Growing Pains: Compliance Obligations for an Expanding Workforce

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Amber Posthauer: Good afternoon, everyone. Thank you for joining us today. We're going to get started in 60 seconds to allow for all registrants to get connected. We'll get started shortly.

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Amber Posthauer: Welcome, everyone, to Growing Pains, Compliance Obligations for an Expanding Workforce.

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Amber Posthauer: Thank you all so much for joining us.

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Amber Posthauer: The Benefits Compliance Team will be answering the questions you send through the Q&A today. We'll try our best to answer all of your questions, but if for whatever reason we are unable to get to your question today, please follow up with your advisor for further assistance.

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Amber Posthauer: Today's presentation is being recorded. We will be sharing the recording in the follow-up email and on the NFP website. If there are any portions of this call that you missed, by Monday, you will receive an email with a link to the full recording. The PowerPoint slides used during this presentation will be shared in the same email.

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Amber Posthauer: At this time, I'll hand it over to Kelly Ekman, Vice President of NFP Benefits Compliance, and Benjamin Mary, Vice President and Council of NFP Benefits Compliance. Kelly, the floor is yours.

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Kelly Eckman: Alright, thanks, Amber, and thank you, everyone, for joining us. I know you're all busy, many of you in the trenches of, you know, open renewal and just kind of year-end stuff, so we appreciate you joining us.

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Kelly Eckman: as we walk through some growing pains that, growing organizations may be having, here are our lovely pictures, in case you have not seen them before, and you want to put faces to the names today. Before we get too far in, we always like to have our disclaimer here.

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Kelly Eckman: So again, that reminder that what we're talking about today, it is intended for general guidance purposes only. It is not tax advice, it is not legal advice. If you have those questions, please, you know, point those to your own legal or tax counsel, and the information we're going to talk about today is current as of today.

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Kelly Eckman: So, what are we going to cover in Growing Pains? So, we're really breaking this into two different sections. The first one is going to be geographic expansion. So, we're going to look at state insurance law basics.

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Kelly Eckman: state leave laws, and then mini COBRA laws that may come into play. And then the second half of the presentation is focused on headcount expansion. So we're going to look at, you know, how do we

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Kelly Eckman: count employees for various, you know, federal laws, and then also just looking at, you know, merger and acquisition rules, and kind of how that impacts that headcount expansion. And then, as always, ending with some takeaways and a look at our resources.

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Kelly Eckman: So again, first we're starting off with geographic expansion, and Ben is going to lead us through state insurance law basics.

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Benjamin Merry: Well, thank you, Kelly, and good afternoon, everyone. Thanks for joining us today. We're talking first about state insurance laws. This is a subject that comes up frequently as your workforce grows and your footprint expands. Which insurance laws do you need to know about? Do you need to worry about the insurance laws where your business is located?

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Benjamin Merry: Where your employees work, where they live.

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Benjamin Merry: So we'll start with the basics.

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Benjamin Merry: States are the primary regulators of insurance products. In most cases, it's up to the states to set the rules for insurance products that are sold within their borders.

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Benjamin Merry: Each state imposes health mandates that apply to insurance policies that are issued or written in the state.

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Benjamin Merry: Some of them might mandate coverage for particular services, others might mandate that coverage be extended to certain individuals.

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Benjamin Merry: We've included a few examples here to give a basic idea of the shapes that these coverage mandates might take.

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Benjamin Merry: For instance, Iowa requires insurance policies that are issued in the state to include coverage for prosthetics.

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Benjamin Merry: Florida requires coverage of certain diabetes treatments.

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Benjamin Merry: Massachusetts even has a unique law that says that if you're a business in Massachusetts, your health insurance must provide continuation coverage to ex-spouses of Massachusetts residents, potentially even until they get remarried.

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Benjamin Merry: So there's a lot of difference from state to state, and since mandates differ by state, it's important to know the state where the policy is issued, since those are the laws that are generally going to govern your group health insurance.

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Benjamin Merry: Next slide, please, Kelly. We're talking all about growing workforces today, so we're gonna complicate things a little bit.

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Benjamin Merry: It's one thing if you're an employer and all of your employees live and work in the state where your business operates, but you're in expansion mode, you've just hired an employee who lives in a different state and maybe commutes across state lines to work, or maybe they're a remote employee.

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Benjamin Merry: In many cases, like I mentioned, it's the insurance laws in the state where the policy is issued that control the policy. But that's not always the case. Some states have insurance laws that apply to any insurance policies that cover an employee who lives or works in the state.

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Benjamin Merry: California and Texas are great examples of this. California law says that any fully insured group insurance policy that covers a California resident must provide coverage for registered domestic partners.

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Benjamin Merry: Texas law says that a policy that covers a Texas resident that allows dependents to enroll must also allow employees to enroll their dependent grandchildren who are unmarried.

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Benjamin Merry: But state insurance laws only go so far.

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Benjamin Merry: Generally speaking, fully insured plans need to comply with state insurance laws.

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Benjamin Merry: Employers with self-insured plans generally don't need to worry so much about state insurance laws.

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Benjamin Merry: You might have heard of the idea of ERISA preemption, that's what we're talking about here.

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Benjamin Merry: Congress wanted employee benefit plans to be subject to one national set of laws so that employers don't have to keep up with the different regulations in every state where they operate.

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Benjamin Merry: But states are still free to regulate insurance.

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Benjamin Merry: So the result is that fully insured plans end up following state insurance laws, because those laws regulate the insurance carriers and the insurance policies themselves.

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Benjamin Merry: Self-insured plans, which include level-funded plans, I should mention that.

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Benjamin Merry: Generally aren't subject to state insurance laws, so they tend to have more flexibility.

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Benjamin Merry: Which brings us to the takeaways.

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Benjamin Merry: And there's a lot of good news to go around, whether you are self-insured or you're fully insured.

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Benjamin Merry: If you're self-insured, the good news is you don't need to worry so much about changing your benefits offerings as you grow and expand into other states.

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Benjamin Merry: State coverage mandates aren't going to apply to you generally. So you have a lot of flexibility to choose what benefits to offer to your employees, regardless of where they live and work.

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Benjamin Merry: If you're fully insured, the good news is that it's generally carriers who have to carry out those laws.

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Benjamin Merry: That means that your carrier is usually going to be your best resource for understanding what coverage mandates apply to your coverage.

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Benjamin Merry: Now it's your job as the employer to keep your carrier up to date on where your employees live and work.

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Benjamin Merry: But it's ultimately the carrier that is going to know the insurance laws for each state. So if you're hiring an employee in another state, and you need to know how that will affect the benefits that you offer, often your carrier is going to know the answer. So lean on your carriers for information.

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Benjamin Merry: The one caveat with this, though, is that employment laws are a different story. Those are always going to be the employer's responsibility.

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Benjamin Merry: So make sure to consult with your HR professional or your employment attorney to get a handle on any employment law considerations that might apply to your situation.

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Benjamin Merry: I do want to note a couple of other considerations around state insurance laws.

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Benjamin Merry: First, Hawaii is unique.

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Benjamin Merry: If you're doing business in Hawaii, you'll want to be familiar with their laws, because they're an exception to the usual rules.

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Benjamin Merry: In particular, they have a state prepaid healthcare act

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Benjamin Merry: Which applies to employers regardless of whether you sponsor a fully insured health plan or a self-insured group health plan.

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Benjamin Merry: The law requires employers to provide specific pre-approved group medical coverage to certain employees, and it limits how much an employee can be charged for coverage.

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Benjamin Merry: I'm not going to go into the weeds today on all of Hawaii's laws, but I just want to flag it in case anyone joining us today has employees in Hawaii, or is considering expanding into Hawaii.

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Benjamin Merry: A second thing I wanted to highlight is that there are currently 5 states plus the District of Columbia that have individual mandates for the residents.

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Benjamin Merry: These laws are based on where the employee lives.

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Benjamin Merry: So if you have employees who live in the states on the screen, California, Washington, DC, Massachusetts, New Jersey, Rhode Island, or Vermont, you may have additional state reporting requirements that you do need to comply with.

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Benjamin Merry: Our benefits compliance team, we maintain a guide on Hawaii benefits considerations and on state individual mandate reporting requirements. We would encourage you to ask your NFP consultant or broker for a copy of either of those publications if you'd like more information.

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Benjamin Merry: And with that, I will hand the microphone over to Kelly to discuss state leave laws.

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Kelly Eckman: Alright, thanks, Ben. Yeah, it's always important to know, you know.

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Kelly Eckman: those nuances that different states have, especially with some of those extraterritorial laws that you mentioned. So now we're going to look at state leave laws. I know this is a hot topic,

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Kelly Eckman: We've had several webinars on this in the past, and I know it's something employers are always wanting to know about, especially, again, as your workforce is expanding, whether it's organic growth, whether you're hiring remote employees, or potentially you're expanding

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Kelly Eckman: You know, through an acquisition that then puts you into a different state. So, we're gonna take a high-level look at paid family and medical leave.

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Kelly Eckman: So again, I think most of us are probably aware of these. These are state-based, mandatory programs that are going to provide not only time off for employees for specific situations, but paid time off.

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Kelly Eckman: for those situations. So, common reasons for PFML, leaves, these are gonna be, you know, childbirth, or bonding with a new child.

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Kelly Eckman: The employee recovering from their own serious health condition, or potentially time off to care for a family member who has a serious health condition.

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Kelly Eckman: Now, we kind of lump PFML together. It's really disability, or, you know, short-term disability insurance, and then paid family leave. Combined, we call those PFML, and that's because most states that offer these programs offer both, so it just kind of gets lumped together.

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Kelly Eckman: And so a state PFML program is going to apply if there's at least one employee who works

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Kelly Eckman: in that state. So again, I know, you know, Ben just talked about, state insurance, or state individual mandates and reporting. That's based on where someone lives. This time, we're saying it's based on where someone works, and that's why, you know, expansion can be so confusing.

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Kelly Eckman: So, what employees are subject to these programs? Again, employees who work… who primarily work in a state that has either the disability or the paid family leave laws. Remote workers can be really tricky.

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Kelly Eckman: Especially if they live in one area, they work in another, or maybe, you know, they're road warriors, and they travel a lot. So sometimes those aren't quite as easy to answer off the cuff, but in general, it's going to be based on

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Kelly Eckman: Where someone, you know, what their primary work site is.

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Kelly Eckman: And so here's a nice little map of the states that currently have these PFML, or disability laws. Again, you'll see Hawaii, I know Ben just talked about that. They're an exception. They are disability only. They don't have the paid family leave part, at least not currently. The other ones in green are the states that have

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Kelly Eckman: the combined programs. Do note the footnotes here, New Hampshire and Vermont.

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Kelly Eckman: They have these programs, but they are optional for private employers. So just a little nuance there, if that might… those might be states that you are, you know, expanding into or potentially looking at.

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Kelly Eckman: So, super high level, what do employers need to do when it comes to these state leave laws? So again, looking at that primary work state, again, especially those remote workers, that's really going to be key to figuring out, you know, which employees are in a state in which these laws apply.

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Kelly Eckman: Engaging with employment counsel is so important. Again, not just because of we need to figure out, you know, if a state PFML law applies, but employment law, as Ben said, goes much further than just benefits, and understanding those nuances of each state, it's really important.

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Kelly Eckman: Now typically, when we have a state with a PFML law, employers can choose if they want to participate in the state-based program, or if they want to, have a private plan. So that is a decision that the employer can make. Oftentimes, you know.

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Kelly Eckman: You have to register with the state program, let them know how you are complying. Typically, there are going to be premiums that employees are going to pay as part of their share, and then, oftentimes the employer may have to

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Kelly Eckman: make a contribution as well. Again, each state is going to do it a little differently, depending on which party pays it, and then potentially

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Kelly Eckman: What the split looks like.

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Kelly Eckman: Premiums are either going to be, you know, remitted to the state, if you're participating in that state-based program, or potentially to carriers if it's a private plan option. States may have…

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Kelly Eckman: Required notices or posters that need to be provided, you know, in the workplace or potentially in handbooks, so making sure that you understand your requirements for each, you know, state in which you have these employees.

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Kelly Eckman: And then, a really important thing that I think we get asked a lot is, you know, how do these programs coordinate with other leave? So, whether it's coordinating with FMLA, or potentially state FMLA programs for smaller employers.

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Kelly Eckman: If the employer, you know, offers its own short-term disability policy, or what if the employer has its own parental leave policy? How do these

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Kelly Eckman: benefits coordinate with, these state programs. You know, sometimes there can be a difference in the duration of the programs, the benefit amounts, you know, will…

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Kelly Eckman: whatever someone receives from the state, will that offset what they can get from the employer's disability policy? That kind of thing. So making sure you understand how these state programs work.

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Kelly Eckman: with employer programs is really important. The last one here, I think, is also very important, so continuation of coverage. A lot of the times, these state PFML programs, you know.

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Kelly Eckman: Some may require benefit continuation, but not all of them do. Now, if they're running concurrently with FMLA, you're gonna have benefit continuation there. Or potentially, with medical coverage, the ACA may require continuation.

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Kelly Eckman: But just understand that there are a lot of moving parts when we're thinking about state leave.

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Kelly Eckman: Whether it is, you know, interaction with other benefits or potentially continuation. So it is important that you're working with employment counsel to make sure you have your policies and procedures in place.

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Kelly Eckman: To make sure that you can administer it, especially if you have employees in a lot of different locations where the state programs may vary quite a bit.

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Kelly Eckman: And so sometimes, too, we have states with these shorter paid time off requirements, sometimes called paid sick leave, and that's a little different than these PFML programs that I was talking about.

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Kelly Eckman: We won't spend a lot of time on this, because really, these fall into that employment law space, so it's not quite the benefits compliance side that our team handles, but it is important to understand that these laws exist in many states.

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Kelly Eckman: And so, again, engaging that employment counsel is key if you are expanding geographically. So, some states have requirements for bereavement leave, or jury duty.

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Kelly Eckman: Illinois has the Paid Leave for All Workers Act, so it's going to require a certain amount of paid time off. New York has prenatal leave. Some states have organ donor leave. So lots of, kind of, shorter term…

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Kelly Eckman: Paid time off requirements that many of these states

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Kelly Eckman: have. Now, again, these are going to vary quite a bit.

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Kelly Eckman: So, each state is going to have its own rules as far as how the leave accrues. Like, here's an example, you know, someone gets 1 hour of paid leave for every 30 hours that they work. Some may have an ability for an employer's existing PTO policy to satisfy the state requirement.

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Kelly Eckman: States will vary based on if you can carry over things, or carry over hours.

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Kelly Eckman: Some states are even expanding the definition of family member, so it may include more than just, let's say, your legal spouse or your biological child. It may be further reaching than that, to kind of capture, you know, what a family looks like these days.

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Kelly Eckman: And so again, these are going to be shorter term, shorter in duration, but again, different paid time off requirements that some states

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Kelly Eckman: offer. And so, again, this is really in the employment law space, but it's important that employers, you know, kind of have this top of mind as you are expanding geographically.

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Kelly Eckman: Alright, so I'm going to do a really quick look at state continuation, or what is more commonly known as mini COBRA laws.

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Kelly Eckman: And so this kind of goes back into what Ben was talking about with,

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Kelly Eckman: you know, state insurance laws. And many COBRA laws are really gonna follow, you know, where a plan is written, but I think it's important to understand some nuances here. So why is it important when we're thinking about geographic expansion?

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Kelly Eckman: Well, it's important, because sometimes we'll have a situation where an employer… maybe you open an office in another state, or you acquire a company in a different state, and then you start looking at

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Kelly Eckman: your insurance plans and think, well, what would happen if we changed our site estate? So, currently, my policy is written in Indiana, but now I just opened an office in Colorado.

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Kelly Eckman: you know, what would it look like if we changed our site estate? And that's gonna impact, you know, those insurance laws that Ben talked about, but it also could bring about some…

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Kelly Eckman: issues with many COBRA laws. So I think most of us are aware federal COBRA is going to apply to employers with 20 or more employees.

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Kelly Eckman: But then we have these mini COBRA, or state continuation. 44 states actually have their own, type of mini COBRA laws.

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Kelly Eckman: And again, what's interesting here is that these can go beyond just what we think of as, you know, federal COBRA. Again, it's going to be applying to those fully insured plans, so not self-insured, not level funded. It's going to apply to fully insured plans written in that state.

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Kelly Eckman: So again, geographic expansion, we're really just saying if you are looking at changing the site of state for your plan.

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Kelly Eckman: Now, requirements are imposed on insurers, which again, so the carrier, they're the ones that bear the burden of compliance, but again, the employers can't just wash their hands of it. Employers need to be aware of the requirements if you are in a state that has these continuation laws.

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Kelly Eckman: And so, many and COBRA laws are going to vary depending on the state. And so, sometimes that variance depends on, you know, which employers are impacted by these laws, or potentially how long

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Kelly Eckman: it might last. Some of these state continuation or mini COBRA laws actually apply to large groups, so it's not just

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Kelly Eckman: that these laws apply to those small groups that are not subject to federal COBRA, but sometimes these state laws will actually apply to larger groups as well, and expand on what is required under federal COBRA.

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Kelly Eckman: Now, typically, many COBRA laws are going to be limited just to medical coverage, and not apply to dental or vision. That's kind of the standard there.

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Kelly Eckman: But again, you want to work with an insurance carrier

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Kelly Eckman: To understand, based on the state in which your plan is written, if there are some mini COBRA laws that are going to apply.

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Kelly Eckman: And so here's a few examples. Again, we like to just pull out some of the different ones, just in case you were looking at making that change. So California, it's usually a state we talk about when we're going to talk about states with unique laws. You know, California, these continuation programs apply to employers of all sizes.

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Kelly Eckman: So for those small groups with fewer than 20 employees, it's gonna provide up to 36 months of medical dental vision. I know, you said, well, Kelly, you told me these only apply to medical. For most states, that is true. But in California, the mini COBRA laws can apply to dental and vision as well.

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Kelly Eckman: And then for those groups subject to federal COBRA, the state continuation will provide an expansion of up to 36 months.

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Kelly Eckman: Illinois, they're not quite as generous there, they're gonna provide up to 12 months, but again, limited to medical only, and they have a requirement that says, you know, the person must have been covered by the plan for at least 3 months prior to the qualifying event.

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Kelly Eckman: So, if you have a new hire, they enrolled in coverage, they're only on the plan for one month, and they terminate, they would not qualify for Mini Cobra in Illinois in that instance.

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Kelly Eckman: New Jersey, again, they look at it a little differently.

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Kelly Eckman: their law, it goes up to 50 employees, so they're not limiting it to 20. And then, interestingly, church plans. Church plans in New Jersey, with up to 50 employees, they must comply with state continuation. And that's kind of interesting, because

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Kelly Eckman: Church plans are not subject to federal COBRA, but they would be subject to, New Jersey's continuation. New Jersey includes domestic partners, civil union partners. So again, just some differences that we see in many COBRA laws.

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Kelly Eckman: So, if you are looking at changing your site estate, it is important to kind of keep in mind what that might look like as you are making those decisions.

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Kelly Eckman: And then just some resources here. We have lots of great toolkits and publications that hopefully you guys, you know, have heard us talk about before. We've got a nice one on state PFML and disability programs, and as you can see, lots of state-specific

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Kelly Eckman: Publications that kind of do a little bit of a deeper dive into some nuances.

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Kelly Eckman: of state requirements, so definitely, you know, reach out to your consultant if you are interested in one of the ones on the screen here. Obviously, we don't have every state, but we, you know, cover some of the states that are a little bit more unique, or, you know, we get asked about quite a bit.

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Kelly Eckman: And so now we're gonna leave the world of geographic expansion and look at headcount expansion and what you need to know. And Ben is gonna lead us through this part.

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Benjamin Merry: Yeah, thanks, Kelly. So yeah, we've talked a lot so far about what to know as your footprint expands into other states, but now we're gonna talk about what to watch out for as your employee headcount increases. Because your compliance responsibilities grow as your workforce does.

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Benjamin Merry: So it could be that you're growing organically, that business is booming and you're hiring more employees, or it could be that you're merging with another company, or you're acquiring another business that's going to keep operating separately from your existing company with its own tax ID number and its own benefit plans.

00:24:17.170 --> 00:24:23.400
Benjamin Merry: In a lot of cases, you're gonna have to take all of those employees into account when determining what your responsibilities are.

00:24:23.780 --> 00:24:30.410
Benjamin Merry: So, our goal today is to help you recognize the landscape of benefits laws as your business grows.

00:24:30.520 --> 00:24:37.710
Benjamin Merry: We'll discuss how to count employees for various laws to help you identify when a growing workforce triggers a new compliance obligation.

00:24:37.940 --> 00:24:48.140
Benjamin Merry: But we're not going to go deep on your specific obligations for each law. We discussed many of those in a previous webinar back in June, which is linked on the slide. You'll get the slides in a couple days.

00:24:48.310 --> 00:24:54.300
Benjamin Merry: And we also have, as you've seen, a number of great publications on many of the laws we'll talk about today.

00:24:55.040 --> 00:24:56.919
Benjamin Merry: So this next slide here.

00:24:57.860 --> 00:25:02.689
Benjamin Merry: It's gonna be a quick reference for the compliance requirements that we'll be discussing in this section.

00:25:03.040 --> 00:25:08.139
Benjamin Merry: And the magic numbers you'll want to have in your head are going to be 20, 50, and 100.

00:25:08.790 --> 00:25:15.180
Benjamin Merry: So 20 employees, that's where you should be thinking about COBRA and the age-based Medicare secondary payer rules.

00:25:15.560 --> 00:25:22.759
Benjamin Merry: At 50 employees, you should be thinking about the Affordable Care Act, and the Employer Mandate, and the Federal Family and Medical Leave Act.

00:25:23.290 --> 00:25:41.229
Benjamin Merry: And then at 100 employees, you should be thinking of disability-based Medicare secondary pay rules. And if your plan is subject to ERISA, which is going to be the case for most private employers, then at 100 participants, you're also going to be subject to the Form 5500 filing requirement with the Department of Labor.

00:25:41.550 --> 00:25:48.560
Benjamin Merry: But while it's important to have these general numbers in your head, it's crucial to know how to count employees for each of these obligations.

00:25:48.790 --> 00:26:00.420
Benjamin Merry: Each one counts employees a little bit differently, so it's best to be proactive and to start planning for your compliance obligations as you approach these magic numbers, and don't wait until you reach them to start planning.

00:26:01.150 --> 00:26:02.849
Benjamin Merry: So we'll start with Cobra.

00:26:04.890 --> 00:26:20.359
Benjamin Merry: And I assume most folks joining us today are familiar with the broad strokes of COBRA. This is the law that requires covered employers that sponsor group health plans to offer continuation coverage to employees, to their spouses and their dependents in certain circumstances where they would otherwise lose that coverage.

00:26:20.550 --> 00:26:30.800
Benjamin Merry: Kelly just discussed, that, that 44 states have many COBRA laws, so, you know, this is now a federal requirement instead of a state requirement that we're looking at.

00:26:31.630 --> 00:26:43.449
Benjamin Merry: But when does an employer have to comply with COBRA? If you're a church plan, as Kelly mentioned previously, or if you're the federal government, you're exempt. COBRA doesn't apply to you. Go get a cup of coffee, I'll see you on the next slide.

00:26:43.770 --> 00:26:53.409
Benjamin Merry: But if you're a private or a public employer, COBRA is triggered if you had at least 20 common law employees on 50% of your typical business days in the previous calendar year.

00:26:53.750 --> 00:26:58.070
Benjamin Merry: And that's 20 employees. It's not just employees who are enrolled in your coverage.

00:26:58.240 --> 00:27:00.250
Benjamin Merry: It's 20 common law employees.

00:27:00.450 --> 00:27:03.720
Benjamin Merry: But for COBRA, not all employees count the same.

00:27:04.520 --> 00:27:11.260
Benjamin Merry: Each full-time employee on your payroll counts as one employee for purposes of COBRA.

00:27:11.590 --> 00:27:19.890
Benjamin Merry: Part-time employees? They're counted as a fraction of an employee based on the number of hours an employee needs to work to be considered full-time by the employer.

00:27:20.180 --> 00:27:26.599
Benjamin Merry: So, for example, if you're a business that employs a lot of high school students, it's their after-school job a couple days a week.

00:27:26.950 --> 00:27:31.029
Benjamin Merry: Those high school students, they might each count as half of an employee toward COBRA.

00:27:31.650 --> 00:27:40.809
Benjamin Merry: Now, if you're an employer that is part of a controlled group, meaning that you're closely enough related to another entity, or you have enough common ownership with another entity.

00:27:41.020 --> 00:27:46.590
Benjamin Merry: Then the employees of those other entities in the controlled group are counted together with yours for COBRA purposes.

00:27:47.040 --> 00:27:57.520
Benjamin Merry: So take, for example, a restaurant group. One company wholly owns 2 or 3 restaurants. Maybe one restaurant doesn't have enough employees to trigger Cobra on its own.

00:27:57.680 --> 00:28:01.509
Benjamin Merry: But there are at least 20 employees, between the businesses.

00:28:01.770 --> 00:28:08.969
Benjamin Merry: Because those businesses are related closely enough, COBRA could apply to each of them, even though they don't individually have 20 employees.

00:28:09.790 --> 00:28:14.689
Benjamin Merry: In addition, non-US employees count toward the 20 employees for COBRA.

00:28:15.030 --> 00:28:21.769
Benjamin Merry: Those employees might not necessarily be eligible for COBRA, but they'll impact whether the employer will be subject to it in the first place.

00:28:22.670 --> 00:28:30.639
Benjamin Merry: But note again what the trigger for COBRA is. It's 20 common law employees on half of the typical business days in the previous calendar year.

00:28:30.970 --> 00:28:33.340
Benjamin Merry: So once that Cobra account is triggered.

00:28:33.460 --> 00:28:39.699
Benjamin Merry: The employer must comply with COBRA for the entire following calendar year, even if their headcount later drops below 20.

00:28:39.870 --> 00:28:44.870
Benjamin Merry: So maybe you're a business that's really booming in the spring and summer, like a golf course.

00:28:45.100 --> 00:28:51.750
Benjamin Merry: You have to hire a ton of employees to get through your busy stretch of the year, but then you don't do so much business in the fall or winter.

00:28:51.880 --> 00:29:07.260
Benjamin Merry: you might trigger your COBRA headcount by the end of the summer, and then by next February, you have, like, a skeleton crew of employees, maybe there's only 10 employees left on the payroll. You're still subject to COBRA all year, because you triggered the count last summer.

00:29:07.640 --> 00:29:08.779
Benjamin Merry: So that's Cobra.

00:29:08.970 --> 00:29:13.499
Benjamin Merry: Let's turn to my favorite subject, Medicare Secondary Payer.

00:29:14.560 --> 00:29:24.129
Benjamin Merry: We get questions all the time from clients that want to be generous to their Medicare-eligible employees. They want to know if they can help them pay for their Medicare premiums.

00:29:24.310 --> 00:29:34.770
Benjamin Merry: Or we'll get questions from the other side. I think everyone here probably knows that healthcare costs are a real challenge right now for everyone. That's not a secret.

00:29:35.220 --> 00:29:45.479
Benjamin Merry: So employers will ask us if they can require their Medicare-eligible employees to enroll in Medicare instead of the group health plan, or they'll ask if the group health plan can pay secondary to Medicare.

00:29:45.940 --> 00:29:49.489
Benjamin Merry: And that's what Medicare Secondary Payer is all about.

00:29:49.870 --> 00:30:01.399
Benjamin Merry: If you're subject to the Medicare Secondary Payer Law, you're prohibited from offering financial incentives to Medicare-eligible employees to waive their coverage or to enroll in Medicare instead of the group health plan.

00:30:01.810 --> 00:30:07.710
Benjamin Merry: You can't treat an employee differently because they're eligible to enroll in Medicare, or because their spouse is.

00:30:08.130 --> 00:30:11.779
Benjamin Merry: And your group health plan will always pay primary to Medicare.

00:30:13.160 --> 00:30:23.919
Benjamin Merry: On the other hand, if you're not big enough to trigger the Medicare secondary pay rules, you have more flexibility. Your group health plan can take a backseat and pay secondary to Medicare.

00:30:24.080 --> 00:30:34.060
Benjamin Merry: We'll see this a lot with small employers with fully insured plans. That's all perfectly fine, as long as you're not big enough to trigger the Medicare secondary payer rules.

00:30:35.060 --> 00:30:37.400
Benjamin Merry: So what triggers Medicare Secondary Payer?

00:30:37.880 --> 00:30:48.149
Benjamin Merry: For age-based Medicare, the law kicks in for employers with 20 or more employees for each working day, and at least 20 weeks in the current or pre-preceding calendar year.

00:30:48.610 --> 00:30:56.780
Benjamin Merry: For disability-based Medicare, it's 100 or more employees on at least 50% of the regular business days during the previous calendar year.

00:30:57.770 --> 00:31:17.000
Benjamin Merry: And these rules, they're strict, and the accounting rules reflect that. Everyone counts. So full-time employees, part-time employees, the intern who works one day a week, they all count equally. Whether they're enrolled in the group health plan or not, they… if they're on the payroll that week, they count as one employee.

00:31:17.230 --> 00:31:24.800
Benjamin Merry: Employees outside of the U.S. count. Least employees count. Employees in other businesses that are part of your controlled group count.

00:31:25.150 --> 00:31:36.190
Benjamin Merry: These Medicare secondary payer rules are really strict, because Congress doesn't want Medicare paying primary when there's employer-sponsored coverage that's available in most instances.

00:31:36.590 --> 00:31:40.539
Benjamin Merry: And that's also reflected in, when employees are counted.

00:31:40.860 --> 00:31:47.989
Benjamin Merry: Employer size is measured based on the date that someone goes to the doctor and receives services for which Medicare is billed.

00:31:48.470 --> 00:31:59.010
Benjamin Merry: So, for age-based Medicare secondary payer, if an employee goes to the doctor and Medicare is billed as primary, then CMS is going to come looking to check your employee counts then.

00:31:59.330 --> 00:32:05.730
Benjamin Merry: If the employee goes back to the doctor a couple months later, CMS is gonna come back, and they're gonna do the count all over again.

00:32:06.020 --> 00:32:17.819
Benjamin Merry: So if you are an employer that is close to these thresholds, and your group health plan pays secondary to Medicare, you need to be on constant alert to know when you meet that employee limit, for Medicare secondary payrolls.

00:32:18.010 --> 00:32:21.830
Benjamin Merry: I don't mean to scare anyone, they're just strict. That's just the reality of it.

00:32:22.780 --> 00:32:33.089
Benjamin Merry: So let's, that's Medicare secondary payrolls. Let's move on to our next magic number. We're going to talk about 50 full-time employees, and this is the ACA's employer mandate.

00:32:34.290 --> 00:32:44.919
Benjamin Merry: The employer mandate has been around for a while, we've all heard about it. It applies to nearly all public and private employers who qualify as an applicable large employer.

00:32:45.470 --> 00:32:48.970
Benjamin Merry: If you're an applicable large employer, an ALE,

00:32:49.230 --> 00:32:56.429
Benjamin Merry: You're required to offer substantially all of your full-time employees the opportunity to enroll in what's called minimum essential coverage.

00:32:56.910 --> 00:33:03.220
Benjamin Merry: And you also generally need to make sure that that minimum essential coverage is affordable and provides minimum value.

00:33:04.590 --> 00:33:12.289
Benjamin Merry: So who is an ALE? Those are employers that averaged 50 or more full-time employees in the preceding calendar year.

00:33:12.450 --> 00:33:17.179
Benjamin Merry: So it's not a switch that gets flipped when you cross that 50 full-time employee limit.

00:33:17.560 --> 00:33:25.520
Benjamin Merry: But once you average 50 full-time employees in a calendar year, then you're required to comply with the employer mandate for the following calendar year.

00:33:27.180 --> 00:33:28.440
Benjamin Merry: How are they counted?

00:33:28.610 --> 00:33:35.360
Benjamin Merry: Well, full-time employees, those are easy. Those are your employees who work 30 or more hours per week.

00:33:35.920 --> 00:33:39.629
Benjamin Merry: Each employee who fits that description, they count as one employee.

00:33:40.180 --> 00:33:43.939
Benjamin Merry: But the ACA also takes into account full-time equivalents.

00:33:44.320 --> 00:33:53.999
Benjamin Merry: So basically, for each month, you're gonna count up all of the hours of service for all of the employees who aren't full-time employees, who aren't working 30 or more hours per week.

00:33:54.150 --> 00:33:56.709
Benjamin Merry: And you're gonna divide that number by 120.

00:33:56.910 --> 00:34:01.449
Benjamin Merry: Whatever that number is, that's the number of your full-time equivalents for that month.

00:34:01.810 --> 00:34:09.480
Benjamin Merry: You add it to your number of full-time employees, and that's your number of full-time employees for the ACA purpose for that month.

00:34:09.790 --> 00:34:20.419
Benjamin Merry: You… you average all your counts out for each month across the year. If your average is 50 or more for the year, you're an ALE for the next year. You have to comply with the employer mandate.

00:34:20.760 --> 00:34:36.619
Benjamin Merry: If you end up with a fraction, you always round down to the nearest whole number. So if, at the end of the year, you take your average and you have 49.7 full-time employees, congratulations, you're not an ALE, you don't need to worry about the employer mandate for the next year.

00:34:38.820 --> 00:34:47.079
Benjamin Merry: Common law employees count for the ACA, but we're only looking at common law employees, so owners and leased employees aren't counted.

00:34:47.690 --> 00:34:55.580
Benjamin Merry: Only those employees with U.S. source income count. The employer mandate isn't concerned with how many employees might work overseas.

00:34:55.870 --> 00:34:59.679
Benjamin Merry: But interns count, so do seasonal workers.

00:35:00.540 --> 00:35:07.769
Benjamin Merry: And this is another law that counts those employees of related employers, those controlled groups that we've discussed before.

00:35:08.170 --> 00:35:18.769
Benjamin Merry: One important thing to note here, though, is that it's the total size of all employers in your controlled group that's gonna dictate whether you're in the small group market or the large group market.

00:35:19.050 --> 00:35:25.839
Benjamin Merry: You might only have 30 full-time employees, but if you're a member of a controlled group that has 300 total employees.

00:35:26.060 --> 00:35:34.610
Benjamin Merry: You need to disclose that to your carrier. You would be in the large group market, not the small group market. That's an important distinction that often gets overlooked.

00:35:37.090 --> 00:35:48.019
Benjamin Merry: That is… that's the employer mandate. Let's discuss our next, our next topic for magic number 50 is gonna be FMLA, the, Family and Medical Leave Act.

00:35:48.410 --> 00:35:55.250
Benjamin Merry: Fmla provides unpaid, job-protected leave for up to 12 weeks in a 12-month period.

00:35:55.480 --> 00:36:03.250
Benjamin Merry: For an employee who has specified family or medical reasons, very similar to state paid fam- family and medical leave laws.

00:36:05.000 --> 00:36:10.400
Benjamin Merry: So it could be for an employee to care for a newborn child, could be for an employee's serious medical condition.

00:36:10.650 --> 00:36:16.350
Benjamin Merry: Or, maybe the employee needs to care for a spouse, a child, or a parent who has a serious medical condition.

00:36:16.950 --> 00:36:26.540
Benjamin Merry: Fmla applies to private employers with 50 or more employees for each working day and 20 or more work weeks in the current or the preceding calendar year.

00:36:27.050 --> 00:36:30.809
Benjamin Merry: It also applies to all public employers,

00:36:31.710 --> 00:36:35.980
Benjamin Merry: And local educational agencies, regardless of their size.

00:36:37.210 --> 00:36:50.299
Benjamin Merry: And for FMLA purposes, you can basically count up the names on your payroll. Everyone counts equally, full-time, part-time, seasonal employees, even temporary employees, they each count as one employee.

00:36:50.720 --> 00:36:55.229
Benjamin Merry: Employees who are on paid or unpaid leave also count towards your total.

00:36:55.810 --> 00:37:04.650
Benjamin Merry: But FMLA, again, is only focused on the employees who are working in the US, so you can exclude any employees who are working internationally.

00:37:05.430 --> 00:37:10.439
Benjamin Merry: And FMLA is the rare law that doesn't take into account employees of controlled groups.

00:37:10.610 --> 00:37:14.939
Benjamin Merry: But employees of another business might count towards your total.

00:37:15.220 --> 00:37:18.830
Benjamin Merry: If the two businesses are considered an integrated employer.

00:37:19.450 --> 00:37:37.710
Benjamin Merry: And an integrated employer is determined based on facts and circumstances. There's not a bright line rule, so it's not always clear-cut who's an integrated employer, but it looks at things like common management, interrelation between operations, the degree of common ownership or financial control between the employers.

00:37:38.710 --> 00:37:49.929
Benjamin Merry: And once an employer meets the size requirements for FMLA, then the employer will remain a covered employer for as long as they continue to meet the requirements, even if their headcount falls below 50.

00:37:50.110 --> 00:38:02.520
Benjamin Merry: So, to use my golf course example from earlier, again, in the spring and summer, you hire a bunch of full and part-time employees to mow the grass and to work in the pro shop and staff the restaurant and pool and whatever else.

00:38:02.640 --> 00:38:11.139
Benjamin Merry: By the end of the summer, you've had 50 employees on the payroll for 20 work weeks, so now you're subject to FMLA for this year and for next year.

00:38:11.320 --> 00:38:17.149
Benjamin Merry: It doesn't matter if you're down to 10 employees in February. The employer is still subject to FMLA.

00:38:17.710 --> 00:38:26.439
Benjamin Merry: As we'll see on the next slide, an employee might not be eligible to take FMLA in February, but the employer is at least subject to FMLA.

00:38:30.300 --> 00:38:35.560
Benjamin Merry: So, an eligible employee is one who worked for the employer for at least 12 months.

00:38:35.850 --> 00:38:41.290
Benjamin Merry: Worked 1,250 hours or more in the 12 months prior to their requested leave.

00:38:41.650 --> 00:38:48.469
Benjamin Merry: And works at a location where the employer employs at least 50 employees within 75 miles of that work site.

00:38:48.810 --> 00:38:52.990
Benjamin Merry: The number of employees is measured as of the date the employee requests leave.

00:38:53.780 --> 00:39:00.570
Benjamin Merry: This, of course, raises the question in our internet age, what's the work site for a remote employee?

00:39:00.820 --> 00:39:09.350
Benjamin Merry: It's not their personal residence. A personal residence is not a worksite. A worksite is either the office an employee works from.

00:39:09.570 --> 00:39:12.860
Benjamin Merry: Or it's the office that assigns work to the employee.

00:39:13.820 --> 00:39:16.319
Benjamin Merry: So, as an example,

00:39:16.580 --> 00:39:21.089
Benjamin Merry: I'm coming to you live from my home office, just outside of Washington, DC.

00:39:21.880 --> 00:39:32.040
Benjamin Merry: I'm within 75 miles of at least 3 NFP offices. We have a large presence in Bethesda, Maryland. We have an office in Washington, D.C. We have another location north of Baltimore.

00:39:32.370 --> 00:39:41.529
Benjamin Merry: Those don't matter for me. My work site is Austin, Texas, because that's where NFP's legal and benefits compliance teams are located.

00:39:41.870 --> 00:39:54.350
Benjamin Merry: So if I request protected leave for FMLA, NFP would look at the number of employees who work within 75 miles of NFP's office building in Austin, Texas, to determine if I'm an eligible employee.

00:39:54.590 --> 00:40:03.180
Benjamin Merry: So remote employees are an interesting case when you start talking about FMLA. Don't just assume that their work site is their home, because that's not correct.

00:40:04.230 --> 00:40:12.029
Benjamin Merry: So let's turn to one more compliance requirement briefly before I turn it back over to Kelly. This is magic number 100.

00:40:12.560 --> 00:40:15.730
Benjamin Merry: And this is for plans that are subject to ERISA.

00:40:15.930 --> 00:40:27.589
Benjamin Merry: If you are subject to ERISA, generally you have to file a Form 5500 with the U.S. Department of Labor once you have 100 plan participants on the first day of the plan year.

00:40:28.120 --> 00:40:37.900
Benjamin Merry: Plans that have under 100 participants as of the first day of the plan year, and are unfunded, fully insured, or a combination of the two, don't have to file.

00:40:39.250 --> 00:40:44.410
Benjamin Merry: But participants for this count, those are only active employees who are enrolled in the plan.

00:40:44.730 --> 00:40:48.220
Benjamin Merry: or retired or former employees who have elected COBRA?

00:40:48.640 --> 00:40:53.789
Benjamin Merry: or retired or former employees who are entitled to elect COBRA, but just haven't yet.

00:40:54.420 --> 00:41:05.399
Benjamin Merry: Dependents don't count, neither do employees who aren't enrolled in the plan. We're strictly looking at people, your active employees and your retired employees who are enrolled in the plan.

00:41:06.440 --> 00:41:20.200
Benjamin Merry: Because this requirement is based on the number of participants on the first day of your plan year, you do not have to file if you start the plan year with under 100 participants, and then participation grows as you hire more employees.

00:41:20.830 --> 00:41:32.610
Benjamin Merry: On the flip side, you're still on the hook to file if you start the plan year with 100 participants, and then end the year with under 100. So we're only looking at that first day of your ERISA plan year.

00:41:33.230 --> 00:41:46.469
Benjamin Merry: If you have a wrapped plan, which is very common, most… most folks don't want to have a separate plan document for every single benefit, so if you have a wrapped plan, where you offer several different benefits with one wrapped plan document.

00:41:46.890 --> 00:41:50.589
Benjamin Merry: You'll generally use the count for the plan with the highest participant count.

00:41:51.190 --> 00:41:59.770
Benjamin Merry: And typically, if you offer employer-paid group term life insurance, that's usually going to be the benefit with the highest participation, because who's going to turn that down?

00:42:00.810 --> 00:42:16.640
Benjamin Merry: If you're required to file a Form 5500 with the DOL, that is, if you have, at least 100 participants on that first day of the plan year, that Form 5500 needs to be filed by the end of the 7th month following the end of your ERISA plan year, unless you request an extension.

00:42:17.110 --> 00:42:27.329
Benjamin Merry: Most plans that have to file a Form 5500 also are going to have to distribute a summary annual report to participants that summarizes the Form 5500.

00:42:27.610 --> 00:42:33.449
Benjamin Merry: And that report generally must be distributed by the end of the 9th month after the end of the ERISA plan year.

00:42:33.830 --> 00:42:42.789
Benjamin Merry: I will say that NFP has a really small but mighty team of plan documents specialists who are wizards when it comes to Form 5500 filings.

00:42:43.010 --> 00:42:54.820
Benjamin Merry: if you've worked with our plan documents team, chances are good they've saved you an awful lot of time and effort preparing your Form 5500 filings. I promise they're not even paying me to say this, they're just extremely good at what they do.

00:42:55.330 --> 00:42:59.520
Benjamin Merry: With that, Kelly, I'm gonna hand it back to you to discuss mergers and acquisitions.

00:43:00.830 --> 00:43:02.809
Kelly Eckman: Alright, thanks, Ben.

00:43:03.220 --> 00:43:15.360
Kelly Eckman: Yeah, so we're gonna end our day with just kind of a very high-level overview of some M&A basics. Again, we've done a whole webinar on this for, like, an hour, so,

00:43:15.970 --> 00:43:30.489
Kelly Eckman: you know, this is just gonna be a high-level overview. The most important thing for this section, though, make sure if you are, you know, part of a merger, an acquisition, or thinking about it, make sure you're engaging your legal counsel.

00:43:30.490 --> 00:43:43.250
Kelly Eckman: as early in the process as you can. I know that normally in these transactions, benefits are not exactly top of mind for either side, you know, of the transaction, but it really is important

00:43:43.310 --> 00:43:48.719
Kelly Eckman: That it is something that is considered, and it is addressed sooner rather than later.

00:43:48.810 --> 00:43:52.320
Kelly Eckman: Now, the type of transaction that's taking place, whether it's a stock.

00:43:52.650 --> 00:44:00.550
Kelly Eckman: purchase or an asset purchase. We will talk about the impact of that transaction type, and then we'll do a little bit of

00:44:00.580 --> 00:44:15.990
Kelly Eckman: talk on control group rules as well. And so then we're going to look at, you know, the federal laws, kind of focusing on 3 big ones, ERISA, the ACA, and COBRA, and just kind of how an M&A transaction may, impact those laws.

00:44:16.430 --> 00:44:23.460
Kelly Eckman: Again, so, from a super high level, you know, what is a stock purchase? Because when we're answering questions, we're often going to ask.

00:44:23.470 --> 00:44:38.089
Kelly Eckman: what kind of transaction it was, because again, the transaction type is going to impact some of those federal laws. So, a stock purchase. So that's basically when the buyer is purchasing the stock, or think about it as purchasing the ownership

00:44:38.090 --> 00:44:43.750
Kelly Eckman: In the seller's business, or potentially, you know, a unit of that seller's business.

00:44:44.200 --> 00:44:54.230
Kelly Eckman: So as our example here, the seller owns, you know, both Company A and company B. The buyer purchases the stock of just Company A from the seller.

00:44:54.880 --> 00:45:03.620
Kelly Eckman: So what's that mean? Well, that means that now that Company A is now owned by the buyer, and would be a member of that buyer's control group.

00:45:04.300 --> 00:45:12.690
Kelly Eckman: Now, what's interesting here is on the employee side. So, with that stock purchase, the employees that were purchased from that business

00:45:12.690 --> 00:45:26.179
Kelly Eckman: they continue their employment, under that same legal entity. So the entity is the same, it's just ownership of that entity has changed. So it changed from the seller to the buyer.

00:45:26.360 --> 00:45:33.190
Kelly Eckman: And most commonly, when we think of mergers, we use the word merger, it's one of these stock purchases.

00:45:33.800 --> 00:45:36.820
Kelly Eckman: Now, on the other hand, we have an asset purchase.

00:45:36.980 --> 00:45:52.160
Kelly Eckman: And so, with an asset purchase, the buyer is purchasing some, or potentially all, of the assets of, you know, the seller's business, or their trade, and then they could be assuming some of the liabilities as well.

00:45:52.270 --> 00:46:04.850
Kelly Eckman: So, an example here would be the buyer is purchasing a physical location, a manufacturing plant, and all of the equipment that that seller had. And so, what does that result mean?

00:46:04.900 --> 00:46:16.499
Kelly Eckman: Well, the buyer obviously has those purchase assets that they bought, but they don't have ownership interest in the seller's company. They just bought those assets.

00:46:16.710 --> 00:46:24.489
Kelly Eckman: And so the employees, it gets a little interesting here. So in this case, the employees are actually going to be terminated

00:46:24.820 --> 00:46:28.570
Kelly Eckman: From the seller's company, and then…

00:46:28.620 --> 00:46:47.719
Kelly Eckman: they would be rehired as new employees of the buyer. So instead of that employment continuing kind of seamlessly, like with a stock transaction, with an asset transaction, we're actually going to have a termination of employment, and then a rehire, assuming, of course, they…

00:46:48.010 --> 00:46:50.500
Kelly Eckman: Rehire those same employees.

00:46:51.100 --> 00:46:58.039
Kelly Eckman: And so what's that mean with these federal laws? So again, we talked about ERISA, we've talked about that, off and on today, so that

00:46:58.200 --> 00:47:14.829
Kelly Eckman: that kind of main federal body of law that's covering health and welfare benefits. And so the important thing here are control groups, and Ben talked about that earlier with some of his, you know, headcount areas. And so it's where we're counting employees

00:47:14.830 --> 00:47:20.749
Kelly Eckman: together. But control group status is also important under ERISA, because…

00:47:20.760 --> 00:47:26.439
Kelly Eckman: Members of a control group can participate in one group health plan.

00:47:26.850 --> 00:47:44.330
Kelly Eckman: And so there are two different types of control groups, and again, we could spend a long time talking through this, but just the two general ones are a parent subsidiary or a brother-sister. So a parent subsidiary, you know, we kind of think of these pretty easily as one parent company is owning

00:47:44.370 --> 00:47:56.159
Kelly Eckman: the other, as far as it is a subsidiary of the parent. And that ownership just needs to be at least 80%. Sometimes you'll hear a wholly owned subsidiary, of course.

00:47:56.220 --> 00:48:07.269
Kelly Eckman: And then brother-sister, that's where it gets a little more complicated. A brother-sister control group exists when you have a group of, a group of entities or corporations

00:48:07.270 --> 00:48:27.250
Kelly Eckman: Where 5 or fewer owners have a controlling interest, which means 80% or more ownership in the stock of each entity. And then they also have what's called effective control, which basically looks at the identical ownership within those entities, and that effective control needs to be at least 50%.

00:48:27.320 --> 00:48:33.560
Kelly Eckman: Again, we're not trying to, you know, name control groups here, just an understanding of two basic types.

00:48:34.940 --> 00:48:54.719
Kelly Eckman: So, if it is a control group, that means that they can participate in, you know, the same benefit plan if they choose. It doesn't mean you have to, but you can choose to do that. But, let's say, and we see this with brother-sister a lot, maybe we have some common ownership, but not enough to be considered a control group.

00:48:54.910 --> 00:49:07.039
Kelly Eckman: Well, if those entities still want to participate in the same, benefit plans, potentially they can, but they're going to create what is called a NEWA, or a Multiple Employer Welfare Arrangement.

00:49:07.610 --> 00:49:16.180
Kelly Eckman: And so, MIWAs are regulated at both the federal and state level, and they can come with quite a lot of compliance rules.

00:49:16.730 --> 00:49:25.189
Kelly Eckman: So definitely it's not something that you want to enter into lightly. Now, what happens sometimes is we end up with accidental Miwas.

00:49:25.340 --> 00:49:36.140
Kelly Eckman: Because employers think, oh, we have some common ownership so we can participate in the same plan. But again, if it's not a control group, then it is a MIWA.

00:49:36.340 --> 00:49:42.519
Kelly Eckman: And so what happens here? So, sometimes this happens where maybe, you know, the seller

00:49:42.640 --> 00:49:50.839
Kelly Eckman: Sells off the business, but they have some former employees, and they allow them to stay on the seller's plan for a certain amount of time.

00:49:51.060 --> 00:49:53.350
Kelly Eckman: That could potentially…

00:49:53.760 --> 00:50:07.780
Kelly Eckman: create an accidental Miwa. Similarly, like I said, maybe you have some common ownership, but not enough to be a control group. If they are participating on a combined plan, it accidentally creates a MIWA.

00:50:08.030 --> 00:50:26.920
Kelly Eckman: And that's why control group status, you know, is much further reaching than just, from a benefits landscape, but you have to make sure that, you know, if you have multiple entities and you want to participate in the same plan, make sure you're verifying that control group status with, you know, legal counsel and tax advisors.

00:50:27.700 --> 00:50:37.850
Kelly Eckman: So, the ACA. Ben talked a lot about the ACA and how we're gonna count those control group employees together. Again, the only thing I'll add here is…

00:50:37.850 --> 00:50:48.839
Kelly Eckman: Again, because we know those ALEs must offer coverage to 95% of employees, or potentially face penalties. So what does that mean if I have a control group?

00:50:48.940 --> 00:51:05.680
Kelly Eckman: Well, penalties are going to apply on a per-member basis. So that means if I have a control group, and one entity in the control group, does not comply with the mandate, that entity will be subject to penalties, but the entire control group would not be.

00:51:06.020 --> 00:51:19.890
Kelly Eckman: We also have ACA reporting. I'm sure many of you are familiar with Form, you know, 1095C, 1094C. So who's responsible for that reporting? Well, again, it's going to come back to the transaction type.

00:51:19.890 --> 00:51:28.240
Kelly Eckman: So if I have a stock transaction, you know, that buyer, again, there are two options here. The buyer can treat itself as a continuation of the seller.

00:51:28.240 --> 00:51:46.400
Kelly Eckman: and just do one combined reporting under the buyer's EIN, or they can opt for two separate returns, again, one when it was under the seller's EIN, and then the second one for the period of time under the buyer's EIN. Now, for an asset transaction, you don't get a choice.

00:51:46.400 --> 00:51:55.079
Kelly Eckman: The seller would be responsible for the period of time before the closing date, and then the buyer once the transaction closes through the end of the year.

00:51:55.090 --> 00:52:06.219
Kelly Eckman: So it's important to make sure that, you know, you keep ACA reporting in mind when you are undergoing a transaction to make sure all parties understand what their obligations for reporting will be.

00:52:07.290 --> 00:52:19.430
Kelly Eckman: Again, we've got some things to walk through, so what if two non-ALEs merge? So, we've got Maggie's Medical Management and Jason's Joint Care. So we don't have a lot of guidance here on if two small groups

00:52:19.720 --> 00:52:36.250
Kelly Eckman: you know, come together. But, we do have a special rule with the ACA that says, you know, if you have a new company forming, and the reasonable expectation is that, they will be an ALE when the business begins, they should be treated as an ALE for that year.

00:52:36.250 --> 00:52:49.799
Kelly Eckman: So the conservative approach would be to treat, you know, two non-ALEs who are merging kind of that same way, saying, well, if when they merged, they have 50 or more employees, then they probably should be considered an ALE

00:52:49.850 --> 00:52:53.320
Kelly Eckman: For the year in which that transaction closed.

00:52:53.440 --> 00:53:06.890
Kelly Eckman: On the other side, you know, what happens if an ALE acquires a non-ALE? So here we have Seaver Strategies, which is an ALE, and they acquire the non-ALE of Carol's Consulting. What happens for them?

00:53:06.890 --> 00:53:13.719
Kelly Eckman: So, Carol's Consulting wasn't an ALE, but once the transaction closes, they do become an ALE member.

00:53:13.900 --> 00:53:30.389
Kelly Eckman: And then they must make sure they're complying with the mandate by offering coverage to at least 95% of their employees, or again, they might be subject to a penalty. And then, obviously, in this situation, both employers have reporting obligations because they are ALEs.

00:53:31.560 --> 00:53:50.429
Kelly Eckman: Now, COBRA. Now, this slide is just a pretty little picture talking about some things that an employer who's going through an M&A transaction may want to think about as it relates to COBRA. We're not going to walk through all of these here, but just sort of something to kind of pop in your brain to think about, if you are

00:53:50.460 --> 00:53:57.570
Kelly Eckman: party to a transaction or a potential transaction, because it is important to think about, you know, what COBRA is going to do.

00:53:57.940 --> 00:54:17.849
Kelly Eckman: So, if we have, you know, a merger and acquisition, who has to provide coverage to what are called M&A COBRA qualified beneficiaries? Well, first we want to define the term, right? So these M&A qualified beneficiaries are those who have a COBRA-qualifying event that occurred either prior to

00:54:17.920 --> 00:54:21.359
Kelly Eckman: The transaction, or in connection with the transaction.

00:54:21.640 --> 00:54:32.030
Kelly Eckman: So if it's a stock purchase, again, those employees are continuing employment with that acquired company, so we're not going to have anyone who has a COBRA event.

00:54:32.240 --> 00:54:46.549
Kelly Eckman: In conjunction, typically, with the transaction. On the asset purchase side, it's going to be different, because again, those employees are, terminating employment with the seller, losing that group health plan coverage.

00:54:46.590 --> 00:54:52.870
Kelly Eckman: Which is going to create a Cobra event. And that even happens if they were hired by that buyer.

00:54:53.420 --> 00:55:10.810
Kelly Eckman: So, we have some default rules, under COBRA for these type of transactions. You know, so if the seller maintains a group health plan after their transaction, then the seller must provide coverage to those M&A qualified beneficiaries. And that can even happen if maybe they sold off

00:55:10.810 --> 00:55:14.119
Kelly Eckman: You know, they have 3 different divisions, and they only sold off

00:55:14.160 --> 00:55:24.400
Kelly Eckman: one of those divisions. They may have to provide COBRA to those M&A beneficiaries under one of those other plans.

00:55:24.690 --> 00:55:40.210
Kelly Eckman: Now, there is an exception here at the bottom. If the seller ceases to maintain any group health plan at all, then the buyer's group health plan would actually be the one that has to provide that COBRA coverage, assuming the buyer maintains a group health plan

00:55:40.210 --> 00:55:45.309
Kelly Eckman: And then, if it was an asset purchase, it is what is considered a successor employer.

00:55:47.270 --> 00:56:01.030
Kelly Eckman: And again, just some takeaways here, it's a lot of information. The big thing to remember is that, you know, thinking through benefit impacts at the beginning of the transaction or the early stages is really important. You have to engage

00:56:01.030 --> 00:56:17.040
Kelly Eckman: legal counsel as part of this process. The transaction type, again, whether it's asset or stock, it's really going to impact those federal laws that we talked about. There are default rules for COBRA, like we talked through. There are even some for health FSAs, which we didn't go through.

00:56:17.170 --> 00:56:19.109
Kelly Eckman: So definitely make sure

00:56:19.170 --> 00:56:38.159
Kelly Eckman: that you do that. And we also have a M&A publication that has some helpful information as well, although it definitely is not a substitute for working through legal counsel, but just some good ideas to think about if you are potentially going to be part of, you know, a transaction like this sometime in the future.

00:56:38.940 --> 00:56:43.350
Kelly Eckman: And now Ben is going to take us through the final takeaways and resources.

00:56:44.670 --> 00:56:46.500
Benjamin Merry: Hey, thanks, Kelly.

00:56:46.840 --> 00:57:01.560
Benjamin Merry: really, the biggest takeaway here, it's in bold at the top of the screen, it's okay to ask for help. You don't need to be an expert on all of these rules as you expand, whether that's geographically or whether that's as your headcount increases.

00:57:01.900 --> 00:57:11.910
Benjamin Merry: But if you can recognize the landscape, if you can recognize your magic numbers, then hopefully a light bulb will go off in your head that tells you to ask someone the right expertise.

00:57:12.050 --> 00:57:14.840
Benjamin Merry: It could be your carrier, if you're fully insured.

00:57:15.150 --> 00:57:21.060
Benjamin Merry: It might be your AR, or your HR professional, or your employment attorney, or your M&A attorney.

00:57:21.550 --> 00:57:27.749
Benjamin Merry: Could be your NFP consultant. They'll work with our team to give you the right guidance, if that's appropriate.

00:57:28.280 --> 00:57:39.659
Benjamin Merry: But know your magic numbers, plan ahead. If you're in a merger or acquisition setting, it's really, really important to work with counsel who's familiar with the transaction.

00:57:40.130 --> 00:57:44.040
Benjamin Merry: As Kelly just discussed, there are a lot of default rules that apply.

00:57:44.240 --> 00:57:51.899
Benjamin Merry: But, especially with COBRA, those obligations can be apportioned differently as part of the transaction, so it's always helpful to be

00:57:52.010 --> 00:57:54.420
Benjamin Merry: Proactive, and to plan ahead.

00:57:54.880 --> 00:58:04.780
Benjamin Merry: And we've mentioned controlled groups so many times today. Know your controlled group status. It has so many impacts on your legal and tax obligations.

00:58:05.780 --> 00:58:16.269
Benjamin Merry: And finally, NFP has resources for all of the topics we discussed today. Ask your NFP consultant for any of the materials that we discussed, and they'll be happy to share them with you.

00:58:17.440 --> 00:58:22.879
Benjamin Merry: But on behalf of Kelly and me, we just want to thank you all for joining us today.

00:58:23.200 --> 00:58:26.299
Benjamin Merry: Please reach out again to your consultant if you have any questions.

00:58:26.470 --> 00:58:28.510
Benjamin Merry: Amber, I'll hand it back to you.

00:58:28.820 --> 00:58:34.379
Amber Posthauer: All right. Well, thank you, Kelly and Ben, for sharing your valuable time and expertise with us today.

00:58:34.600 --> 00:58:49.459
Amber Posthauer: To reiterate, today's presentation was recorded. We'll be sharing the recording in the follow-up email and on the NFP website. If there are any portions of this call that you missed, by Monday, you'll receive an email with a link to the full recording. The PowerPoint slides used during this presentation will be shared in the same email.

00:58:49.980 --> 00:59:00.910
Amber Posthauer: At the end of this call, a survey will populate in a new window. Please take a brief moment to complete the survey, as it lets us know what topics are important to our listeners, and helps make our education program as current and relevant as possible.

00:59:01.020 --> 00:59:05.789
Amber Posthauer: That concludes our webinar for today. Thank you, everyone, for joining us, and have a great day!