Friday, November 16, 2012

A Quick Look at the Patient Protection and Affordable Care Act (PPACA)


I had the fortune of attending the Pottstown Society of Human Resources (SHRM) Meeting yesterday.  It was an informative and interesting look at the Patient Protection and Affordable Care Act (PPACA) presented by Charon Planning consulting.  I would like to share some of the highlights from that PPACA presentation, supplemented with some additional information pulled from the SHRM and IRS websites. 

PPACA Rollout

Now that the PPACA is the law of the land, there are significant changes that will fundamentally transform almost every aspect of pay and benefits in the United States between now and 2018. 

For quite some time, many businesses were holding off on making changes due to the possible change in the landscape.  However, the election is over.  There will not be any changes in leadership between now and the rollout of this plan.  It is imperative for HR, Payroll, and Benefits waste no time in starting the change procedure.  Be sure to communicate changes to your employees as they happen as they will need the information to make their decisions.

FSA Changes 2013

The PPACA limits pre-tax contributions to Flexible Spending Accounts to $2,500 for calendar 2013.  There has been some further clarification by the IRS on that limit:  Employers that offer more generous FSAs have until Dec. 31, 2014 to roll out the changes to existing employees, but no new employees can have the higher limit during 2013 or 2014.  As a result of the PPACA, the “Use it or Lose it” rule may or may not be lifted, pending resolution by the Treasury Dept and the IRS.

Full Time Employees

The definition of Full Time Employee is changing in 2014, starting with a required “measurement period” for existing employees on Jan. 1, 2013.  Full Time is considered any employee who on average works 30 hours in a month, or could reasonably have been expected to have worked 30 hours.  After the “measurement period” of 1 year ends, the employees will be eligible for coverage based on the calculation.  There is than a 90 day time frame known as the “administrative period” where employees will be notified of their status and options.  Following that comes a “stability period”, which happens concurrently with the next “measurement period”.  There is a more complicated calculation which will be required for new 2013 employees where a calculation of an overlapping “stability period” will be required for 2014 and after.

90 Day Waiting Period

Starting in 2014, Employers will be required to determine within the first 90 days following hire whether an employee will be eligible to enter the employer based insurance.  Since a “measurement period” will not yet have been completed, employers will need to base this determination on expectation of whether the employee could be expected to work full time over the next year.

Full Time Employee Penalties

Per IRS codes 4980H(a) and 4980H(b), companies with greater than 50 employees of any sort will be required to offer coverage.  Full Time Employees will be required to be covered by “affordable” medical insurance.  If you do not offer coverage to these Full Time Employees, a $2,000 per employee penalty will apply.  If medical insurance is provided, but it is determined that it is not affordable under Safe Harbor calculations and any single employee chooses to use a heathcare exchange, the lesser of $3,000 per employee using the exchange or a $2,000 per employee (every employee) penalty will be applied.  If a penalty is applied, the employer will also lose their 35% pretax corporate tax savings on the cost of the medical plan.  Additionally, if the penalty is applied, the employer will also lose their 0.0765% FICA tax break.  In the event affordable coverage is offered by the employer, affordability being determined per the Safe Harbor calculation applied to both the individual, spouse, and family; and the employee chooses to enter the exchange, then there will not be a penalty applied.

Healthcare Subsidy

An employee can decide for any reason that an employer offered plan is not right for them, whether it is due to affordability or other issues.  Should they choose to decline the offer, they may receive a government subsidy for their healthcare.  Individual employees making less than $44,680 annually will be eligible to receive a subsidy.  Employees with a spouse making less than $60,520 will be eligible to receive a subsidy.  There is a graduated scale of subsidies which will be provided from the government based on the number of children and marriage status.

Out of Time

Okay, I am out of time to post for today.  There is really so much stuff here, I have barely scratched the surface of the PPACA.  I have not even gotten to the Heathcare exchanges.   If I have time, I will circle back around to PPACA in the future.  There is still so much information.

Disclaimer

Please note, this information is based on my understanding and is only to be used for informational and educational purposes.  Do not take what I am writing as advice.  Seek legal counsel before making business or personal decisions. 



Relevant Links:
http://www.shrm.org/hrdisciplines/benefits/articles/pages/fsaguidance.aspx
http://www.shrm.org/hrdisciplines/benefits/articles/pages/ppaca-full-time-employees.aspx
http://www.gpo.gov/fdsys/pkg/USCODE-2011-title26/pdf/USCODE-2011-title26-subtitleD-chap43-sec4980H.pdf
http://www.gpo.gov/fdsys/pkg/BILLS-111hr3590enr/pdf/BILLS-111hr3590enr.pdf

Organizational Links:
Charon Planning consulting group (http://www.charonplanning.com/)
Pottstown SHRM (http://gtrpottstown.shrm.org/)


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