pay or play?

E D U C A T I O N S E R I E S

Pay or Play?

Date: August 10, 2010

Presented by:

Dominic Franchini

Vice President Market Development, HORAN

William Freedman

Attorney, Dinsmore & Shohl

Marty Howard, CPA

Cassedy Schiller

Agenda - Pay or Play

Define the regulation, employers affected and timeline

Review the moving parts

Model options and costs

Identify tax consequences

Discuss employer notification requirements

Share other key points to consider

Regulation Highlights

Beginning in 2014, individuals must maintain “minimum essential coverage” or pay a penalty

Applicable large employers with 50 FTE’s may owe penalties• Failure to offer “minimum essential” health coverage • Offering “minimum essential” health coverage that is not affordable

Full time employee = 30 hours or more per week

Full time employees may be eligible to purchase coverage through exchange

Full time employee may qualify for premium credit

Who is affected

Businesses with 49 employees or less• Exempt from pay or play mandates

Businesses with 25 employees or less• Exempt from pay or play mandates• Eligible for tax incentives IF currently offering group health benefits

Businesses with 50 or more employees• Required to comply with pay or play mandates

Timelines

Insurance as “usual” until 2014• New discrimination rules• New underwriting requirements

W-2 reporting of 2011 benefits

Small business tax credit 2010 - 2013

Exchanges established by January 1, 2014

Pay or Play begins January 1, 2014

Things to Consider

How much does insurance cost my company today?

How much would I pay in penalties?

Is my benefit plan design compliant? Cost to change benefit design?

Do I have employees a 100% to 400% federal poverty guideline?

Is my contribution affordable for those employees?

How much would penalty be for employees receiving assistance?

How would employees purchase insurance outside employer? Cost?

For Example

Em

ployers Must

Offer Minimum Essential

- 60% actuarial value

- Grandfathered plan

(Tax deductible)

Offer Affordable- 9.5% or less of AGI

- Single coverage

- Lowest plan offered

(Tax deductible)

Offer Voucher- 8% - 9.8% AGI

= to ER contribution

(Not deductible)

Pay Penalty$3,000xFTE receiving

assistance

(Not deductible)

Pay Penalty$2,000xFTE-30

(Not deductible)

8

Employer Notification

Required notifications to employees (Not later than March 1, 2013)• Existence of an Exchange, description of services, how to get assistance• Employer plan’s share of total allowed cost is less than 60%, eligibility for premium tax credit• Purchase of health plan through exchange, outside free choice voucher, may forfeit employer contribution and tax deduction

Required notifications to Secretary of Treasury• Name / Address / TIN # / months enrolled for all FTE• Waiting period• Months during year coverage is available• Monthly premium for lowest cost option• Employer’s share of total allowed cost

Common Considerations

Divisions / Common ownership

Cafeteria plan

1099 employees

Contributions defined as % income