1) Health Care Reform Key Points Contact Us 855.220.8634 HealthCareReform@eidebailly.com w w w . e i d e b a i lly.com www.eidebai l l y . c o m 

2) Individual Implications • Individual mandate to have health insurance • Penalties applies if NO health insurance 2014 - $95 per person or 1% of income; • 2015 - $325 per person or 2% of income; • 2016 - $695 per person or 2.5% of income • • High wage earners (MFJ > $250,000, Single > $200,000) Medicare payroll tax (.9%) • Net investment income tax (3.8%) • w w w . e i d e b a i lly.com www.eidebai l l y . c o m 2 

3) 2013 Provisions • • • • • • Medicare tax for high wage earners (.9%) Net investment income tax for high wage earners (3.8%) Medical device excise tax Improving preventive health coverage Medical itemized deductions increases from 7.5% to 10% Limitation on health flexible savings accounts w w w . e i d e b a i lly.com www.eidebai l l y . c o m 3 

4) Health Care Reform Impact on Business w w w . e i d e b a i lly.com www.eidebai l l y . c o m 

5) Employer’s Key Number Is ≥ 50 = Applicable Large Employer and subject to penalties ≤ Full-time Equivalent Employees w w w . e i d e b a i lly.com www.eidebai l l y . c o m 50 = Small Employer and NOT subject to penalties 5 

6) Full-time Equivalent Employees • Employed an average of 50 full-time equivalent employees in the previous calendar year 1) 2) • Full-time employees include all employees who work on average at least 30 hours per week (monthly test is if they work 130 hours or more hours per month). Full-time equivalents include adding your part-time employees (those who work less than 30 hours per week) and your seasonal employees. Analysis is done on a monthly basis w w w . e i d e b a i lly.com www.eidebai l l y . c o m 6 

7) Large Employer (> 50) NOT Offering Insurance • Employers NOT offering health insurance: • A penalty of $2,000 per year/per FT employee (and seasonal employees the month they work full-time) • Exempts the first 30 employees from computation • Example: 100 employees and one goes to an Exchange and receives a subsidy • Penalty = (100-30) x $166.67 = $11,667/month • $140,000 annually • • Triggered on all full-time employees if one full-time employee goes to the exchange and receives a subsidy Penalty is NOT tax deductible w w w . e i d e b a i lly.com www.eidebai l l y . c o m 7 

8) Large Employer ( > 50) Offering Insurance • Potential $3,000 penalty if employer OFFERS health insurance – must pass 2 tests! • Subsidy eligibility based on unaffordable or inadequate insurance Unaffordable = Employee insurance premiums exceeding 9.5% of HHI (Safe Harbor created for employers – single plan premiums paid by employee cannot exceed 9.5% of wages) • Inadequate = Insurance policy less than 60% of actuarial value • A penalty of $3,000 per year/per FT employee who goes to the marketplace and receives an exchange subsidy • Capped by the amount of penalty for not offering insurance coverage • w w w . e i d e b a i lly.com www.eidebai l l y . c o m 8 

9) Health Care Reform – Employers 50 Full-time Employees 1. 2. 3. 4. 5. 6. Calculate your full-time employees Calculate your (part-time and seasonal) FTEs Add the two numbers in steps 1 and 2 Add up the 12 monthly numbers in 3 and divide by 12 If less than 50, not applicable large employer If more than or equal to 50, greater than 120 days? w w w . e i d e b a i lly.com www.eidebai l l y . c o m 9 

10) Health Care Reform – Employers Example 1 • XYZ Company had 40 full-time employees who worked 173 hours per month all year. XYZ also had 25 part-time employees who worked 87 hours per month all year. XYZ has 58 full-time equivalents calculated as follows: 1. 2. 3. 40 full-time 25 EEs * 87/month/120 = 18.13 total FTE = 40 + 18.13 = 58 FTE XYZ would be an applicable large employer w w w . e i d e b a i lly.com www.eidebai l l y . c o m 10 

11) Health Care Reform – Employers Example 2 • XYZ Company had 49 full-time employees who worked 173 hours per month all year. XYZ also had 25 seasonal employees who worked 173 hours per month for 2 months. XYZ has 49 full-time equivalents calculated as follows: 1. 2. Full-time employees is 49 for 10 months and 74 for 2 months. So for 12 months there was an average of 53 full-time employees for each month. The number is greater than 50, but the workforce for XYZ exceeded 50 full-time employees for less than 120 days (only 2 months) so not an applicable large employer. w w w . e i d e b a i lly.com www.eidebai l l y . c o m 11 

12) Health Care Reform – Employers • 40% excise tax on “Cadillac” health plans ($10,200 for individual, $27,500 for family) – Starts 2018 • Expanded coverage for children under 27 • • Effective 2010 Value of employee sponsored health plans on W-2’s – effective after December 31, 2012 • Employers who issue more than 250 W-2’s w w w . e i d e b a i lly.com www.eidebai l l y . c o m 12 

13) Employer Penalties Employer subject to Penalty for: EE Category Included in FT equivalent calc? Not offering minimum essential coverage? Offering minimum essential coverage but not affordable or adequate? Full-time Yes Yes Yes Part-time Yes No No Seasonal, working full-time Yes Yes Yes No No Seasonal, working part-time Yes w w w . e i d e b a i lly.com www.eidebai l l y . c o m 13 

14) Controlled Group Provisions • • • • • Internal Revenue Codes 1563 and 414; Parent – Subsidiary – 80% rule; Brother/Sister corporations – 50% stock; Combined Group Section 801 Certain Insurance Companies w w w . e i d e b a i lly.com www.eidebai l l y . c o m 14 

15) Subsidy Factors • Current Employer coverage results in NO employees eligible for an exchange subsidy as coverage is deemed affordable: Affordability < 9.5% Qualified Health Plan (Actuarial Value) = Safe harbor affordability is based on single-only coverage and the employee’s W-2 pay. ? w w w . e i d e b a i lly.com www.eidebai l l y . c o m Test is plan actuarial value has to be greater than 60%. 15 

16) Subsidy Factors – with Spousal Income • The following chart shows the breakdown of subsidy-eligible based on no employer sponsored insurance: 9 , 7% Household Income as a % of Federal Poverty Level 3 , 2% Medicaid Large Subsidy Eligible 65 , 48% 59 , 43% Small Subsidy Eligible No Subsidy Eligible Income Level Premium as a % of Income Up to 133% FPL 2% of income 133 – 150% FPL 4% of income 150 – 200% FPL 6.3% of income 200 – 250% FPL 8.05% of income 250 – 300% FPL 9.5% of income 300 – 400% FPL 9.5% of income w w w . e i d e b a i lly.com www.eidebai l l y . c o m 16 

17) Employer Checklist for 2013-2015 2013 • • • • • FSA limit of $2,500 Medicare taxes for highincome Notification of state marketplaces to employees Women’s health prevention coverage W-2 reporting of health insurance (greater than 250) 2014 • • • • • • Individual mandate Automatic enrollment Minimum essential benefits Insurance reforms Marketplace education Increased wellness rewards cap 2015 • Employer shared responsibility • 6055 & 6056 Tax Forms w w w . e i d e b a i lly.com www.eidebai l l y . c o m 17 

18) Non-discrimination in Insured Health Plans • Non-grandfathered insured group health plans that impermissibly discriminate in favor of highly compensated employees face significant liability under new rules. • Relates to the 1986 Tax Law – Internal Revenue Code (IRC) Section 105(h)(2). • Prohibition on discrimination in favor of highly compensated individuals. • Effective date for plan years beginning after ___________? (waiting for final guidance). • The penalty for plans will have an excise tax of $100 per day for the plan per person discriminated against, with a maximum penalty of $500,000! w w w . e i d e b a i lly.com www.eidebai l l y . c o m 18 

19) Health Insurance Exchanges • Public versus Private? • What is an marketplace? • Marketplace for individuals and small businesses to purchase insurance • • Different health plans (Metallic levels), compare different plans Participation? • • Small employers – 2014 Individuals – 2014 w w w . e i d e b a i lly.com www.eidebai l l y . c o m 19 

20) Questions? w w w . e i d e b a i lly.com www.eidebai l l y . c o m 

21) Thank You Contact Us 855.220.8634 HealthCareReform@eidebailly.com w w w . e i d e b a i lly.com www.eidebai l l y . c o m