57. Our plan has no lifetime maximum but it has an annual maximum of $500,000. Will we have to change or eliminate the annual maximum?

Yes. Starting in 2014, plans cannot have annual maximums on essential benefits. For plan years beginning before 1/1/14, you can have an annual maximum on essential benefits provided the limit is no less than:

• $750,000 for a plan year beginning on or after September 23, 2010, but before September 23, 2011,

• $1,125,000 for a plan year beginning on or after September 23, 2011, but before September 23, 2012, and

• $2,000,000 for plan years beginning on or after September 23, 2012, but before January 1, 2014.

58. Our plan has an annual maximum of $10,000 for chiropractic care. Do we have to remove the limit?

Until HHS has provided more guidance on the specifics of what is an essential benefit and whether chiropractic care would fall under one of the categories of essential benefits, it’s not possible to answer this question. Until these regulations are issued, the agencies enforcing PPACA have said they will take into account good faith efforts to comply with a reasonable interpretation of the term “essential health benefits”.

An alternative to having annual dollar maximums might be to replace them with day or visit limits, which are not limited or restricted for chiropractic care at this time.

59. We offer our employees a high deductible health plan combined with a Health Reimbursement Arrangement (HRA). We contribute $1,000 annually to each employee’s HRA. Does the elimination of annual limits mean we have to change our HRA?

No. When HRAs are integrated with other coverage under a group health plan (e.g. with a high deductible plan), and the other coverage is in compliance with all the applicable health insurance reform provisions, the fact that the benefits are limited under the HRA does not cause it to violate PPACA.

60. We have a lot of minimum wage employees who can’t afford our health plan so we offer them a “mini-med” plan that has a $75,000 annual maximum. Will we have to raise that maximum?

Maybe not. The agencies enforcing PPACA have indicated that they are working on a waiver program for certain mini-med plans if complying with this rule would result in a significant decrease in access to benefits or a significant increase in premiums. Stay tuned for more details on this issue.

61. PPACA prohibits “rescissions”. What does this mean and how will it affect our plan?

Rescissions are defined as a cancellation of coverage that has a retroactive effect. Rescissions are prohibited unless the termination is due to fraud, or an intentional misrepresentation of a material fact, and are permitted by the written terms of the plan. Therefore, effective for plan years starting on or after September 23, 2010, your group health plan will not be permitted to terminate coverage retroactively under any circumstances unless the employee performs an act of fraud, or the employee intentionally misrepresents a material fact and the plan has been drafted or amended to provide that such misrepresentations will result in a termination of coverage.

Retroactive cancellation of coverage due to a failure to pay premiums is not considered a rescission.

62. We have several locations and sometimes we are not immediately notified by supervisors or managers when an employee loses eligibility for plan coverage when they are reassigned to a part time position. We can still terminate coverage retroactively in those cases, right?

Yes, as long as you did not continue withholding contributions from the employee’s paycheck and paying claims. If you continued to withhold contributions and provide coverage, then the coverage can only be terminated prospectively.

Example. Joe has coverage under the plan as a full-time employee. The employer reassigns Joe to a part-time position and Joe is no longer eligible for coverage. The plan mistakenly continues to provide health coverage, collecting premiums from Joe’s paycheck and paying claims submitted by Joe. After a routine audit, the plan discovers that Joe is no longer eligible. The plan rescinds Joe’s coverage effective as of the date he changed from a full-time employee to a part-time employee.

Conclusion. The plan cannot rescind Joe’s coverage because there was no fraud or an intentional misrepresentation of material fact. The plan may only cancel coverage for Joe prospectively.

63. What are the special rules that will apply to our HMO option regarding the choice of primary care physicians (PCP)?

The new rules on PCPs are effective for plan years starting on or after September 23, 2010 but only apply to nongrandfathered plans. If your HMO option is not grandfathered, you must allow participants or beneficiaries to elect a PCP including:

• Designating any participating primary care physician who is available to accept the individual; and

• Designating any participating physician who specializes in pediatrics who is available as a child’s PCP.

64. We read that HMOs cannot require females to get authorization for OB/GYN services. How does that work?

This new rule applies only to nongrandfathered plans. If your HMO option is not grandfathered, it cannot require an authorization or a referral from the HMO or a PCP for a female seeking OB/GYN services from a participating health care professional (i.e. physician, physician assistant, midwife, etc.) who specializes in OB/GYN care.

65. Do we have to notify the employees enrolled in or enrolling in the HMO of these new rules?

Yes. If your nongrandfathered HMO plan requires the designation of a PCP, you must provide a notice informing each employee of the following:

• The plan requirements for electing a PCP;

• That any participating primary care physician who is available to accept the participant can be designated as a PCP;

• That any participating physician who specializes in pediatrics can be designated as a PCP for a child;

• The plan may not require authorization or referral for OB/GYN services provided by a participating professional who specializes in OB/GYN care.

This notice must be included in the plan’s SPD or any other similar description of the benefits under the plan. The DOL has issued a model notice for this purpose which can be downloaded in Word format from their website at:

http://www.dol.gov/ebsa/healthreform/

66. There are new rules for emergency room services. How will they affect our plan?

These rules apply only to non-grandfathered plans. If your plan is not grandfathered, it must provide coverage for emergency room services in the following manner:

• Without the need for any prior authorization determination, even if the emergency services are provided on an out-of-network basis;

• Without regard to whether the health care provider furnishing the emergency services is a participating network provider with respect to the services; and

• If the emergency services are provided out of network, without imposing any administrative requirement or limitation on coverage that is more restrictive than the requirements or limitations that apply to emergency services received from in-network providers.

Also, if the emergency services are provided out of network, the copays or coinsurance amounts imposed cannot exceed the amounts imposed for in network emergency room services.

Disclaimer: Staff One, with its ESAC accredited Professional Employer Organization (PEO) business offering, serves as a human resources department for small and medium-sized businesses. By entering into a co-employment relationship with a PEO, companies have access to experienced specialists who can help with many time-consuming activities in areas such as Human Resources Management, Payroll Management (including 940 and 941 filings), Employer Liability Management, Risk and Safety Management and Benefits Management. We share this information, from our partner GBS, with our clients and friends for general informational purposes only. It does not necessarily address all of your specific issues. It should not be construed as, nor is it intended to provide, legal advice. Questions regarding specific issues and application of these rules to your plans should be addressed by your legal counsel.

45. If the adult child is married are they still allowed to have the coverage?

Yes. Eligibility for coverage of children up to age 26 cannot be based on factors such as financial dependence, student status, residence, or marital status.

46. Do I have to cover the spouse or child (the grandchild of the employee) of the adult child too?

No. Plans that provide dependent coverage are only required to provide coverage to the employee’s children (i.e. natural or adopted children) until the age of 26. The plan is not required to provide coverage to the employee’s son-in-law or daughter-in-law or grandchildren.

47. Our plan covers step children and in some cases grandchildren if they meet specific criteria. Will we now have to cover them to age 26 as well?

PPACA does not require plans to cover step or grandchildren but if they are covered under a plan, they must be covered until they turn age 26 and eligibility cannot be based on factors such as financial dependence, student status, residence, or marital status.

48. We have an employee whose child is 25 but is not a full time student, does this mean we will have to calculate imputed income for that employee?

No. The definition of a tax dependent for group health plan purposes was amended as part of the health care reform package to include children until the end of the year they turn age 26. This change will also apply to children to age 26 who are covered under a plan that currently extends coverage to children to age 26 (or older).

The IRS has now issued Notice 2010-38 that offers guidance on the tax exclusion for these adult children. It clarifies several items including:

• Child is defined as son/daughter, step son/daughter, adopted child or eligible foster child, without regard to whether the child is financially supported by the employee or resides with the employee or is a full time student

• Coverage for these adult children can be paid for on a pretax basis under a §125 cafeteria plan

• The change in status regulations will be amended so that employees can add coverage under a §125 plan for a newly-eligible adult child where the plan has been amended mid-year to add the adult child coverage.

49. Our plan has a preexisting condition limitation. Will we have to change it or eliminate it?

Yes. Starting with your first plan year beginning on or after 9/23/10, a preexisting condition limitation cannot be applied to any enrollee who is under age 19. This includes employees and spouses under age 19 and dependents under age 19.

Starting with your first plan year beginning on or after 1/1/14, preexisting condition limitations will be prohibited for all plans and all covered individuals so you will have to eliminate it altogether by that date.

50. We have a plan provision that excludes coverage for services that are the result of an injury that occurred before the effective date of the employee’s coverage. Is this still permissible?

Because this provision operates to exclude benefits for a condition that was present before the effective date of coverage, it is considered a preexisting condition exclusion. Therefore, it will be subject to the same rules described above. Starting with your next plan year beginning on or after 9/23/10, it cannot be applied to enrollees under age 19, and then starting in 2014, it will have to be eliminated.

51. We have two plan options. One has a $1 million lifetime maximum and the other has a $2 million lifetime maximum. How will these maximums be affected?

Effective with your first plan year starting on or after 9/23/10, lifetime maximums that apply to essential benefits will have to be eliminated regardless of whether or not your plan is grandfathered.

52. How do we know what benefits are “essential benefits”?

The Act defines “essential benefits” to include the following categories of coverage:

• Ambulatory patient services

• Emergency services

• Hospitalization

• Maternity and newborn care

• Mental health and substance use disorder services, including behavioral health treatment

• Prescription drugs

• Rehabilitative and habilitative services and devices

• Laboratory services

• Preventive and wellness services and chronic disease management

• Pediatric services, including oral and vision care

At this time there is no guidance on the specifics of these benefit categories but it is expected that regulations defining “essential benefits” will be published in the future. Until these regulations are issued, the agencies enforcing PPACA have said they will take into account good faith efforts to comply with a reasonable interpretation of the term “essential health benefits”.

53. Can we still keep our lifetime limit for benefits that are not considered “essential benefits”?

Yes. Lifetime limits on benefits that are deemed not to be essential benefits are permitted.

54. We have an employee who dropped coverage at our last open enrollment because her daughter’s claims exceeded the lifetime maximum and no further claims were going to be paid. Do we have to let her back on the plan?

Yes. If she is eligible for coverage, you must inform the employee in writing that the plan’s lifetime maximum no longer applies and she and her daughter are allowed to enroll in the plan and the daughter is eligible for benefits again.

55. Do we have to notify employees who exceeded the lifetime limit that they can return to the plan? How long can they have to reenroll?

Yes, you must provide them with at least 30 days to enroll and the enrollment opportunity must be provided no later than the first day of the first plan year starting on or after 9/23/10. If they enroll, the coverage must start no later than the first day of that plan year.

The DOL has issued a model notice for this purpose which can be downloaded in Word format from their website at: http://www.dol.gov/ebsa/healthreform/

56. Can we require her to enroll in the plan option she was enrolled in when her daughter’s claims exceeded the lifetime maximum?

No. She must be offered all the benefit options available to similarly situated employees.

Disclaimer: Staff One, with its ESAC accredited Professional Employer Organization (PEO) business offering, serves as a human resources department for small and medium-sized businesses. By entering into a co-employment relationship with a PEO, companies have access to experienced specialists who can help with many time-consuming activities in areas such as Human Resources Management, Payroll Management (including 940 and 941 filings), Employer Liability Management, Risk and Safety Management and Benefits Management. We share this information, from our partner GBS, with our clients and friends for general informational purposes only. It does not necessarily address all of your specific issues. It should not be construed as, nor is it intended to provide, legal advice. Questions regarding specific issues and application of these rules to your plans should be addressed by your legal counsel.

34. We have to make changes due to Mental Health Parity for our next plan year starting on August 1, 2010. Will these changes cause our plan to lose grandfathered status?

No. Plan changes made to comply with Federal or State legal requirements cannot cause a loss of grandfathered status.

35. If we lose our grandfathered status, what are the other health care reform requirements that will apply?

In addition to the changes required for grandfathered plans, any new plan or any plan that loses its grandfathered status will have to comply with the additional requirements listed below effective for plan years starting on or after September 23, 2010:

• Provide coverage to children to age 26 regardless of whether they are eligible for other employer-sponsored coverage;

• Coverage for recommended preventive services, without cost sharing

• For emergency room care: o No pre-authorization permitted – in or out of network

o Identical coverage in and out of network

• For Primary Care Physician Designations: o Participants may designate any available participating primary care provider

o Parents may select pediatrician for child(ren)

o May not require authorization or referral for OBGYN care from participating obstetrician or gynecologist

• New claims appeal rules including both internal and external review

• Nondiscrimination rules for fully insured health plans under Code §105(h)

For plan years starting on or after January 1, 2014, new plans or plans that have lost grandfathered status will have to comply with additional requirements including:

• No discrimination against individuals participating in clinical trials (insured plans only);

• No discrimination based on health status

• Provide essential benefits and prohibit cost sharing in excess of the limits for qualified high deductible health plans (insured plans only)

36. We intend to keep our plan grandfathered as long as possible. Is there anything we have to do to verify we have not made any changes that would result in the loss of grandfathered status?

Yes. You will be required to maintain records of your plan’s grandfathered status for as long as the plan takes the position that it is grandfathered. This means you must maintain records documenting the terms of the plan in effect on March 23, 2010, and any other documents necessary to verify, explain, or clarify your plan’s status as a grandfathered health plan. This should include intervening and current plan documents, health insurance policies, certificates or contracts of insurance, summary plan descriptions, documentation of premiums or the cost of coverage, and documentation of required employee contribution rates.

In addition, you must make these records available for inspection to participants or State or Federal agencies upon request.

37. Will we have to tell our employees about our plan’s grandfathered status?

Yes. To maintain status as a grandfathered plan, you must disclose, in any plan materials provided to participants, that your plan believes it is a grandfathered plan under PPACA. The disclosure must also provide contact information for questions and complaints. The following model language can be used to satisfy the grandfathered plan disclosure requirement:

This [group health plan or health insurance issuer] believes this [plan or coverage] is a “grandfathered health plan” under the Patient Protection and Affordable Care Act (the Affordable Care Act). As permitted by the Affordable Care Act, a grandfathered health plan can preserve certain basic health coverage that was already in effect when that law was enacted. Being a grandfathered health plan means that your [plan or policy] may not include certain consumer protections of the Affordable Care Act that apply to other plans, for example, the requirement for the provision of preventive health services without any cost sharing. However, grandfathered health plans must comply with certain other consumer protections in the Affordable Care Act, for example, the elimination of lifetime limits on benefits.

Questions regarding which protections apply and which protections do not apply to a grandfathered health plan and what might cause a plan to change from grandfathered health plan status can be directed to the plan administrator at [insert contact information]. [For ERISA plans, insert: You may also contact the Employee Benefits Security Administration, U.S. Department of Labor at 1-866-444-3272 or www.dol.gov/ebsa/healthreform. This website has a table summarizing which protections do and do not apply to grandfathered health plans.] [For nonfederal governmental plans, insert: You may also contact the U.S. Department of Health and Human Services at www.healthcare.gov.]

38. Our plan currently covers children to age 23, so we’ll have to extend that to age 26. When do we have to do that? Can we do it now?

For grandfathered plans, the change must be made by the first day of the first plan year that starts on or after September 23, 2010. For example, a calendar year plan would have to comply by January 1, 2011. However, the change can be made sooner. You should make sure the insurer or stop loss carrier approves the change if you intend to implement it prior to the required effective date.

For insured plans, many insurers are implementing this change ahead of the actual effective date. You can contact your insurer for more information on how this change will affect your plan.

39. Do we have to offer coverage to adult children even if the “child” already has coverage through their own employer’s plan?

Not for plan years starting prior to 2014, if your plan is grandfathered. Until then, you must provide coverage to dependent children until they turn age 26, unless they are eligible for any other employer provided coverage that is not a group health plan of a parent. However, for non-grandfathered plans and all plans starting in 2014 and later, coverage must be available regardless of whether the child has any other coverage (but COB rules may still apply).

40. Can I just continue the children already on my plan, or do I have to go back and offer the coverage to those who have already aged out?

If the child’s coverage under your plan was ended (or if the child was not eligible for coverage) because, under the terms of the plan, coverage was not available to age 26, you are required to give children under age 26 a special enrollment opportunity of at least 30 days. This special enrollment opportunity must be provided beginning no later than the first day of the first plan year beginning on or after September 23, 2010.

41. Am I required to tell employees about this opportunity? How do I do that and by when?

Yes. You must provide a written notice to employees describing the special enrollment opportunity. You can give or send the notice to the employee or it can be included with other enrollment materials, provided the statement describing the special enrollment opportunity is highlighted. This notice must be provided no later than the first day of the first plan year starting on or after September 23, 2010. For example, a calendar year plan would have to provide the notice and the 30-day special enrollment opportunity no later than January 1, 2011.

The DOL has issued a model notice for this purpose which can be downloaded in Word format from their website at:

http://www.dol.gov/ebsa/healthreform/

42. Do I have to offer the coverage to an adult child who has aged out, but is currently on COBRA?

Yes. If the child who aged out has elected COBRA, the plan must allow the child to be enrolled as a dependent of an active employee. In addition, if the child subsequently loses eligibility due to a qualifying event, the child would have another opportunity to elect COBRA.

43. Can I charge more for these adult children?

In most cases, no. The employee cannot be required to pay more for a child’s coverage based on their age (e.g. adding a surcharge for children over age 18 or over age 23). However, an additional surcharge for adult children could be applied if that surcharge is applied for every new child added to the plan regardless of age.

44. Can I offer a more limited benefit to these adult children?

No. The benefits or coverage cannot vary based on the child’s age. It must be identical to the coverage that is provided to similarly situated children who are not adult children.

Disclaimer: Staff One, with its ESAC accredited Professional Employer Organization (PEO) business offering, serves as a human resources department for small and medium-sized businesses. By entering into a co-employment relationship with a PEO, companies have access to experienced specialists who can help with many time-consuming activities in areas such as Human Resources Management, Payroll Management (including 940 and 941 filings), Employer Liability Management, Risk and Safety Management and Benefits Management. We share this information, from our partner GBS, with our clients and friends for general informational purposes only. It does not necessarily address all of your specific issues. It should not be construed as, nor is it intended to provide, legal advice. Questions regarding specific issues and application of these rules to your plans should be addressed by your legal counsel.

23. Our plan is self funded and we are changing our third party administrator (TPA). Will that cause our self funded plan to lose its grandfathers status?

No. changing third party administrators will not result in the loss of grandfathered status for your self funded plan.

24. Our plan is currently insured but we are considering a change to self funding and changing our PPO network. Would these changes cause our plan to lose grandfathered status?

The guidance we have does not address the effect of changing your plan’s funding mechanism or changing networks. Further guidance is necessary on this question and it may also depend on the date you make the changes.

The agencies responsible for enforcing the rules have invited comments from the public regarding the effect of these types of changes (or any other changes) so we anticipate that further guidance will be forthcoming. However, it appears that any new standards subsequently published in the final regulations that are more restrictive than what was included in the interim final regulations would only apply prospectively to changes to plans made after the publication of final rules.

25. We are thinking of amending our plan to delete coverage for depression. If we make this change, will it cause our plan to lose its grandfathered status?

Yes. The elimination of all benefits or substantially all benefits to diagnose or treat a particular condition will cause a loss of grandfathered status.

26. Our plan currently pays 90% of covered services and the employee pays 10%. We want to reduce our share to 80%. Would that cause the loss of grandfathered status?

Yes. Any increase in the participant’s coinsurance amount will cause the plan to lose grandfathered status.

27. Our plan currently pays 90% of covered services but we want to reduce that to 50% for durable medical equipment only. Would that cause a loss of grandfathered status?

Yes. Because it is an increase in the participant’s coinsurance amount, it would cause the plan to lose grandfathered status.

28. Our plan is facing a significant premium increase this year so we want to raise the deductible. What effect will this have on our grandfathered plan status?

It depends. Employers are permitted to raise plan deductibles (or other fixed cost sharing amounts such as out-of-pocket limits) but your plan would cease to be a grandfathered plan if the increase since 3/23/10 is greater than a percentage equal to medical inflation plus 15%.

Example: On March 23, 2010, a grandfathered health plan has a $300 deductible. The plan is subsequently amended to increase the deductible to $400. As of March 23, 2010, the medical care component of the CPI-U is 387.142. Within the 12-month period before the $400 deductible takes effect, the greatest value of the overall medical care component of the CPI-U (unadjusted) is 475.

Conclusion: The increase in the deductible from $300 to $400 is an increase of 33.33%. Medical inflation from March 2010 to the date of the change is 0.2269 (475 – 387.142 = 87.858; 87.858/387.142 = 0.2269). Therefore, the maximum

percentage increase in the deductible permitted is 37.69% (0.2269 = 22.69%; 22.69% + 15% = 37.69%). Because a 33.33% increase does not exceed 37.69%, the change in the deductible would not cause the plan to lose its grandfathered status.

29. Our plan has a $10 office visit copay. We want to raise it to $20. Will this cause our plan to lose grandfathered status?

Maybe. The increase to your copay will result in a loss of grandfathered status if the increase is more than the greater of:

$5 (adjusted for medical inflation); or

A percentage equal to medical inflation plus 15%.

Example: On March 23, 2010, a grandfathered health plan has a $30 office visit copay. The plan is subsequently amended to increase the copay to $40. Within the 12-month period before the $40 copay takes effect, the greatest value of the overall medical care component of the CPI-U (unadjusted) is 455.

Conclusion: The increase in the copayment from $30 to $40 is 33.33%. Medical inflation from March 2010 is 0.1753 (455 – 387.142 = 67.858; 67.858/387.142 = 0.1753). The maximum percentage increase permitted is 32.53% (17.53% + 15% = 32.53%). Because 33.33% exceeds 32.53%, the change in the copayment requirement at that time will cause the plan to lose its grandfathered status.

30. We have just received our renewal for 8/1/10 and we need to lower our contribution and increase the employee’s contribution percentage for family coverage. Currently, we pay 100% of the employee’s coverage and 80% of the family coverage and we want to reduce the 80% to 50%. Will this change cause us to lose grandfathered status?

Yes. To retain grandfathered plan status, you cannot decrease the percentage of premiums you pay by more than 5 percentage points below your contribution rate on March 23, 2010. This rule applies to any tier of coverage (e.g. self-only, 2 person, family, etc.) for any class of employee. Because the decrease in your contribution for family coverage would be 30%, your plan would lose grandfathered status.

31. Our plan has an annual limit of $500,000. If we reduce that amount to $250,000, will the plan lose grandfathered status?

Yes. Grandfathered status is lost when the annual limit is reduced by any amount. Similarly, if a plan did not have an annual limit on March 23, 2010, grandfathered status is lost if one is added at a later date.

32. We are going to significantly reduce benefits and increase employee contributions for our PPO option at next renewal but we are not changing our HMO option. Does our plan lose grandfathered status for both plan options or just the PPO option?

If the changes to the PPO result in a loss of grandfathered status, only the PPO option will be affected. The HMO option will remain grandfathered for as long as

no changes are made to the HMO option that would result in a loss of grandfathered status.

33. Before we knew what changes would affect grandfathered status, we made several plan changes for our May 1, 2010 renewal that will result in a loss of grandfathered status. Are there any exceptions that would allow us to keep these changes without losing our grandfathered status?

Yes. There are two “transition rules” that if applicable, may allow you to keep your plan changes without losing grandfathered status.

The first transition rule says that if the changes were adopted prior to March 23, 2010, they would be considered part of the plan as of March 23rd, even though they were effective at a later date. A change is deemed to be adopted if the changes were incorporated into a legally binding contract that was executed on or before March 23, 2010 or if a written plan amendment was adopted on or before March 23, 2010.

The second transition rule says that if plan changes were made prior to June 14, 2010 (the date regulations were released), the plan will not lose its grandfathered status if:

1. the plan changes that cause the loss of grandfathered status are revoked or modified effective by the first day of the first plan year beginning on or after September 23, 2010; and

2. the terms of the plan, as modified, would not otherwise cause the plan to lose grandfathered status.

Disclaimer: Staff One, with its ESAC accredited Professional Employer Organization (PEO) business offering, serves as a human resources department for small and medium-sized businesses. By entering into a co-employment relationship with a PEO, companies have access to experienced specialists who can help with many time-consuming activities in areas such as Human Resources Management, Payroll Management (including 940 and 941 filings), Employer Liability Management, Risk and Safety Management and Benefits Management. We share this information, from our partner GBS, with our clients and friends for general informational purposes only. It does not necessarily address all of your specific issues. It should not be construed as, nor is it intended to provide, legal advice. Questions regarding specific issues and application of these rules to your plans should be addressed by your legal counsel.

12. How do I determine how many full time employees I have?

For the purpose of this reg, Full time employees are defined as those employees who work on average 30 hours per week.

13. Are there any exclusions for seasonal and part time workers?

The health reform package does not require employers to provide coverage for employees working on average less than 30 hours per week (“part-time”). Part time employees are only used to determine full-time equivalents for purposes of determining if the employer is subject to the employer mandate. This is done by taking the total number of monthly hours worked by part time employees and dividing by 120 to get the number of “full time equivalent” employees.

The healthcare reform package does not require employers to provide coverage for seasonal employees. Seasonal employees are workers who perform labor or services on a seasonal basis (no more than 120 days during the taxable year and retail workers employed exclusively during holiday seasons). They can be excluded from the threshold count to determine whether an employer has over 50 employees to be subject to the employer mandate and eligible for the premium credits. They are also excluded from the calculation of the employer’s annual wage level for purposes of premium credits.

14. I’ve heard that existing plans may be “grandfathered”. What does that mean?

Existing plans, including plans maintained pursuant to a collective bargaining agreement, in operation as of March 23, 2010 are grandfathered and can be continued without being subject to minimum coverage standards. However, certain benefit mandates included in the Act will apply.

15. It sounds like our plan is grandfathered. What benefit changes will we have to make? And by when?

The legislation includes the following mandates which all grandfathered group health plans, including collectively bargained plans, will have to comply with effective with the first plan year starting on or after September 23, 2010:

• Provide coverage to dependent children until they turn age 26 unless they are eligible for any other employer provided coverage that is not a group health plan of a parent

• Eliminate lifetime aggregate dollar limits on “essential benefits”

• Eliminate annual dollar limits on “essential benefits”(unless permitted by the Secretary)

• Eliminate preexisting condition exclusion for children up to age 19

• Prohibit the rescinding of coverage except in the case of fraud, intentional misrepresentation, or nonpayment of premiums

Starting in 2014, grandfathered plans must:

• Eliminate annual aggregate benefit limits

• Provide coverage of dependents to age 26 regardless of eligibility for other coverage

• Eliminate preexisting condition limitations for adults

• Eliminate waiting periods of greater than 90 days

16. Our plan is collectively bargained and we heard that we don’t have to make any changes until the last collective bargaining agreement expires. Has that changed?

Initially, it appeared that there was a delayed effective date for collectively bargained plans but that’s not the case. Insured and self funded plans maintained pursuant to a collective bargaining agreement ratified before March 23, 2010 are deemed to be grandfathered plans. Because they are grandfathered plans, they are subject to the same reforms and effective dates as any other grandfathered plan.

For insured collectively bargained plans only, the plan will remain grandfathered until the last agreement expires, even if plan changes, including changing insurers, are made during the collective bargaining agreement that would normally result in a loss of grandfathered status.

After the last collective bargaining agreement expires, the determination of whether the plan is still grandfathered is made by comparing the coverage on the expiration date with the coverage that was in effect on March 23, 2010.

17. We also provide dental and vision coverage to our employees. Are we required to make these changes for those plans as well?

Maybe. The mandated changes for grandfathered plans only apply to your group health plans that are not “excepted benefits” as defined under HIPAA. If your dental and/or vision are excepted benefits, then you are not required to make any of the required changes for those coverages.

HIPAA excepted benefits include most health FSAs and limited scope dental and vision plans. Limited scope dental and vision benefits are those benefits that are either provided under a separate policy or contract of insurance or are not an integral part of the group health plan (i.e. employees can waive the dental or vision; and employees who elect the dental or vision pay an additional amount).

18. We provide retiree health coverage for our retired employees. Will these benefit mandates apply to our retiree plan?

It depends. There is an exception for retiree-only plans subject to ERISA that cover fewer than two active employees. For health insurers and nonfederal governmental plans subject to the Public Health Service Act, HHS has indicated they will apply a “non-enforcement” policy for insured retiree-only plans and retiree plans sponsored by non-federal governmental entities. In addition, HHS is encouraging states, which have enforcement authority over insurers, not to enforce the new health care reform provisions on these plans.

If your retiree plan covers both retirees and active employees under the same plan, then the exception will not apply and the health care reform provisions that apply to the plan will apply to both active and retired employees covered under the plan.

19. What if I like some of these changes and want to incorporate them into my plan now? Can I do that and still meet the “grandfathered plan” rules?

If you would like to immediately adopt any of the mandated changes, it will not affect your plan’s status as a grandfathered plan.

20. We made some plan design changes that are effective 7/1/10. Will they result in a loss of grandfathered status?

It depends. Certain plan changes made after March 23, 2010 will result in a loss of your plan’s grandfathered status. These changes include any decrease in the plan’s coinsurance amount; changing insurers; or reductions in benefits, annual limits, or employer contributions. Also, increases in coinsurance, copays, deductibles and out-of-pocket maximums can cause your plan to lose grandfathered status. If your plan changes are any of the increases described above, it will require an analysis of the amount of the increase compared to increases in medical inflation.

21. How do we know what medical inflation is?

Medical inflation is the increase since March 2010 in the overall medical care component of the Consumer Price Index for All Urban Consumers (CPI-U) (unadjusted) published by the Department of Labor. To calculate medical inflation, the increase in the overall medical care component is computed by subtracting 387.142 (the overall medical care component of the CPI-U (unadjusted) published by the Department of Labor for March 2010) from the index amount for any month in the 12 months before the new change is to take effect and then dividing that amount by 387.142.

The CPI – U values can be found on the Bureau of Labor Statistics website at:

http://www.bls.gov/cpi/tables.htm

22. We are changing insurers on 8/1/10. Will this result in a loss of grandfathered status?

Yes. A change in insurers after 3/23/10 will cause your plan to lose its grandfathered status.

Disclaimer: Staff One, with its ESAC accredited Professional Employer Organization (PEO) business offering, serves as a human resources department for small and medium-sized businesses. By entering into a co-employment relationship with a PEO, companies have access to experienced specialists who can help with many time-consuming activities in areas such as Human Resources Management, Payroll Management (including 940 and 941 filings), Employer Liability Management, Risk and Safety Management and Benefits Management. We share this information, from our partner GBS, with our clients and friends for general informational purposes only. It does not necessarily address all of your specific issues. It should not be construed as, nor is it intended to provide, legal advice. Questions regarding specific issues and application of these rules to your plans should be addressed by your legal counsel.

by GBS

1. Is there anything we have to do immediately?

Although the Act was effective on the date the President signed it, most of its provisions are not effective immediately. For example, certain coverage mandates don’t take effect until the first plan year starting on or after September 23, 2010. Other provisions are phased in between 2011 and 2018.

2. Will I be required to offer health insurance coverage to my employees?

No. However, if you have more than 50 full-time employees, and you don’t offer coverage, you will owe a penalty starting in 2014 if any full time employee is eligible for and purchases subsidized coverage through an exchange. This penalty is called the “free rider” penalty.

3. Our plan is self-funded. Will we have to do anything as a result of this new law?

Self-funded plans are generally treated the same as fully-insured plans under the Act. You should be analyzing the coming changes for the impact they will have on your self-funded plan.

4. We are a governmental entity. Do we have to comply with this legislation?

Yes. It appears that there are no exceptions for nonfederal governmental plans so you should be analyzing the coming changes for the impact they will have on your plan.

The Act makes several significant changes to the Public Health Service Act which may ultimately result in changes to HIPAA’s opt out provision for self-funded, nonfederal governmental plans. GBS is currently analyzing these changes for their impact on the new health care reform requirements as well as to HIPAA’s opt out provision. We will provide further updates as more information becomes available.

5. We are a church plan and our plan is not subject to ERISA. Do we still have to comply with this legislation?

Yes. There are no exceptions for church plans so you should be analyzing the coming changes for the impact they will have on your plan.

6. Do I only have to “offer” the coverage, or do I also have to pay for the coverage to avoid the “free rider” penalty? If so, how much do I have to contribute?

Not necessarily. You are not required to offer coverage nor pay any part of the coverage if you offer it. However, employers with at least 50 full time employees who don’t offer coverage or whose contributions exceed a certain percentage of the employee’s income could be subject to a penalty starting in 2014 if any full time employee receives a premium tax credit towards purchasing their own coverage through an exchange.

If the employer does not offer coverage and at least one full time employee receives a premium tax credit, the employer will pay a fee of $2,000 per full time employee (excluding the first 30 employees).

If the employer offers coverage, but at least one employee receives a premium tax credit for purchasing coverage in the exchange, the employer will be assessed the lesser of a $3,000 penalty for each full-time employee who declines employer coverage and instead purchases subsidized individual coverage through an exchange, or $2,000 per full-time employee. An employee who is offered coverage will only be eligible for subsidized coverage if the employee’s contribution exceeds 9.5% of the employee’s household income or if the plan’s share of the total allowed cost of benefits is less than 60%.

Alternatively, if you provide coverage but the employee contribution exceeds more than 8% but less than 9.8% of the employee’s household income, and the individual’s household income is less than 400% of the federal poverty level, you must provide “free choice” vouchers – equal to what you would have paid for single or family coverage under the company’s plan – to enable these employees to purchase coverage through an exchange. If you provide a voucher and the employee purchases coverage through an exchange, you will not be subject to the “free rider” penalty as a result of that employee’s purchase.

7. Do I have to “offer” and pay for dependent coverage also? What if the dependent (spouse or children) are covered by another employer’s plan?

The Act does not require you to offer or pay for health coverage that includes spouses and dependent children (but see Questions 38-48 on the requirements for plans that provide coverage for children). However, if you do provide coverage for dependents, the amount you contribute towards the cost of the coverage may have an impact on whether you are subject to the employer mandate penalties as described in Question 6.

8. We don’t know our employee’s household income. How will we know if an employee is eligible for a voucher or premium subsidies?

It will be up to the exchange in your state to determine if an individual is eligible for a voucher or premium subsidy. You will then be notified by the exchange if/when an employee has qualified.

9. I’ve been hearing about “exchanges”. Can you describe what they are?

Exchanges are arrangements through which private and non-profit insurers offer small employers (up to 100 employees) and individuals the ability to purchase health insurance. The Act requires each state to set up an exchange for the purchase of health insurance coverage. Coverage can be purchased through the exchanges starting in 2014. States have the option to allow large employers (more than 100 employees) to begin purchasing coverage through the exchanges starting in 2017.

Regional or national exchanges could also be established to set standards for what benefits would be covered, how much insurers could charge, and the rules insurers must follow in order to participate in the exchange.

It is expected that each exchange will offer four categories of plans plus a catastrophic plan including:

• Bronze plan – Essential health benefits covering 60% of the benefit costs of the plan, with an out-of-pocket limit equal to the Health Savings Account (HSA) current law limit ($5,950 for individuals and $11,900 for families in 2010);

• Silver plan – Essential health benefits covering 70% of the plan benefit costs, with HSA out-of-pocket limits;

• Gold plan – Essential health benefits covering 80% of the plan benefit costs, with HSA out-of-pocket limits;

• Platinum plan – Essential health benefits covering 90% of the plan benefit costs, with HSA out-of-pocket limits;

• Catastrophic plan – Available to individuals up to age 30, or to those who are exempt from the mandate to purchase coverage. Provides catastrophic coverage only, with the coverage level set at the current High Deductible Health Plan levels except that preventive benefits and coverage for three primary care visits would be exempt from the deductible.

10. Will I have to buy health insurance for my employees through one of the new exchanges? Starting when?

No. Employers will not be required to purchase coverage through an exchange though it will initially be an option for small employers starting in 2014.

11. Am I considered a small employer for purposes of buying insurance through the exchanges?

A small employer for purposes of buying coverage through an exchange is defined as an employer with 100 or less full time equivalent employees. Prior to 2016, states can limit purchases through an exchange to businesses with 50 or fewer workers. Starting in 2017, states can allow businesses with more than 100 employees to purchase coverage through an exchange.

Disclaimer: Staff One, with its ESAC accredited Professional Employer Organization (PEO) business offering, serves as a human resources department for small and medium-sized businesses. By entering into a co-employment relationship with a PEO, companies have access to experienced specialists who can help with many time-consuming activities in areas such as Human Resources Management, Payroll Management (including 940 and 941 filings), Employer Liability Management, Risk and Safety Management and Benefits Management. We share this information, from our partner GBS, with our clients and friends for general informational purposes only. It does not necessarily address all of your specific issues. It should not be construed as, nor is it intended to provide, legal advice. Questions regarding specific issues and application of these rules to your plans should be addressed by your legal counsel.

by BHZ

Payroll legal obligations can put companies and managers at great risk in many ways. If you have anything to do with employee payroll and related matters, be aware of the following 11 mistakes and corresponding penalties.

Mistake #1: Failing to deposit withheld income taxes, Social Security and Medicare contributions, and employer matching amounts on time. The government wants its money by strict deadlines. Penalties accrue quickly if your business or organization misses deposit deadlines.

The penalty for not making deposits on time is:

• 1 to 5 days late, 2 percent of amounts due.
• 6 to 15 days late, 5 percent.
• 16 or more days, 10 percent.
• 15 percent if notice from the IRS is ignored, plus interest on the amount not deposited, plus 100 percent of the uncollected amounts if the failure to deposit is willful.

Note this grave, personal danger: These penalties can be levied personally against all responsible individuals in a business or organization. The corporate veil is no shield in these situations. Any individual with a responsibility for getting the money to the government on time faces possible exposure to penalties and fines.

Mistake #2: Under-withholding and failing to match required amounts.

The employer’s obligation is to withhold income tax, Social Security, and Medicare contributions from employees’ pay, as well as match the Social Security and Medicare contributions. Failure to do so subjects the employer to late deposit penalties of up to 15 percent of the under-withheld and under-deposited amounts. If the IRS deems the under-reporting or under-depositing willful, the penalties can be up to 100 percent of the uncollected amounts.

As with failing to make deposits in a timely manner, under-withholding and failing to match amounts creates a personal risk to individuals with a responsibility for getting the correct sums of money to the government on time.

Mistake #3: Failing to pay — or under-paying — state and federal unemployment taxes. The greatest portion of unemployment insurance (UI) taxes is levied by the state. And state-levied penalties vary. Since state UI funds are being exhausted in this period of high unemployment, states are aggressive in collection efforts.

Mistake #4: Failing to process wage garnishments correctly. Federal and state laws obligate employers to accurately withhold from employee pay, and remit, court-ordered garnishments, levies, and child support.

Violating these laws can result in penalties, depending on state laws. Also, federal law limits the amount of earnings that can be garnished, and protects employees from being terminated from their jobs because of a first-time garnishment. A violation can mean reinstatement of a discharged employee, payment of back wages, and restoration of improperly garnished amounts. Employers who willfully violate the discharge provisions of the law can be prosecuted criminally and fined up to $1,000, imprisoned for not more than one year – or both.

Mistake #5: Making unauthorized deductions from an employee’s pay. Employers can legally deduct from an employee’s pay only amounts authorized or required by law (such as tax withholding), by court order (such as garnishments), and amounts authorized by the employee (such as the employee’s share of health insurance).

What are unauthorized deductions? State laws vary and it can be tricky. In addition, federal wage and hour law requires payment of agreed upon and earned wages (with the allowed deductions listed above.)

Do you ever feel compelled to dock an employee’s pay if he or she breaks or damages company products or equipment? Check first with your attorney to see if this is permitted by your state law — even with the employee’s permission

Mistake #6: Treating some workers as independent contractors when they’re not. Misclassifying employees as independent contractors exposes employers to substantial legal costs and penalties.

In an effort to increase collections, the IRS and state agencies have ramped up investigations of misclassified employees. When a misclassification is discovered, the employer becomes obligated for unreported and undeposited withholding taxes, Social Security and Medicare contributions, penalties, and possible liability for employee benefits. When the IRS deems the misclassification to be negligent, the penalties can be up to 100 percent of the uncollected taxes.

And the payment of unreported taxes and contributions isn’t just for the past year. When the IRS and state agencies discover the misclassification of just one or two employees, this can trigger audits of the employer’s employment for prior years.

Mistake #7: Failing to include the value of awards, bonuses, and fringe benefits (when required) in employees’ taxable incomes. This action then results in the failure to withhold sufficient amounts from the total reportable income and not reporting the total reportable income to the IRS. The risk: The employer is subject to under-reporting penalties of up to 15 percent of the under-withheld and under-deposited taxes. If the failure is willful, the penalties can be up to 100 percent. And the employer could also be subject to information return penalties for incorrect W-2 forms (up to $50 penalty for each incorrect W-2).

Mistake #8: Using bogus or incorrect Social Security numbers for employees on their W-2 Forms and failing to accurately complete I-9 Forms. The risk: The employer can be subject to information return penalties for incorrect W-2 Forms, of up to $50 for each incorrect W-2. This mistake or failure by the employer also creates issues for the employees involved because they aren’t receiving proper earnings credits through the Social Security Administration.

Mistake #9: Failing to pay at least the higher of the federal or state minimum wage to non-exempt employees… as well as overtime in any seven-day workweek in which they work more than 40 hours. The risk: If this error is discovered, the employer is required to compensate the employee for back pay, plus fines and penalties. In addition to the fines and penalties imposed by the Department of Labor, the employer likely will be subject to federal and state wage and hour audits and owe additional amounts

Mistake #10: Not preparing and filing W-2 forms, and failing to send them to employees. The risk: The employer can be subject to information return penalties for incorrect W-2 forms, penalties of up to $100 for each incorrect or unreported W-2. For intentional failure, the penalties can go up to $200 for each incorrect statement.

Mistake #11: Failing to abide by state laws. It’s not just the federal wage and hour rules that employers must comply with. Employers need to be aware of, and comply with, the laws in the states where they have employees.

PEOs can help prevent these mistakes

To help avoid these costly blunders, more companies are turning to a professional employer organization (PEO), like Staff One.  A PEO serves as a human resources department for small and medium-sized businesses.  By entering into a co-employment relationship with a PEO, companies have access to experienced specialists who can help with many time-consuming activities in areas such as Human Resources Management, Payroll Management (including 940 and 941 filings), Employer Liability Management, Risk and Safety Management and Benefits Management.

by GBS

The American Recovery and Reinvestment Act (ARRA) provided a COBRA premium reduction for eligible individuals who were involuntarily terminated from employment through the end of May 2010. Due to the statutory sunset, the COBRA premium reduction under ARRA is not available for individuals who experience a qualifying event of involuntary termination of employment after May 31, 2010. However, individuals who qualified on or before May 31, 2010 may continue to pay reduced premiums for up to 15 months, as long as they are not eligible for another group health plan or Medicare.

On July 6, Assistant Secretary of Labor Phyllis C. Borzi issued a statement regarding the COBRA premium reduction under the American Recovery and Reinvestment Act (ARRA): For a copy of Assistant Secretary Phyllis Borzi’s statement, click on the following link:
http://www.dol.gov/ebsa/newsroom/2010/ebsa070610.html

The Unemployment Compensation Extension Act of 2010 signed by the President on July 22, 2010, did not include an extension of the COBRA premium reduction.

A model general notice and a model election notice for individuals with a qualifying event after May 31, 2010 can be obtained from the COBRA section on the DOL’s website at:
http://www.dol.gov/ebsa/COBRA.html

These notices are virtually unchanged from the pre-ARRA models provided by the DOL in 2004.

The Department of Homeland Security (DHS) has issued a final regulation (75 FR 42575, July 22, 2010) concerning the use of electronic signatures and storage for Form I-9s.

Although the changes in the final rule are relatively minor, they provide clarification of some ambiguities contained in the initial rule. The primary changes implemented by this rule are as follows:

• employers must complete a Form I-9 by the third business (not calendar) day after an employee started work for pay;
• employers may use paper, electronic systems, or a combination of paper and electronic systems;
• employers may change electronic storage systems as long as the systems meet the performance requirements of the regulations;
• employers need not retain audit trails of each time a Form I-9 is electronically viewed, but only when the Form I-9 is created, completed, updated, modified, altered, or corrected; and
• employers may provide or transmit a confirmation of a Form I-9 transaction, but are not required to do so unless the employee requests a copy.

By TJ Carter

Being an effective manager takes work. Also, if you are new to the role with little or no training, you will discover there is a difference between being a great employee and managing great employees.

Being a manager takes courage, drive and a little insanity. Many managers know what to do; they are just overwhelmed with the volume of what they need to do.

Here are 5 tips managers most likely know but tend to forget, so lets review what you already know so you can put that knowledge into practice immediately.

1. Determine Who’s Who. Know the personalities on your team, and who you are. The 4 different ‘playground personalities’ will help you do this. Ask, “What type of kid was I on the playground?”

• The one who made sure everyone got a turn at bat? This is the Peacemaker.
• The one who made everyone line up and count off? The Organizer.
• The one who changed the rules midway through the game? The Revolutionary.
• The one who wanted to play it my way? The Steamroller.

Once you figure out your playground personality, determine whos on your playground. Don’t miss the signs. People are very clear with their body language, word usage and intentions.

Peacemakers appreciate communication and collaboration. If a staff member’s eyes bulge when others argue, that’s a clue.

Organizers are structured and decisive. If an employee comes to a meeting with charts or color-coded paper, he’s an organizer.

Revolutionaries hate routine and prefer to adapt to the moment. You’ll know a revolutionary when you ask, “Where did that come from?”

Steamrollers are smart and opinionated and can solve complex problems. They take opposing views and keep ideas floating at 30,000 feet.

2. Show Respect. Respect starts with the manager. Saying “hello” or “thank you” goes a long way. To show respect:

• Brainstorm ideas with Peacemakers
• Provide meaningful work with deadlines to Organizers
• Assign emergency tasks to Revolutionaries
• Ask Steamrollers for their opinions

3. Face Facts. Not everyone collects facts the way you do, so ask questions, be open to learning and don’t shut down discussions too early. When you think you have the facts, ask again to make sure.

4. Find the Humor. Humor should never be personal, but try to find the absurdity that invades everyone’s workspace and lighten the mood. Humor helps employees relate to you and builds camaraderie for difficult tasks.

5. Put it all Together. Managers get paid to get work done. Just when you have a plan, something goes wrong. Don’t immediately go to Plan B. Leverage personalities and the way each approaches a problem.

Understanding employees and empowering them to tackle their work in a manner that suits them will help you blossom into a confident, seasoned professional.