 I'm very fortunate today to have with us a team from Ernst & Young, Dana Krieg and Tanner... Coulter? Coulter, that's what I get for not following my script. And I know what they're going to share with you today is going to be very helpful and insightful, as I've seen this presentation before. With the ACA becoming law, you know, we see new terminology surrounding counting employees, variable hour, payroll, accountability. And today we're here to provide you with insight into these new requirements and how your business needs to be prepared for and implemented them. So as I said, we have Tanner Coulter on my right, far right, who's managing human capital at Ernst & Young, Dana Krieg, Executive Director of Human Capital, which is an interesting title, but... Tanner is a member of Ernst & Young Human Capital Practice in the Dallas office, they're both in Dallas. Tanner is primarily focused on tax aspects of certain compensation and benefits matters. Tanner is a graduate of the Indiana University Mara School of Law and received his undergraduate degree from the Floyd University. In addition, Tanner is a member of the American Mara Association and Indiana State Mara Association. With Tanner, as I said, is Dana, who's Executive Director with Ernst & Young Practice in Dallas. Her primary focus is executive compensation and related projects such as short and long-term incentive plans. In addition, Dana has focused a significant amount of time over the past year educating employers on the impact of the Affordable Care Act. Dana has worked with clients in a variety of industries, including oil and gas, utilities, mining, retail, nonprofit manufacturing, and healthcare. So we have a lot of experience here, a lot of knowledge. I know that both Dana and Tanner said that as they go through the presentation, if you have questions, shout them out. Let's talk about it when it happens. We'll also leave a few minutes at the end if you have some additional questions you want to wrap up with. So without further ado, let me turn it over to Dana and Tanner. Great. Well, thanks for coming today out in the rain and everything. We're excited to be here and have the opportunity to speak to you guys. I think from the ACA presentations I've heard and the things that we've done, I think we take a little bit different perspective on ACA than a traditional HR consulting firm would or a law firm. What we've done is we have a group in D.C.R.E.Y. Washington Council and they've been tracking the Affordable Care Act since 2010 when it was implemented or passed. And so really they've been focused on not necessarily what do you need to do to your benefits plans to be compliant with this, but as an organization what do you need to do to operationalize this? This is a huge change and it's so much more than, you know, I need to cover dependent stage 26 now and I need to eliminate lifetime maximums and pre-existing conditions. It really is an organizational wide effort. And so what we did is we looked at it as a tax law because at the end of the day that's what it is. So we have our tax attorney here. You can talk about that. But it impacts IT, it impacts finance, it impacts HR, it impacts internal audit to an extent. It really is far-reaching in its implications. It's not just simply an HR issue. And it's not just simply let me change my benefits plans to be compliant. One second. So really what we are doing is going out to employers. We had a huge effort in January where, as Glenn said, I'm an executive comp person by background. But this is such a far-reaching effort that we actually had a huge training back at the first of the year when everybody agreed that this is going to be a reality now. This isn't going to change. And they really just trained all of us up, got us all up to speed on ACA and said, you know, let's go out and help clients because this is a lot bigger than I think most people realize. Of course, at the first of July, they did have the delay. So really the only thing that that's changing is that the penalties are going to be delayed a year. Everybody in America is still required to have healthcare coverage as of January 1st. Employers are still required to offer it or they won't pay a penalty this year, but they'll pay a penalty going forward a year from now. Medicaid expansion is still taking place and the biggest change, the exchanges are still opening October 1st. So there's a big employee communications effort that you guys are going to need to undertake so that you don't have employees going, hey, I think I'll go check out these exchanges and see what they have, you know, as opposed to just taking their own benefits and understanding what they currently have and not thinking that there's necessarily something better on the exchanges. You know, we've met with hundreds of employers over the past six months, six to eight months, and, you know, we've heard everything from, hey, well, I can go to the exchange to get healthcare for free, right? No, it's not free. Or, you know, I've heard the exchanges, it's going to be like $15,000 for an individual to get coverage. And there's a wide range of information out there. A lot of it is not accurate information. You know, a lot of this is still kind of a wait-and-see thing. But today we're going to kind of go through, from an EY perspective, what we think employers need to be thinking up to actually operationalize this, actually put this into action for your company. So, let's just skip ahead to page seven. So we do have this one-year transition period. And really what, in our perspective on it is, this is a good trial run. You have a year to kind of make sure you have the right processes, the right systems in place. You're communicating with employees. You're ready when these penalties and these filings are going to be required in 2015 to go. You're good. You're good to go. So really, you know, the delay is a good thing. We've seen a lot of employers who've said, oh, all right, good. Then I'm not thinking about it again for another year. But in our opinion, I think go ahead, take the steps necessary, start doing, you know, trials of stuff, figuring out where you need to get the data for the filings, understanding who's going to own certain processes. The exchange notification process is a big one. How is that going to work? Who's going to own it in your organization? How are you going to respond? Really kind of figuring all that out this year before it becomes a reality next year. Okay. So we kind of went over key dates. So the exchanges, again, that's a huge, huge, huge change. And this map basically shows you who is going to have state exchanges, who's going to have federal exchanges, and then who's going to have partner exchanges. So it's a combination of state and federal efforts. Texas, of course, is going to be a federally facilitated exchange. So the federal government will be running the exchange for the state of Texas. You know, really, again, we're already seeing the ads. I'm sure you guys are seeing the ads. You know, it's a market share game at this point. So we have 40 million uninsured Americans, and all of those insurance companies want their piece of them. So we're seeing ads in Dallas. We're seeing, you know, hey, come buy your insurance from us. You're getting stuff in the mail. And your employees are getting all of this. And so it's really important to kind of get out ahead of that, because the mandatory communication doesn't have to go out until October 1st either. And so, you know, to kind of eliminate hassle on your end, really communicating with your employees now and having them understand, hey, you are offered benefits. They're affordable. You know, they meet the minimum value requirement. You know, you don't need to go to an exchange, really kind of helping them understand what they have versus what the exchange can provide. The other thing that's big that's happening this year is the Medicaid expansion. So they're actually expanding the definition for Medicaid who's eligible. Texas is one that is not expanding. You know, the Medicaid population is huge. There was a statistic and I'm sure I'm going to get this wrong. But hopefully Tanner can remember better than I did. But there of the percentage of the population that's eligible for Medicaid, it is a tiny, tiny percentage that actually takes it. And so I'm not going to throw a number out because I'm sure it'll be wrong. But it's a very small number. So you have, you know, of that uninsured population that's out there, you know, a lot of those people could probably go on Medicaid. Particularly, you know, in states where they're expanding it, even more people will be eligible. All right, I will turn it over to Tanner and he'll kind of go through kind of the act itself and some of the basics around it that you guys should be aware of. And I'm sure this is, a lot of this is going to be old hat for you. But please ask questions as we go. We're, you know, we're here to help you understand this and kind of understand our perspective on it too. So as Dana mentioned, as part of this law, what was implemented were a lot of requirements for employers. A lot of what I'm going to talk about today applies to large employers, which I will get into a little bit later of kind of what that entails. But there are also certain provisions for small employers as well. So maybe just a show of hands just so I know the audience of how many people here are from organizations that have 50 employees or less. Okay, so everybody else is from an organization that's a little bit bigger. So the large employer provisions will apply to you and then for you people from small organizations as well, there are some certain rules that you need to be aware of. So I'll get into both. So the basic employer coverage rule, so as Dana mentioned, basically the whole gist of the act is that everybody, you, me, Dana, everybody has to have insurance coverage this year or you pay a $95 penalty on your 1040, you pay a tax. As part of getting everyone to have health insurance, part of that is what they call the employer mandate. So most people get health insurance through their employer and so the government realizes that and has expanded certain provisions and coverage requirements for employers. So basically the general rule is that large employers may be subject to an excise tax if at least one of their full-time employees whose household income is between 100 and 400% of the federal poverty level receives a premium tax credit for exchange coverage and an employer either fails to offer coverage to their full-time employees and their dependents or they offer coverage to full-time employees and it doesn't meet the affordability or minimum value requirements. So it's kind of a two-pronged test and there's a couple of different taxes that apply and we'll get into kind of the federal poverty level and what the premium tax credit is but the gist of the law is basically the government realizes that certain people aren't going to be able to afford coverage and so if you make a certain amount of money they're going to help you out with the tax credit and so the employer provisions kind of tie to that aspect. So the first question and so as I mentioned here the basic rule applies to large employers so what is a large employer? As I mentioned it generally is any employer with 50 or more full-time equivalent employees and it's a little bit more technical than that it applies to all common law employers so you could potentially be employing certain independent contractors but if the IRS comes in and says actually under the common law standard it looks like this is an employee of yours then that would be considered an employee for purposes of this law so that's almost a separate and distinct issue that I think Dana mentioned we have another year to get ready for this that you want to start looking at independent contractors looking at policies and procedures who your people are you really want to have a good kind of thumb on your pulse of who your employees are for foreign companies if you have and I'm not sure if that applies here but if you have 50 full-time equivalent employees performing work in the US you are also subject to the law if they have US source income so if you're issuing W-2s to these individuals then you're going to be subject to determine kind of if you're a large employer so if you come from an organization and you're right on the cusp you say I think we've got 53 people I don't know if they're full-time, full-time equivalents so you basically need to start it's an hours counting exercise so a full-time employee for purposes of this law is someone who works 30 or more hours a week and let me just say from the front we have very detailed slides here we only have an hour so if you want the slides at the end of the day we can send them to you but I am probably going to gloss over some of the mechanical aspects of how to determine large employer status I mean this kind of gets into you're going to count the number of full-time employees you're going to calculate the number of full-time equivalents so that these are people that basically you aggregate the number of hours of individuals so you could have 100 part-time employees but if all of their hours add up to what is known as a full-time equivalent you could still potentially be subject to the large employer rules and I think actually this was one of the initial things in the law when it came out that people went oh full-time is now defined as 30 hours, not 40 hours and a lot of the companies we've talked to are like well we defined it as 35 or 38 or 36 but now you have those additional people that are going to get captured in that 30 hours they will not so I think what in my example that I was mentioning if you had 100 people that were potentially working less than 30 hours you could potentially have more than 50 full-time employees and be considered a large employer but because you actually don't have any full-time employees there'd be no corresponding coverage requirement but if you had one, if you had one guy over here that's working 40 hours you would have to offer coverage to him because you're a large employer does that make sense? that's right sure? potentially if those full-time equivalents and full-time employees added up and aggregated is greater than 50 and you would have to offer those under 30 hours? you would only have to offer it to your full-time employees that just determines how you're working yeah it just determines, it's almost a two-step process so it's a split it would be large am I a large employer or am I a small employer? yes I'm a large employer so now I'm subject to these rules and have to offer coverage to anybody over 30 you're a large employer and you don't want to pay for the benefit of 35 hours can you drop them? because I'm hearing people are being dropped 25 hours per week so that the employer doesn't have to pay insurance you can that's a strategy that is a strategy and we are seeing companies that are doing that and I mean again that goes to a business decision is that sustainable? it's an employee relations issue are your employees going to be able to live on 25 hours a week? there's a lot of considerations there there's no penalty or anything? no in all of the meetings we have I've only heard of one organization on the west coast it's a large retailer that said I'm cutting everybody back to 20 hours and I'm not offering benefits period that was their business decision and obviously it becomes a competitive issue too if I'm not going to get benefits am I going to work for you? but yeah it is a strategy are there going to be any tracking software systems for this? because they're just myself and HR and it's very time consuming when we start getting all these time sheets we have to calculate to see who else works for the hour absolutely there are I know a lot of probably the big payroll providers are offering these services I don't know about some of the mid tier and smaller tier providers but I know there are software programs out there that track and put yeah I know we have payroll people absolutely does that make sense? if you have overseas operations as well as we'll say here locally you have less than 50 overseas maybe another 50 on top of that it only counts if they are receiving US source income so if you issue those people a W-2 or if they're solely in France and they get French wages and don't have anything to do with the United States then no there'd be a lot of analysis that would go into whether or not they would be receiving US source income but that's the general answer I think it matters whether or not somebody is subject to US source income then they likely are not receiving a W-2 they're not getting US source income if you don't look at them you're fine all you have to do is offer and that coverage has to be affordable and meet the minimum value test if I could just ask you to ask questions if you could project a little bit we don't have a microphone there is an exception for seasonal employees so this applies to certain retailers or certain agricultural type companies if your workforce exceeds 50 full-time employees for a certain part of the year that's four months or less you can potentially not be considered a large employer so some retailers pick up their employees right around the holidays to account for the excess volume if it's only for four months or less you can exclude those employees to the extent they are truly seasonal employees and back them out and then do your count and that may save you from actually being a large employer and there's certain guidance that we're actually still waiting on with respect to what a seasonal worker is it's really the DOL said it's a reasonable good faith interpretation and as we go through this there are a lot of things that are still awaiting guidance things could still change one item of note in determining large employer this applies on a controlled group basis and so I'm not sure how many of you sponsor a qualified retirement plan a 401k or a pension these are the same rules that apply for your qualified retirement plan requirements that you have to cover everyone in your controlled group so if you have a subsidiary that's included in your count for employees so you have to look across your whole organization on a controlled group basis to determine whether or not you have 50 employees so you can't say well I've got 25 here but I've got two subsidiaries that each have 15 all three of us are small employers actually you have to aggregate it we have 25 employees total and we're a large employer so what is a full-time employee you'd think it'd be pretty apparent but the IRS always makes things hard so you have to actually there's a definition for that so it's anyone who on average has 30 hours per week per month or 130 hours over a calendar month and an hour of service not only includes an hour of service but it includes hours when you're not working vacation, leave, holiday jury duty military duty those types of things and I will probably keep harping back to this but it's very similar to your qualified plan rules a lot of the principles for this law kind of came out of qualified retirement plan so it's similar when you're counting hours for your qualified plans you have to include vacation you have to include jury duty in certain things like that you can actually calculate the hours for hourly employees you have to count hours there's no way around it you have to actually receive time sheets or track it using some sort of software and understand how many hours people are working for your non-hourly or your salaried employees there's three different ways you can do it you can have them submit time sheets as well which I don't think we see very often and actually count hours or you can use an equivalency method basically the equivalency there's a day's worked equivalency and a week's worked equivalency the day's worked is basically you have to credit someone 8 hours of service on any day that they have 1 hour of service so if I come in for an hour on Tuesday I might have to be credited 8 hours for that day the week's worked is very similar if I have 1 hour on Monday I'm going to get 40 hours for that week so it's a very similar type of equivalency because the IRS wants to make sure you're not understating hours and people are not erroneously being excluded again it's very similar to a qualified plan the DOL has equivalency rules that are actually more generous than this but it's a similar type of principle so there are certain safe harbors so and let me go back really quick basically the general rule on people who are classified to be full time they must be eligible for your health plan within 90 days so you can have a waiting period but it cannot be longer than 90 days I'm glad you asked that because you're keyed up my next conversation so in order to count hours how do you do that the Treasury has provided what they call a measurement and a stability period safe harbors so you can basically select a period of time in which you count the hours so that can be from 6 months up to a year prior and you basically look at the individual's hours over that period and if it comes out to more than 30 hours during that period then the individual is a full time employee as far as your specific question on whether you can use the 130 versus 30 hours per week I'm actually not sure about that we'll note that and see if I can track that down let's think about that so it would be 30 times I think the 130 is almost a safe harbor type of rule but I don't know specifically but I think when you get into the calculation yeah I don't know we'll have to look at that and so again the measurement period you can have between 3, 6, 9, 12 months and then you have if you use a measurement period of 6 months of counting hours you have to offer what they know what is known as a stability period this is to prevent people from your example right there hey I'm 30 hours this week now I'm not I'm in and out of the health plan nobody wants that so basically you have to offer at least as long as your measurement period was so if you had a measurement period of 6 months you're counting hours for 6 months and I'm over 30 hours the individual has to be allowed to be in the plan for the next 6 months at least the same amount of period of time as your measurement period if my measurement period is a year then I have to stability period is a year as well so they'll be in a year I think a lot of employees are choosing what they're used to you have an annual open enrollment so you can count hours around the fall have your open enrollment October November and say yep you are over 30 starting January 1 you're going to be eligible for the health plan through 1231 and then we'll do it all over again the next year so that is the general kind of full-time employee in counting and who needs to be included I'll talk a little bit about the small employer provisions the general kind of ideas that small employers are not subject to the same tax penalties that large employers are so if you do all this analysis you realize you're under 50 employees you're not going to be hit with an excise tax if you potentially don't offer coverage that's minimum value or you don't offer it to everybody there are certain provisions under the Affordable Care Act that you need to be aware of there is what they're calling exchange which is if you have between 50 and 100 employees you can actually go through a special exchange for small employers and offer your coverage through there so I think the government kind of realizes that this is a very large administrative burden for smaller companies and so they're kind of helping out a little bit by saying hey you can offer coverage through our exchange and we'll cover some of the admin the administrative items for you in offering that coverage there is a small employer tax credit if you're less than 25 and there's certain wage requirements so if your average wages are no more than 50,000 there's certain credits that you can apply for so I'm not going to get into excruciating detail on that but just know that there isn't a credit out there for certain small employers and in some of the other requirements so you still small employers cannot offer their coverage based on the health of employee population so that's one of the things that's kind of across the board on the Affordable Care Act and then essential health benefits so if you're in the small group or individual market you have to cover what they're calling essential health benefits part-time employees so as I mentioned earlier large employers are not required to offer coverage to part-time employees so if I work if I do my measurement period and I determine that I work on average less than 30 or 130 a month over that period then I'm not I'm not going to be offered coverage offered coverage by the employer and that's fine if you do decide to say hey we've always offered coverage to anybody that's 25 hours or more there are certain rules you can't kind of give them crappy coverage because they're part-time employees so the waiting period still applies certain insurance market reforms apply there's preventative care there's no annual and lifetime limit so a lot of the overall ACA principle still apply if you're going to offer coverage to part-time employees I think they wanted to make sure that part-time employees were not getting kind of a raw deal so what happens if we screw it up or if we don't do this or decide not to comply with this as Dana mentioned at the front we view this as a tax law this is do this or we're going to hit you with an excise tax so really that's kind of the whole pay or play type thing and why companies are going to comply with this and again for next year nothing's going to happen if you don't comply there won't be any tax penalty starting in 2015 is when it's going to go into effect and I think she raised a good point at the beginning is that you really have been given a mulligan here and some companies are waiting and saying hey we'll we'll mess with this next year but all of the companies that we met with it was everybody seemed to be scrambling because for years nobody thought this was going to actually come into place there was oh well Romney's going to win the election and overturn it oh well you know what the Supreme Court's going to overturn it it finally passed everybody said oh shoot it's going to come into play now and we don't have enough time to implement this and people were really scrambling so now you've kind of been given an extra 12 months and I think it's it's good to start looking at processes looking at software and saying can we can we count employees looking at independent contractors and saying who are our employees so I think there's some key things that need to be done probably starting now and to understand whether or not you're going to be able to comply so basically employers will face taxes there's a new code section in the Internal Revenue Code 4980H which really governs a lot of this and as I mentioned at the front if you do not offer minimum essential coverage or if your coverage is unaffordable or not of minimum value and somebody that's eligible for a credit goes out to the exchange and gets a credit then you're going to be deemed and I'll get into a little bit more specifics around what those penalties are and then that last bullet like we said there's a transition period for the penalties for 2014 and they won't apply until 2015 but again all of this hinges on someone going to the exchange and getting that tax credit yep any questions at this point I'm sorry if you're a large employer yes subject to what I mentioned certain principles around you can't discriminate on health annual lifetime limit I mean there's certain things for small employers that have to look at and tweak it yes right and then just continue to offer to our folks on employees when we're doing yes right yep okay so independent contractors what are you talking about with regards to how much time they spend in your employee account or so this has said in the regulations under health care reform that they're going to look at the common law rules of who an employer is and what that means is the IRS has what's known as a right to control test so you may say that someone is an independent contractor you may have a contract with them and it may say I get paid on a 1099 I am not an employee of you I don't offer benefits the IRS may come in and say actually even though you say that there's 20 factors that we look at that says differently it says that you have the right to control this person this person's been there for five years what's the there's no real difference between an employee and this individual so even though you say that the IRS may think otherwise and that could create potentially certain issues so let's say you have 45 employees and 20 contractors the IRS comes in down the road a couple years from now and says actually 10 of these contractors appear to be employees and now not only are you liable for back FICA and an employer kind of taxes that you should have been withholding because this person's actually an employee now whoops now you're at 55 employees and you're a large employer and you haven't been offering coverage so we don't know how this is going to play out but it definitely is a consideration to start looking at your population understanding well maybe this person is an employee and we should actually make them an employee and start paying them on a w2 and withholding employment taxes and certain things like that so I think this year is a good time to understand your policies and procedures around that and understand if you're complying and these are more these are your people like I'm hiring Tanner to come in and do something versus I'm going through an agency and they're providing Tanner to me so I you know Tanner and we see this a lot actually a lot in the IT arena a lot of those you know your IT people are independent contractors but they have badges to get in your in your building they have access to all your systems they have an email with your email address you know I mean all of that stuff really points to oh they're functioning as an employee not an independent contractor and so particularly if you're kind of in you know on that cuss of you know maybe I'm right at 50 mark and you really have to be aware of that because if the IRS comes in and and looks at this like Tanner said and does their 20 factor test and says yeah these extra 10 people are really employees then you know you could be subject to additional penalties because you weren't offering offering coverage if you're already a large employer you already have more decision what I'm trying to figure out is do you have to offer self-care coverage for the company so the issue you'll face there and I'll get into this it's actually on this slide is the what we call the A penalty where you have to offer coverage to substantially all your full-time employees it ends up being a 95% threshold and if for some reason you had a lot of independent contractors that you were not offering coverage to but the IRS says no these are employees all of a sudden you thought you were offering coverage to all your employees but you may not be and you may fall below that 95% and now all of a sudden you're potentially hit with an excise tax penalty so now you're deemed to have not offered coverage to 95% plus of your full-time employees and that's the big penalty so that's $2,000 times every employee every full-time employee and you get to subtract out the first 30 but I mean that's the big penalty because they deem you as you didn't offer coverage and you know we had a client in Houston and Tanner actually worked a lot with them but half of their workforce was independent contractors who a lot of them were functioning in an employee capacity and so you know they really needed to look at that and you know either kind of change their arrangement with those people if they don't want to bring them on as full-time employees or bring them on as full-time employees and one more point and then I'll get to your question I think the again I will say we don't know how this is going to play out the IRS has not issued regulations or guidance on how they're going to enforce this but from what we've seen with employer or with the service the DOL and certain litigation and there's even a White House initiative this is a hot-button issue that the regulatory bodies are focusing on big-time they're focusing on back taxes and we all know they're struggling to pay for this law so I would not be surprised to see them coming in on piggybacking on an independent contractor review and applying the ACA penalties as well because it's a money grab I mean it's low-hanging fruit that potentially it could result in large revenues for the government but keep in mind this all hinges on someone goes to the exchange and gets the tax credit that has to happen before any of this other stuff comes into play so you and then there's a lot that they'll look at it's not necessarily just the time I mean from what you're telling me sounds like that it truly are kind of contractors you're contracted out to do your landscaping but again I think it is important for companies to look at things like that understand hey are we doing this right so it I mean it sounds like it's fine but you want to really get into the details and make sure you feel comfortable with that so the IRS has actually just recently issued guidance that basically if they are offered coverage through their agency then you're fine but it's going to be on you to look at that contract are you going to say to your agency hey what if you're not offering coverage and I get dinged for a penalty are you going to indemnify me for that so there's certain things that you want to work out with your agency to make sure that you're you're covered in case that they're not doing what they say they do or maybe it's you get a representation letter from the agency that says yeah we are offering coverage in this we've had an independent firm come in and say it meets its minimum value it is affordable we're offering it to everyone and to the extent this is wrong we'll pay the penalties so I think there's considerations on that side as well sure it affects them the same for the most part I think the only difference that we've seen so far is there was a PCORI filing that was due this past July 31st so this is again a way to fund part of this law of the patient-centered outcome research institute so this is a program that the government's putting in for health research I think self-funded in plans had to file that on their own fully insured the insurer filed that penalty or that excise tax filing yeah that's really the primary difference in fully insured versus self-funded is who's responsible for the filings and paying like the PCORI fee and the reinsurance fee and then I mean you're obviously if you're a self insured you're on the hook for making sure your own plan design works right I mean generally if you're fully insured your insurer is going to offer you something I mean they're not going to offer you a product that is not compliant so it's more just on you to make sure that what you're offering meets your minimum value is affordable then I don't think there would be a difference if you're kind of having that outsource okay we only have a little bit less than 15 minutes yeah so let me do a high level of just kind of the penalties so there's two penalties under 4980H there's what we're called a penalty because it's subsection A of that and this is the big one where if the large employer does not offer minimum essential coverage to full-time employees so 30 hours again and they're dependent you may face a tax of $2,000 multiplied by your total employee population if one of those employees goes and gets a credit so as Dana mentioned this is all hinges on the fact that I have somebody that's working for me that's making 100 to 400% of the poverty line they decide they don't want coverage with me they go out to the exchange and get a tax credit and are approved if that happens then all of a sudden I've kind of passed through the excise tax gate and now can potentially be subject to it if I'm not offering coverage and when we say full-time employees again there's kind of a the IRS wanted to prevent the fact that you get deemed for this if there's a foot fault so there's a 95% threshold so you have to offer it to 95% of your employees well and one thing to keep in mind you know poverty level you think oh that's really low and I don't pay any of my employees that low but it's one to four times which actually ends up being $44,000 or something like that so that's not you know that's good wages that's still going to put them in that category of being eligible for a tax credit so what you're saying we have to offer benefits to the dependent correct now dependence does not include spouse right so actually UPS was in the news a couple weeks ago because they said if your spouse can get coverage through their employer we're not covering them they're off they're not eligible for our plan and that was estimated to save them like $40 million a year or something what if the spouse doesn't work then they're going to have to they're eligible for UPS's plan but if the spouse can get coverage through their employer then UPS was saying they can't be on our plan just to kind of hammer home Dana's point and this is a little hard to see I know but at the bottom two rows of the online safe harbor for this year 100% was 11.5 but up to 400% is 45 almost $46,000 so if I'm making it if I'm making 45,000 salary I'm potentially eligible for a premium tax credit so it's not super low or paid people as you might think there are a lot of people that are going to be eligible for this and then let me get into the B tax because basically if your coverage you offer the coverage again if somebody goes and gets a premium tax credit but the coverage is for some reason unaffordable or it does not provide minimum value then the employer may face a tax of $3,000 multiplied by the number of full-time employees receiving the premium tax credit or $2,000 times the number of full-time employees whichever is less so again this is hinged on the fact of who's getting a premium tax credit okay I didn't know if you had a question and so again I don't know if they've covered this in sessions earlier today but the affordability and the minimum value standards do you guys are you all familiar with that or we can go over that pretty quickly yeah I can run so affordability is basically the employees share no spouses premium for the employer's lowest cost plan cannot exceed 9.5% of household income or the employee may be eligible for a tax credit so a lot of employers are saying we have no idea what household income is I mean somebody's spouse may be CEO of a Fortune 500 company but we're paying them $10,000 we don't know so there are certain safe harbors that you can rely on companies will have access to so there's a W-2 safe harbor so basically you know what you're paying employees you know what you're reporting in box 1 of a W-2 as long as the employee premium does not exceed 9.5% of what's reported in box 1 then it can be considered affordable there's a rate of pay safe harbor so the employee premium share cannot exceed 9.5% of basically the hourly rate of pay and there's certain kind of mechanical way to calculate that I think you use 130 hours per month again and then there's a federal poverty line safe harbor so if your premiums do not exceed 9.5% of the federal poverty line then the coverage will be considered affordable and again here's the slide kind of on the affordability these are some of the estimates and like I said there's a lot of detail here so if you do want to see these slides let us know and we can send these out minimum value a plan basically is not doesn't provide minimum value if the plan's share of the total allowed cost of benefits provided under the plan is less than 60% of such cost and this is generally an actuarial type analysis that's done to look at everyone and understand whether or not the company is providing 60% or more of the benefits so there's a certain cost sharing arrangement that has to be done in order to meet minimum value so you can't basically can't just make the employees pay for everything the employer is going to have to cover part of it or else it's not going to be considered minimum value yeah in our coverage for our employees in our county we have the basic health care insurance coverage and then we have another sign up where we sign up for optional coverages which the employees pay we pick up all the premiums on the basis and we have the optional vehicle dental and eye care on the rest in this will those two things be combined to arrive at that nine and a half or is that nine and a half does that just apply to the basic type of health care and not include dental care, eye care and all the rest it just applies to the basic it wouldn't be any sort of supplemental right assuming your basic meets the other requirements in terms of package that our employees somewhere could be paying up to nine and a half percent of their gross pay plus the major part that they pay for all this optional so their total insurance premium and eye care could get to be a cruiser yeah yep so I think that at a high level those are kind of the taxes I will that there are certain communications with employees in the IRS and we've kind of laid out the steps of how it'll work so one thing to be aware of is basically the employers under the federal labor standards act will must provide employees with information about coverage and availability of the exchanges by ten one so that's kind of a compliance deadline that you need to be aware of that these notices need to go out by October 1st and this is kind of in my opinion kind of tricky timing because if you're on a calendar your benefit plan you don't have open enrollment until probably November sometime so your employees are now getting these notices October 1st they're seeing all these ads for the exchanges they're hearing all the stuff about the exchanges but they don't actually they aren't getting their benefits information necessarily or the ability to enroll and change their benefits for another month to six weeks so that timing is going to leave some questions in employees minds and okay well what is better for me what do I have now I mean I know if I just think about myself I mean I don't think about my benefits unless I need to go to the doctor or it's open open enrollment I mean other than that I don't really give it a lot of thought so you know and if I'm just a normal employee if I'm not out at conferences talking about this I don't really get this I mean this is a very complicated law I think you know they're just going to see the ads they're going to hear stuff from their friends and it's going to be like okay what do I do can I go to the exchange and get it for free maybe I can I don't know maybe I need to check that out I mean I just think it's a critical time to really start communicating with your employees and making sure they know the value of the benefits that you're offering and the cost that they're incurring for that versus what they could potentially get on the exchange in summary so in summary there's a lot here there is there's a time here the reason you're here all day is because there's a lot of aspects of this law there's a lot of things employers need to be aware of start looking at your plans I think the key takeaway is the one year delay is not only a blessing from just an administrative standpoint but really to just start getting your ducks in a row I think we have no doubt this is going to go into effect at some point or another and really it kind of behooves employers to start looking at these items and start kind of making sure everything is going to be in compliance are you both staying through lunch? yes so Dana and Tana will be here get their contact information they'll be around I'm sure they'll be happy to speak with you this sounds like we could have done this for two or three hours on behalf of the chamber Dana and Tana I'd like to present you with Bill George's book he's a professor business, a Harvard business school this book's been noted by New York Times so one of the most important business books on leadership and he also is sort of a hometown boy he was chairman and CEO of Metronus Corporation for a number of years so we really thank you Tana this morning we'll join you in our welcome