The information should include the number of calories and percentage of daily diet requirements. Daily specials and temporary menu items (less than 60 days per year) are excluded from this requirement.
Tax on Indoor Tanning Services: The Act imposes a tax on indoor tanning services of 10% effective for services performed July 1, 2010 and thereafter.
Reasonable Break Time For Nursing Mothers: The Act amends the Fair Labor
Standards Act to require you to provide a reasonable break time for an employee to express breast milk for a nursing child for 1 year after the child’s birth, as well as a place, other than a bathroom, that is shielded from view and free from intrusion by coworkers and the public for such purpose. If you have less than 50 employees, the requirements will not apply if you can show they would impose an undue hardship.
The DOL’s Wage and Hour division has a website dedicated to providing information on PPACA’s break time requirement for nursing mothers here: http://www.dol.gov/whd/nursingmothers/ Adoption Assistance: The Act increases the adoption tax credit and adoption assistance exclusion by $1,000, makes the credit refundable, and extends the credit through 2011. The enhancements are effective for tax years beginning after
December 31, 2009.
435. Is COBRA coverage extended now beyond 18 months for my terminating employees? No, COBRA coverage is not expanded beyond the already existing 18-, 29- and 36month COBRA qualifying events. One of the proposed pieces of legislation did include an extension of COBRA until the date at which the exchanges opened in
2014, but that was not included in the final bill that was passed.
436. I’ve heard that several state attorneys general have filed a lawsuit against the federal government claiming that it is unconstitutional to force individuals to buy health insurance. Is it?
No. On June 28, 2012, the U.S. Supreme Court upheld the constitutionality of the individual mandate under Congress’ taxing authority. As a result, plan sponsors should continue their efforts to implement all the applicable provisions, including their long-term "Play or Pay" strategy.

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