CC 2013-11-12_08.b. Resolution - Affordable Care ActMEMORANDUM
TO: CITY COUNCIL
FROM:
BY:
DEBORAH MALICOAT, DIRECTOR OF ADMINISTRATIVE SERVICES r
KAREN SISKO, HUMAN RESOURCES MANAGER ~
SUBJECT: CONSIDERATION OF A RESOLUTION ADOPTING A MEASUREMENT
PERIOD FOR IMPLEMENTATION OF THE PATIENT PROTECTION
AND AFFORDABLE CARE ACT ("ACA")
DATE: NOVEMBER 12, 2013
RECOMMENDATION:
It is recommended the City Council adopt a resolution defining the measurement period
for implementation of the Patient Protection and Affordable Care Act ("ACA").
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
The cost of providing medical coverage under the ACA is based on the number of
employees that are eligible for this benefit. The City currently provides health coverage
for all full-time employees who work forty hours per week. The ACA will also require
employers to begin providing coverage to employees who work over thirty hours per
week, but less than forty hours per week, beginning January 1, 2015. There is no
impact on the fiscal year 2013/14 budget. Future costs will also depend upon the level
of coverage provided to employees working thirty or more hours per week, but less than
forty, which has not yet been determined.
Administrative Services staff will have to begin tracking weekly hours for all employees
starting December 1, 2013. Supervisors will have to monitor work hours of employees
in positions that are not budgeted to work more than 30 hours per week.
BACKGROUND:
On March 23, 2010, the Patient Protection and Affordable Care Act ("ACA") was
enacted by Congress. The individual mandate is that all citizens and legal residents
must have minimum essential health care coverage beginning in 2014 or face a penalty.
On January 2, 2013, the IRS released proposed regulations on the Employer Shared
Responsibility under the ACA. An employer with more than fifty full-time employees
may be subject to a penalty if it does not offer affordable health coverage that provides
a minimum level of coverage to at least 95% of its full-time employees and their
dependent children to age 26 commencing January 1, 2015 (per IRS published Notice
2013-45). Under the ACA, a full-time employee is defined as an employee with an
Item 8.b. - Page 1
. i:
CITY COUNCIL
CONSIDERATION OF A RESOLUTION ADOPTNG A MEASUREMENT PERIOD FOR
IMPLEMENTATION OF THE PATIENT PROTECTION AND AFFORDABLE CARE
ACT (" ACA")
NOVEMBER 12, 2013
PAGE2
average of at least 130 hours per month (thirty hours per week) of service. Currently, all
full-time salaried employees who work forty hours per week are covered under the
City's health plan. Effective January 1, 2015, employees who work thirty hours or more,
but less than forty hours per week will also be eligible for coverage.
ANALYSIS OF ISSUES:
As an employer with more than fifty full-time employees, the City is subject to "pay or
play" penalties under the ACA. Affordable, minimum value coverage must be offered to
each full-time employee and they may also cover their dependent children to age 26
(but pay the full difference in premium for the dependents). An affordable premium for
the employee coverage is a maximum of 9.5% of the employee's income. A minimum
value plan p·ays at least 60% of the actuarial benefit. Failure to provide affordable,
minimum value coverage may result in one of two possible penalties:
• Penalty A: If the employer does not offer minimum coverage to at least 95% of
its full-time employees and the employer has received a Section 1411
certification that an employee received a federal subsidy to help pay for
insurance coverage from an insurance exchange, the penalty is $2,000/year for
every full-time employee (# full-time employees minus 30) whether or not
coverage was offered to any employees.
• Penalty B: If the employer does offer coverage but it is not affordable, minimum
value coverage and the employee then receives a federal subsidy through an
exchange, the penalty is $3,000/year for every full-time employee not offered
appropriate coverage.
Eligibility Determination/Measurement Period:
The first step to compliance with the ACA is determining who is eligible for health
coverage by establishing an initial measurement period. An employee must work an
average of 130 hours per month (30 hours per week) during the measurement period to
be an eligible full-time employee.
It is recommended that the City begin the measurement period on December 1, 2013
through November 30, 2014. This would subsequently begin each year on December
1st and end the following year on November 30th. This will provide the City with a full
year to average employees' work hours.
Under the ACA, full-time employees who are eligible for health coverage must have
their coverage begin by January 1, 2015. After January 1, 2015, an employee who is
hired into a position that is reasonably expected to work thirty hours or more per week
must be offered medical insurance coverage before the end of their initial sixty days of
employment.
Item 8.b. - Page 2
CITY COUNCIL
CONSIDERATION OF A RESOLUTION ADOPTNG A MEASUREMENT PERIOD FOR
IMPLEMENTATION OF THE PATIENT PROTECTION AND AFFORDABLE CARE
ACT ("ACA")
NOVEMBER 12, 2013
PAGE3
Employees who work seasonal or variable hours and who are not expected to average
30 hours or more per week, will have their eligibility determined by their own personal
measurement period. A new seasonal or variable hour employee will have an initial
separate measurement period start on the first day of the calendar month after their
start date and it shall end by the last day of the first calendar month beginning on or
after the first anniversary of the employee's start date.
Regulations:
The regulations for the ACA are very complex. The first step in complying with the ACA
is to establish a measurement period so the City may start tracking employee hours for
benefit eligibility. Staff will be waiting for more definite rules on the employer mandates
to come out in the coming months and will return to Council with recommendations for
implementation of the remaining steps of the ACA.
ADVANTAGES:
By complying with the rules of the ACA, the City will not be subject to substantial
penalties that could be imposed following an IRS audit, if triggered.
DISADVANTAGES:
Complying with the ACA will incur additional benefit costs for the City starting in the FY
2014/15 budget. It also involves additional staff time t~ monitor and track employee
hours during the measurement period.
ALTERNATIVES:
The following alternatives are provided for the Council's consideration:
Approve staff's recommendation by adopting the resolution to establish a
measurement period under the ACA;
Establish a different measurement period;
Provide direction to staff.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted in front of City Hall on Thursday, November 7, 2013. The
Agenda and report were posted on the City's website on Friday, November 8, 2013. No
public comments were received.
Item 8.b. - Page 3
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF ARROYO GRANDE ADOPTING A MEASUREMENT
PERIOD FOR IMPLEMENTATION OF THE PATIENT
PROTECTION AND AFFORDABLE CARE ACT
("ACA")
WHEREAS, The Patient Protection and Affordable Care Act ("ACA") was enacted on
March 23, 201 O; and
WHEREAS, ACA added Section 4980H, Shared Responsibility for Employers
Regarding Health Care Coverage, to Title 26 of the United States Code, the Internal
Revenue Code (Section 4980H); and
WHEREAS, Section 4980H imposes an assessable payment on an applicable large
employer when (1) it fails to offer "substantially all" of its full-time employees (and their
dependents) the opportunity to enroll in minimum essential coverage or offers coverage
to "substantially all" of its full-time employees (and their dependents) that is
"unaffordable" or does not provide "minimum value" and (2) any full-time employee is
certified to the employer as having received a subsidy for coverage through the
exchange ("Assessable Payment"); and
WHEREAS, the City of Arroyo Grande ("the City") is considered an applicable large
employer because it employed an average of at least 50 full-time employees (including
full-time equivalents) on business days during the preceding calendar year; and
WHEREAS, the Department of Treasury issued proposed regulations regarding Section
4980H, that permit the City to adopt the Look Back Measurement Method Safe Harbor
("Look Back Safe Harbor") in order to determine the status of an employee as full-time
for purposes of determining and calculating the Assessable Payment (78 Federal
Register 218, 243, January 2, 2013); and
WHEREAS, the City hereby intends to adopt the provisions of the Look Back
Measurement Method Safe Harbor in order to determine the full-time status of
employees for purposes of the Assessable Payment.
NOW THEREFORE, BE IT RESOLVED, by the City Council for the City of Arroyo
Grande as follows:
1) The City establishes the Look Back Measurement Method Safe Harbor
with regard to all ongoing employees as follows:
Item 8.b. - Page 4
RESOLUTION NO.
PAGE2
a. The City establishes a twelve (12) month standard measurement
period for ongoing employees.
b. Starting on December 1, 2013, a standard measurement period will
start each year on December 1st, and end the following year on
November 30th.
c. The standard measurement period will be the period during which an
ongoing employee's hours are measured.
2) When an employee takes special unpaid leave (i.e. unpaid leave under
the Family and Medical Leave Act of 1993, unpaid leave under the Uniformed Services
Employment and Reemployment Rights Act of 1994, or unpaid leave on account of jury
duty), to determine hours of service the City will compute the average after excluding
any periods of special unpaid leave during the measurement period and apply that
average for the entire measurement period.
3) The City establishes the Look Back Measurement Method Safe Harbor
with regard to new variable hour employees as follows:
a. The City establishes a twelve (12) month initial measurement period
for each new employee.
b. The initial measurement period will start the first day of the first
calendar month after the start date, unless the start date is the first of a
calendar month in which case the initial measurement period will start
on that date.
c. The administrative period shall start the day following the last day of
the initial measurement period and shall end no later than the last day
of the first calendar month beginning on or after the first anniversary of
the employee's start date.
d. The City establishes a twelve (12) month stability period associated
with the initial measurement period.
e. If the new variable hour employee does not measure as a full-time
employee during the initial measurement period, the stability period
associated with the initial measurement period must not exceed the
remainder of the standard measurement period (plus any associated
administrative period).
Item 8.b. - Page 5
RESOLUTION NO.
PAGE3
4) A new employee's hours will be measured during the first complete
standard measurement period for which he/she is employed. This means that a new
employee's status may be tested under an initial measurement period and at the same
time be measured under the overlapping standard measurement period.
On motion of Council Member , seconded by Council Member
,and on the following roll call vote, to wit:
AYES:
NOES:
ABSENT:
the foregoing Resolution was passed and adopted this
,2013.
day of
Item 8.b. - Page 6
RESOLUTION NO.
PAGE4
TONY FERRARA, MAYOR
ATTEST:
KELLY WETMORE, CITY CLERK
APPROVED AS TO CONTENT:
STEVEN ADAMS, CITY MANAGER
APPROVED AS TO FORM:
TIMOTHY J. CARMEL, CITY ATTORNEY
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