W-2 Reporting and Tax Implications

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Welcome to NAHU's PPAC Certification module 6. This is Joan Fusco. What we will cover today is the W2 reporting provision, summary of benefits coverage, waiting period, automatic enrollment, deductibles and the class act. First, as you know, the PPACA was signed March 23, 2010 and there were 2,407 pages. A week later the President signed the fix it bill with 153 pages. So in Washington speak we have 2,560 pages. Since then weve had thousands of pages be reported by the agencies, HHS, DOL, IRS and all of these pages were intended to make the provisions more clear and try and assist carriers and employers and providers with understanding how to apply it in real life. So truly today we have probably more than 4,000 pages in explanation of making, trying to make this clear. The clarifications are very clear that they are listening to stakeholder comments and they are actually making changes as I will discuss in this module. Our value is knowing the details and strategizing with our employers. Our value as agents and brokers is to assist the employers in understanding these changes. If you have heard some of these provisions six months ago or a year ago, that is not whats happening today so its really vital that you remain in touch with the changes through NAHU or your other various sources in order to effectively assist employers. This is likely to change even more as time goes on and agencies find some of the logistics are really not workable on the street. So in addition to my comment on the stakeholder comments, its vital that you remain in touch with your legislators or anyone who is a decision maker here and tell them what you feel is working and what is not working and what could be made easier for the employer cause thats who theyre really focusing on is the employer. So the first provision in our discussion is the W2 reporting and the reference there is section 6051A14 and we try and give you references so you can research this yourself. If you are a research person like myself, you will have the sections to look at. You can look on your various legislative sources and probably even Google some of these and find it. But I urge you to only use reputable sources, NAHU, Health and Human Services, Department of Labor, IRS, but again make sure that youre looking at the most current iteration of the provision. If you look at something that was published a year ago, thats not gonna be the same as whats happening today in many instances. Its not vastly different but enough that it will make a difference to the employer. So the W2 reporting is generally providing aggregate cost of employer sponsored health insurance coverage and must be originally it was stated as being reportable January 2011. This has since changed with this requirement was postponed for one year. So now the supplies for tax year 2012 for W2s that are sent by employers on January 2013. This was a big change as a result of comments. Again very good thing and very good reason for all of us to remain involved. This includes coverage through insurance, reimbursement or otherwise. So that may effect some of you out there. For this purpose the aggregate cost to be determined under the rules similar to the rules of this IRS section referenced define the applicable premium under the rules providing for Cobra continuation. In other words what is reportable is the employer and the employee

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portion, what is paid to the carrier. This slide is telling you that the IRS notice dated March 29, 2011 made some clarifications. This notice provides guidance for employers on the 2012 forms W2 and those that choose to voluntarily comply for 2011. What happened was when this was first written and announced and discussed, many employers contacted their paymaster and wanted to be compliant right away or were moving in that direction. So some employers are doing this already from 2011 voluntarily because thats what they thought were going to happen. Nobody is saying they cannot do that. There is nothing against the law saying the W2 can provide this information. However now its only mandatory for certain employers. This notice includes information how to report, what coverage to include and how to determine the cost of coverage. So you can see the link to that notice and also I would urge you to please read 2012-9. That is a newer IRS document bulletin and that would provide you with more information if you worked with employers who have to comply. This is not going to be for everyone. This guidance provides transitional relief to employers filing fewer than 250 forms W2. So you can see theres a big change here. This only applies if the employer sends at least 250 or more forms W2. This will apply until 2014 but that date is changing as well. So at this point I would say that we dont know if this is going to apply to employers who send less at any time in the future. Stay tuned please. An employer is not required to report for employees who terminate and request their W2 earlier than January of the following calendar year. So as you know with W2s if I terminate employment earlier in the year I can request my W2 early and that still has to be complied with. However, this W2 reporting requirement does not apply if I ask for an early W2. Some of this may be important to your employers but please dont assume if youre hearing this and saying, Whats the big deal, this may be a big deal to a certain employer. So please add it to your reporting to your employers, to your PowerPoint, however you present to your employers every detail because you may not be aware that somethings important to them. Transitional release meaning it does not apply, so it would not apply to your HRA, in addition HSA and MSA dollars, standalone dental and vision. So this is dental and vision plans that are not integrated into another group health plan. These are standalone. Standalone by definition means offered under a separate policy certificate with separate election and separate premium. Also the release is for self insured plans of employers not subject to Cobra. So those are things like churches. We know that federal Cobra does not apply to churches, therefore the transition release means this W2 reporting would not apply to them. Reportable plans, cost for fully insured and self insured plans must be reported and that those plans include medical, prescription, dental and vision unless theyre stand alone, executive medical, on site clinic unless diminimus. Diminimus means any property or service, the value of which is so small as to make accounting unreasonable. So this might

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be a clinic at a hospital that provides full scale medical treatment would not be considered diminimus. So please make sure that your employers are aware of this. Not many employers have this but it is valuable for them to know. Must be reported is Medicare supplemental policies, and employee assistance programs if a Cobra premium would be associated to them should the person leave. So thats a big if. Retiree coverage is reportable only if the retiree receives a W2 and fixed indemnity plans are only reportable if the employer contributes and if its paid after tax. So this would probably include your mini med plans. Again only reportable if the employer is contributing and if the employee is paying after tax. Another note here is that partners are treated as employees while self employed are not and therefore would be not reportable and that would also count in your 250. So these are some valuable notes for your employers. What is not reportable? Long term care, accident disability, specific disease or illness policies, contributions to MSA or HSA accounts, salary reduction contributions to health FSA. Again only health FSA. So that means what is not reportable is the employee contribution via a cafeteria plan versus if the employer contributes to the health FSA, that would be reportable. So this is a huge distinction for you to remember. What is not reportable? Self insured group plans that are not subject to federal continuation. We spoke about that so that would be an example would be churches. Not reportable is the cost of coverage provided by the federal government, state government or any agency under a plan that is maintained primarily for members of the military or family. Not reportable would be things like accident insurance, disability, dental, vision, specific disease, long term care, workers comp and auto. Accepted benefits are not reportable. Limited scope dental and vision like we said. Also whats very important is the multiple employer welfare funds so if you have a multiple employer welfare fund, they would not have to report here. Controlled group is another important feature of this. Controlled group basis may apply, meaning all employer holdings will be counted in aggregate. However there is an electronic filing exemption to do with this. If each entity files via their own EIN number, each would be counted on their own. However if all of the common controlled group entities of this employer use a common paymaster, they will all be combined and count toward your 250. So there are some nuances here that need to be remembered and documented for the employer. Next provision for today discussion is the summary of benefits and coverage and the uniform glossary. This requirement, the purpose of which is to use a common format and easy to understand terms so consumers can more easily comparison shop. As we know today we have various benefit summaries from different carriers. If youre moving from one carrier to another its difficult sometimes to put them side by side and assist your employers in understanding who they work. Theyre on different lines. The verbiage

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thats used is different. So this supposedly is going to make the formatting the same and easy to understand. Beginning with the first open enrollment or plan year on or after 9-23-2012, health insurers and group health plans must provide the summary of benefits and coverage and make the uniform glossary available to eligible employees. And this also means the beneficiaries. Anybody covered under the plan has to have this information and please dont forget affected person who persons who are on continuation. An example of that might be open enrollment time a Cobra person may switch plans. Well they have to have a summary of benefits in order to totally understand the new plan and be able to effectively make a decision. This summary is in addition to the SPD plan document. In addition if they want, if the employer wants to combine them, this summary of benefits must be highlighted and displayed prominently as part of it. And the font as we will discuss can be no less than 12. So if your SPD is not 12 then this summary is going to really stand out. This is applicable to fully insured and self insured group plans, grandfathered plans and individual plans. So it really applies across the board. The summary need not be provided for accepted benefits. So whats an accepted benefit? And accepted benefit would be retiree only plans with fewer than two active participants, Medicare, MediGap, FSA or accepted under HIPAA, certain standalone limited scope dental and vision as weve said, HSAs. HRAs do not need a separate SBC for integrated HRAs it can be combined with a major medical. A standalone would need its own so thats an important distinction on your HRA. If its integrated it can be combined. If its standalone it would have to have its own. So who must provide the SBC? The group health plan issuer to the group health plan provided by the insurance carrier or the group health plan to participants and beneficiaries. Health insurance issuers offering individual plans and the SBC must be provided in writing and free of charge. So what this means in reality is that the carriers will be creating these SBCs. They will make them available on their portal for employers to retrieve. My experience is that some carriers who work exclusively with brokers are putting the oness on the broker to make sure that the employer gets it. So the thank goodness because of the complexity and you will see the expense involved with this as we continue to discuss this requirement. Thank goodness the carrier is producing this but the only; the penalty will only rest with the employer for not providing it when hes supposed to. Information that must be included, uniform definitions and this is a uniform glossary so its not specific to each employer. There is the uniform glossary that explains terms like deductible, coinsurance, appeal and this is just standard for everyone. A description of the coverage, description of exceptions, reductions, limitations, cost sharing provisions, renewability, continuation and beginning January 1-14 a statement regarding the minimum essential coverage and total allowed cost of benefits and we will I have examples of this to show you as we move on.

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Additional information which must be included, a statement that the SBC is a summary only and that the plan document should be consulted. Now this is really important sentence to think about. The SBC is a summary only and if its included in the plan document, the plan document will supersede so we really wanna be careful if we combine these or we just leave these as separate. The SPD will be the one that really is the end result if theres some kind of an appeal or a debate. Must include contact information for questions or for a copy of the plan. Information regarding network, RX formulary, coverage examples and the template. Here you see page one of the template. This is one of eight pages and Im hoping that it is legible. You will see that there is some valuable information. It says deductible, why the deductible matters. So it does go into more explanation that I have found on a carriers summary of benefits. And here you can see page two and this page is important and I want to spend a few moments on this. For every single plan the carrier must provide examples of having a baby and managing type II diabetes. These are the only examples. The original law, theres a third example about cancer but that was nixed because of space so these two affect a majority of the population or a big portion of the population. So you will see these two on every single plan that the carrier offers. Please note on the left where it says this is not a cost estimator. The problem we are seeing is that this is very, very general information. So if you have a member coming to you or to the employer saying wait a minute, this having a baby didn't work for me. The reason is this is a very generic informational summary of how it works under the plan but it may not be for each individual employee because the carrier cant know what deductible has been satisfied, whats been paid under the plan, what maximum out of pocket has occurred. So in some respects its not very useful for each info person but it is what it is at this point. And also the fourth page which we have not displayed the next template page for and I urge you to look at all eight pages. But the next page after this goes into why specific information is not on there. So you really need to be aware of these two pages to effectively be proactive with the employer who can be proactive with employees and say why this is not specific to each individual employee. This we didn't realize this when it was first issued but now have problems have arisen, this has become a big issue. So who gets the SBC? This Im just discussing with you at this point. Theres not a slide. Eligible employees and dependents. This must be provided to each participant or beneficiary who is eligible to receive benefits under the plan. So its not just the employee. Every single person has to get this. If a participant and the beneficiary are known to reside at the same address, a single SBC sent to that address will satisfy. However, if the beneficiarys last known address is different than the participant and the employer knows about it, then the SBC must be provided separately to that individual. So if anybody is thinking admin costs, this is certainly a huge admin cost for the carriers

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and for the employers. This requirement only applies if the employer knows of a separate address. So how would the employer know? If an employee enrolled and on the application there was a separate address for a child in college or a dependent at 26, that is the employer knowing and that means now they have to create a separate file to make sure that the SBC becomes available. And well talk about electronic delivery in a moment. So the formatting and the language requirements of the SBC, the standalone document as weve said and its no more than four double sided pages in 12 point font and grayscale. It can be paper or electronically distributed, more on that later. Culturally and linguistically appropriate language. So that does that mean? Just looking for a reference tool here. Culturally and linguistically appropriate, what the government has done is theyve taken; theyve looked via the census at every single county in the United States. And they have determined that if in any county someone is speaking Spanish, Chinese, Navaho or Tagala which is a dialect of Philippino, so if any county in the United States there are more than 10 percent who do not have English as their primary language but one of these four languages as their primary language and you can see Chinese was not on your screen but it is included. Again, Spanish, Chinese, Tagala and Navaho. If in the members county, this is not the employers headquarters ZIP code, for every member thats on the plan if any member is effected they also must receive this SBC in their language. For example I just looked, theres a document on CCIIO, the Center for Information, Consumer Information and Insurance Oversight. So if you Google CCIIO SBC culturally linguistically you will find the same list I did and it will show you in every single county what language applies. I can tell you as an example in New Jersey and New York there are three counties where the SBC must also be provided in Spanish. In Delaware and Pennsylvania there are no counties that have to be provided one of these four languages. I also can tell you at this point that the government is struggling with the Navaho so if they cant find a translator its gonna be a little difficult for the carrier to do so. So just note that that may be delayed a little bit. The delivery of the SBC, we have multiple times when this must be theres a trigger for this. Upon request or at any time within seven business days they have to be provided to the individual. The employer must provide this. For new employees it must be provided at enrollment time. It must be included with enrollment materials. So what the employer needs to do, what we need to do to assist employers is to make sure that every single carrier has a link on the employer portal on their website for every single plan and that the employer can readily provide this. Again the employer is the only one whos going to be fine if its not provided. If some disgruntled employee goes to the Department of Labor. So for new employees it has to be provided at enrollment. It has to be provided at HIPAA special enrollment time. That would mean that if I waived off my employers coverage because I was covered under my spouse, my spouse loses his

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coverage, now I want to enroll, thats called a HIPAA special enrollment and I would have to be provided with an SBC within 60 days following the enrollment. At the time of application or renewal with the open enrollment materials and this must be provided again to eligible employees and anybody covered under the plan or eligible to be covered under the plan. You can see this is very, very costly and time consuming for all of us. We have to set up a system and assist the employer to set up a system to be aware of this first of all and then to be able to provide it. Additional distribution information, if a modification takes place and I see a typo there, we apologize. If a modification takes place prior to the first day of the plan year, a new summary is required. So if during the plan year the carrier made a modification to the plan, we have to make sure that every employee and beneficiary has the new SBC. If the plan administrator is aware of a dependent with a different address as weve said, it must be mailed. And this is the qualified medical order which is a federal requirement imposed on the employer to make sure that children are enrolled. Thats what the QMSCO is. The different address applies in all circumstances. Electronic delivery rules for delivery from Arissa group health plans to participants, they must meet the general Arissa delivery rules. So the format has to be readily accessible by the plan, the SBC is provided in paper form free of charge. If the electronic form is an Internet posting the insurer advises in a timely manner the plan and paper form or e-mail that the documents are available on the Internet. So this, an example of this might be white-collar versus blue-collar company. So if we work at a white-collar company and we always get notifications via e-mail and everyone has access to it on a daily basis, work wise, then the employer can use this format for the SBC distribution. If you dont have that situation the employer is going to have to print them out and make sure that everyone gets it. Unless otherwise requested by the individual, the SBC must be provided in paper form. May be delivered electronically and weve discussed that. If the request for information is made electronically or if the application is submitted electronically. So if you have a company, usually a larger company where people enroll via themselves without paper on the Internet then you can certainly use this vehicle for the SBC distribution. The delivery from insurer to the individual for an individual policy, so these are non group situations. They must be requested that the individual acknowledge receipts, make the SBC available in a format readily usable by the general public which is going to be different from your employer situation. So if you sell in the non group market this would be important for you to have readily available. Post the SBC in a prominent, easily accessible location, provide the paper copy free of charge and enable a request for an SBC on both the insurers website and via phone. Again this slide would relate strictly to non group situations.

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Modifications to the SBC. This thank goodness was changed because originally what the PPACA stated was any change at any time there had to be a 60 day prior notification to persons covered under the plan. So since then the change says that 60 day modification notification need only happen if the change happens off renewal. So for renewal changes we dont have to send this. If however an off renewal material modification happens, a notification has to go to every single person telling them of the change and it must go 60 days in advance. Whats the definition of a material modification? Changes that enhance or reduce benefits, increase premium or cost sharing or it imposes new referral requirements. Modification notice may be a separate notice describing just the material modification or an updated SBC. My experience since this has become effective is that one carrier in my state has determined that they will be policing these changes. So if theres an off renewal change, this particular carrier says they want all paperwork and election forms 75 days before any off renewal change in order to make sure that the employees have adequate notice and in order for the carrier to provide a specifically dated SBC to this change you will notice on the SBC at the top it gives dates of coverage. So this particular carrier has said well if the original SBC said 1-1 through 12-31, this material change off renewal cant say the same thing. Therefore the carrier has to notify the employer has to notify the carrier of the change request and if its going to happen on March 1st of the year then the carrier wants to create an updated SBC that says this coverage period is March 1 through 12-31. So hoping that carriers dont go down this path because what I have found is there were several employers not realizing that they had to send it or they did send it but the carrier still wanted the notice. And what they did is they just moved carriers. So thats a really horrific subsequent result of what happened. So please be aware of this. You may even want to poll your carriers to see how theyre handling it but this was really an unintended consequence. Okay, still on the SBC regarding carve out benefits. Health and Human Services has provided a one year postponement for incorporating carve out benefits into the medical SBC. So for one year employers may provide multiple SBCs to their employees as long as the SBCs are understandable and provide an explanation and this example would relate to RX benefits. As it relates to HRAs, these are add ons. This is what the government is calling add ons so the final SBC regulations provide that standalone HRA must satisfy the SBC rules. An HRA that is integrated with other major medical can simply modify the SBC for that coverage and this; the word simply should really not be there because it is not a simple task to integrate the medical with the HRA. But if it is integrated then a separate SBC. This would also include add ons like HSA or wellness so please keep that in mind. And add on is an add on. It doesnt always apply to HRA. The effects of such add ons can be denoted in the appropriate spaces in the SBC for deductible co-pay, coinsurance and benefits not otherwise covered by the major medical plan. The coverage example should note the assumptions used in creating them so there

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is a significant amount of work, my experience has been that the TPAs assisting with HRAs are going to assist with these SBCs so please reach out to them. They do have the knowledge and the contacts with the IRS on this I have found. The uniform glossary is part of the SBC requirement but this does not have to be distributed. The employer only need have this available. So either on their website or in some way that its available for all employees. Its uniform definitions, as weve said, its very, very useful and I found it very useful for new employees. So if you as a broker are hiring new people or if the employer has a new HR person, I think this is a very effective means of explaining to them rather than going one by one what all these terms mean its all in one place and I would suggest your have a copy to distribute when you go to your employees. The glossary must be available within seven days of request. But again they need to know where it is. It doesn't have to be overtly distributed. And then we have penalties. Most employers wanna know okay, now that I have this requirement, what happens if I dont abide? An insurer or health plan that willfully fails to provide an SBC will be subject to a fine of $1,000.00 but this is really up to the employer. The Department of Labor has enforced, enforcement authority over Arissa plans and may issue separate penalty regulations. Failures are also subject to an excise tax. However since this originally was provided we find that there is a one year safe harbor, meaning that if everybody is trying to work toward this result in providing the SBCs there is a one year safe harbor where there will be no penalties. So we have employers and carriers and brokers all trying to learn about this, trying to do the right thing and if that is on its way to fruition then there will be no penalty. Next provision for this module is discussion of the waiting period limitation. Effective 2014 group health plans and group health insurance may not impose a waiting period that exceeds 90 days. So you see the section here of the public health service act. The definition of a waiting period means with respect to a group health plan, an individual who is a potential participant or beneficiary, the period that must pass with respect to the individual before the person is eligible to be covered. So thats our official definition of waiting period. So HIPAA, Health Insurance Portability And Accountability, the requirement defines the term waiting period and we just went through that. So the first of the month following 60 days may no longer work because the maximum waiting period is going to be 90 days. So and it will go into an example here. So this might not work and I was trying to look at examples of what how this might not happen. If somebody is hired May 2nd and they have to wait the first of the month after 60 days, if you do the math that might not work here. So really, really have to go through every single employer and dont assume that the first after 60 day works. Im concerned here that the first after 60 days may actually go away but you can figure that out on your own.

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This 90 days interacts with the individual mandate exception of short term loss of insurance so that means that the individual mandate that applies to all of us as Americans on 1-1-2014, meaning that if we dont have coverage we have to pay $95.00 or 1 percent of income whichever is lesser. So this 90 days will interact with the individual mandate where you would not the person would not have to suffer a penalty if they were in the waiting period. Also interesting and related is that the employer shared responsibility or the play or pay penalty will not be impacted if the employee is in their 90 day window. So that means the play or pay is not part of this module for purposes of the certification but the play or pay applies to employers who have at least 50 or more full time equivalent employees how may not offer coverage or coverage that is not minimal or affordable. So under that provision if someone is under a waiting period of 90 days, the employer would not suffer a penalty. There are several very good IRS bulletins on this. 2012-2, 2012-17 and 2012-59. Good in a sense that when comments were provided and explanation was provided and comments were solicited from stakeholders, so that means employers, brokers, carriers, everyone whos involved, they responded to say well this is going to be very difficult for an employer who positions eligibility based on the number of hours worked. And what about an employee who works variable hours? You do have many industries for example, home healthcare aides, security guards, there may even be restaurant type individuals who work variable hours. Who is to determine whos full time here? So these bulletins provide much latitude for employers who have variable hour employees or who condition employment on the number of hours theyve worked. For example if I have a company and I do not permit persons to enroll for coverage until they have satisfied 1,200 hours of work. That would be a problem under this provision and that is there is the variability here and the latitude in these bulletins. And this is really something that if you work with these type of industries, you need to study these and be aware of the latitude. I mentioned that as much as I can this changed because of comment from you and me and employers and everyone out there whos reading this and trying to make sense of how this is really going to work on the street. So this was a very good knowing that these agencies are willing to work with employers is really excellent. In these bulletins you will see though, with all of that said, the maximum waiting period using all those calculations provided is going to be 13 months. So the employer does have latitude but he cant just go on forever and not provide coverage. So it demonstrates the agency willingness to work and thats a very important message here today and that we really need to keep in mind. Id like to read from you from some of the guidance on the 90 day waiting periods limitation. As weve discussed the agencies HHS and DOL have really taken seriously the comments that weve provided regarding this impact to employers, especially employers that have employees with variable hours or that are start out part time and then slowly move to full time or who condition enrollment in the group health plan on the

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number of hours. So I dont mean to read to you but I think its important that you realize where to find things and how seriously the departments have taken our comments. This is notice 2012-59, Guidance on 90 Day Waiting Period Limitation and Im going to read you excerpts from it. The PHS Act which is the Public Health Service Act does not require employers to offer coverage to any particular employee or class including part time. They merely prevent an otherwise eligible employee or dependent from having to wait more than 90 days before coverage becomes effective. The departments invited comments on the 90 day waiting period in addition to requesting comments on the employer shared responsibility. That just happens to be in the memo. Specifically the guidance outlined in approach under which employers would be permitted under certain circumstances to use an eligibility condition requiring and employee to complete a specified number of cumulative numbers of service in order to be eligible under the plan. The guidance provides temporary guidance on what the departments will consider as compliance with PHS and this guidance will remain in effect at least through 2014. Important to note, this will not be forever but at least through 2014. Regulations or other guidance on these issues applicable for periods after 2014 will provide adequate time to comply with any additional modified requirement. So we can assure our employers that they can use this for a couple of years with ample notice to when it changes. For this purpose, being eligible for coverage means having met the plans substantive eligibility condition such as being in an eligible job class or achieving job related licensure requirements specific to the plan terms. And Im excerpting this because its very important to note that we as stakeholders, including employers said that many times an employer has licensure requirements and they really understood and took that to heart. So other conditions for eligibility under the terms of a plan are generally permissible under PHS unless the condition is designed to avoid compliance with a 90 day waiting period limitation. And this is stated throughout all of these bulletins permissible unless the condition is designed to avoid compliance. So if there was ever a disgruntled employee, or someone were to call the department, that is what they would be looking for. Are you trying to circumvent or you really trying in good faith do the best that you can? Continuing with this bulletin, if a group health plan conditions eligibility on an employee regularly working a specified number of hours per period or full time and it cannot be determined that theyre reasonably expected to regularly work that number of hours, the plan may take a reasonable period of time to determine whether the employee is going to meet that condition. And the departments are calling this a measurement period. And if the measurement period is consistent with the timeframe permitted for such determination it will be permissible. So except when a waiting period that exceeds 90 days is imposed after a measurement period, the time period for determining whether an employee is eligible will not be considered tying to skirt the law. Very, very important.

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Ninety day period limitation if coverage is effective no later than 13 months after the employees start date plus if the employees start date is not on the first of the calendar month, the time remaining until the first day of the next calendar month. So were going to go into two examples because if you were hearing this for the first time and when I read it for the first time my reaction was okay, lets say this another 17 times to understand it. The basic message here is that the coverage must be effective no later than 13 months after this measurement period has been established. So here are some examples which illustrate the employer really not intending to avoid compliance. So if an employer under employer Ys group health plan, only employees that work full time defined as regularly working 30 hours a week are eligible for coverage. The employee begins work for this employer November 26 of year one. The hours are reasonably expected to vary with an opportunity to work between 20 and 45 hours per week depending on shift availability and the employees availability. Therefore it cannot be reasonably determined if this employees start date and the expected work full time date under the terms of the plan, variable hours, are eligible to enroll in the plan if they are determined to be full time after a measurement of 12 months. Coverage is made no later than the first day of the first calendar month after the 12 month period. This would be would not be considered to be designed to avoid compliance and this employer policy would be in compliance with the law. So a second example would be if the employee begins work 25 hours a week on January 3rd is considered part time. The employer sponsors a group health plan that provides coverage to part timers but only after theyve completed cumulative 1,200 hours of service. This employee who was hired January 3rd satisfied the plans cumulative hours of service on December 15th. So the cumulative hours of service condition with respect to part time employees is permissible and is not considered to be designed to avoid compliance. Accordingly coverage for this person under the plan must begin no later than the 91st day after the person works 1,200 hours because the employer has set 1,200 hours as the hours of service. If the plans cumulative hours of service requirement were more than 1,200 days the department would consider the requirement to be designed and would not be permissible. Im reading you right from the bulletin because I feel theyre very, very effective examples and what I see on a daily basis and that is again, bulletin 2012-59. Next under this module is the regarding automatic enrollment, employers with more than 200 full time employees must automatically enroll new full time employees in the lowest cost health plan offered with the ability to opt out. This is applicable to insured and self funded plans without regard to grandfather status and we mention this because many plans exclude grandfather but this one does not. We are really awaiting further guidelines. The automatic enrollment would be subject to any waiting period so that this does not mean that an employer could not have a waiting period. So we do need some more definition on this but you need to be aware of it only applies to 200 or more full time employees.

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Next is about deductibles and out of pocket limits in the small group market. Now note small group market here. Under PPACA a small employer is up to 100. Many states have kept the 2 to 50 mark so states will be able to keep the 2 to 50 definition until 2016. So whatever state youre in, your small group market definition, the parameter, deductibles cannot exceed $2,000.00 for individual and $4,000.00 for family. Now it remains to be seen if the carriers will offer higher deductibles assuming that the employer will fill any gap. Deductible amounts may be increased by the maximum amount of reimbursement reasonably available through an FSA. So if the employer is funding the gap with an FSA, he can have a higher deductible but again, I dont know how its going to work in the real world. Will the carriers offer higher deductible assuming that thats out there? If they do, they have to assume that employers are even aware of this. If they do and put the employer in jeopardy the employer that will not be a qualified health plan. So Im really at this point we dont know how the carriers will react to this. And the $2,000.00 will be indexed annually. Then regarding the class act, this was abandoned but not repealed. It is still on the books. It would really be a good idea to get it off the books so it doesn't rear its ugly head at some point in the future. Originally it was when it was not originally its still on the in the law. Its a national voluntarily insurance program for purchasing community living services and support. Options for people who become functionally disabled and require long term care with guaranteed issue and a supplement to private long term care. The reason why it was abandoned, it was because the numbers had to work and it had to be self sustainable and it could not happen because of the way it was set up. Persons would have to individual employees would have to pay a sizeable amount every month in order to fund their own long term care. They would have to be vested for five years in order for this to happen and the return was so minimal it wasn't worth it. So the return would be maybe $50.00 a day and as we know in todays market, $50.00 a day maybe covers two hours of a non professional home healthcare visit. Who knows what that would mean if I was vested in this program for five years, $50.00 a day would be meaningless and it could not be sustainable because people could opt in and out of the program. So it was abandoned, its not repealed. Those are some of the few facts. You can certainly research this on your own but frankly its not worth the effort because it is not going to happen. And thats the end of my presentation for today. [End of Audio]