Please find attached our 4th Quarter Benefits Bulletin. Highlights include updates on Pay or Play Penalties and an overview of what\'s next now that the election is over.

1. Fourth Quarter
2012
IN THIS ISSUE
Obama Wins Re- IRS Issues New Cost of Family Wellness
Election: Health Guidance on Coverage Rises 4 Programs Save
Care Reform Law Employer Percent
Here to Stay Penalties
PAGE 2 PAGE 4
PAGE 1 PAGE 1
IRS Issues New Guidance
on Employer Penalties
Obama Wins Re-election: Health
Beginning in 2014, large employers may face penalties if they do not
Care Reform Law Here to Stay offer any health coverage to full-time employees, or if they offer
health coverage that is unaffordable or does not provide minimum
After hard-fought campaigns by both candidates, value. The penalty is known as a “shared responsibility payment,”
President Barack Obama has been re-elected for a and is triggered if one of the employer’s full-time employees receives
second term in office. Obama’s victory in the election, a premium tax credit or cost sharing reduction for coverage obtained
along with last summer’s Supreme Court decision through a health insurance exchange.
upholding the health care reform law, cements the
Democratic Party’s dedication to the legislation. On Aug. 31, 2012, the IRS issued Notice 2012-58, which describes
safe harbor methods and rules that employers may use to determine
While opponents of the law have called for its repeal, which employees are considered fulltime for the purposes of the
health care reform’s supporters consider the legislation Affordable Care Act (ACA)’s shared responsibility provisions.
to be the major achievement of Obama’s first term.
Obama’s re-election, along with continued Democratic This notice also addresses a safe harbor based on Form W-2 wages
control of the Senate, means that implementation of the for employers to use in determining whether their health coverage is
law will now continue without additional roadblocks. affordable. Employers will not be required to comply with any future
WHAT DO EMPLOYERS HAVE TO DO NEXT? guidance that is more restrictive until at least January 2015.
With the landscape of employer-provided health care CONTINUED ON PAGE 2
potentially changing over the next few years, employers
should consider their future plans related to their role in ANNOUNCEMENT – EDUCATIONAL OUTREACH
employee health care.
Flood and Peterson will be hosting a Health Care Reform and
CONTINUED ON PAGE 3 Insurance Exchange Educational Outreach during the 1st quarter
of 2013. Dates and Information will be released soon.

2. Fourth Quarter, 2012
IRS Issues New Guidance on Employer Penalties (cont. from page 1)
value must not exceed 9.5 percent of the employee’s W-2
Notice 2012-58 includes safe harbor rules for determining wages.
full-time status for ongoing employees and new employees, Employers satisfying these requirements will not be subject to
including employees with variable hours and seasonal penalties for providing unaffordable coverage for that
employees. Under the safe harbor for ongoing employees, employee, even if the employee receives a premium tax credit
employers may use three-month to 12-month measurement or cost sharing reduction through a health insurance
and stability periods to determine whether ongoing exchange. Employers can be proactive, however, and
employees work at least 30 hours per week. Also, employers structure their plans and operations so that the employee
may utilize an “administrative period” of up to 90 days contribution amount does not exceed 9.5 percent of any
between the measurement and stability periods to determine employee’s W-2 wages for that year.
which ongoing employees are eligible for coverage and to
notify and enroll employees. It is also important to note that the safe harbor does not
For new employees, Notice 2012-58 provides that employers affect employees’ eligibility for premium tax credits, which
will not be subject to a shared responsibility penalty for an are based on the affordability of employer-sponsored
employee who is expected at his or her start date to work full- coverage relative to employees’ household incomes, rather
time, as long as coverage is offered no later than 90 days than W-2 wages.
following the employee’s start date. Cost of Family Coverage Rises 4 Percent
The safe harbor for new variable hour and seasonal The annual Kaiser Family Foundation / Health Research &
employees is similar to the one for ongoing employees, Education Trust Employer Health Benefits Survey reports a
meaning that employers may use the measurement and modest increase compared with last year’s 9 percent spike, and
stability periods to determine if the employees are fulltime. half the 8 percent average of the previous decade. The cost of
Employers may also use an administrative period following health benefits for employers and employees rose 4 percent this
the measurement period for new variable hour and seasonal year for family coverage.
employees. When the stability period ends, employers must
repeat the process, beginning with another measurement On average, employer premiums are at $15,745 for family
period. coverage, with employees paying an average of $4,316.
In addition, Notice 2012-58 discusses the affordability of
Employers and employees faced a 3 percent rise in cost for single
health care and how to determine if an employer will be
coverage, paying on average $5,615 and $951, respectively.
subject to a shared responsibility penalty. ACA dictates that
coverage is considered affordable if the employee’s required Though the 4 percent cost increase is still greater than the 2.3
contribution is less than or equal to 9.5 percent of his or her percent rate of inflation, it follows a trend that sees the size of
household income for the taxable year. To address the issue increases shrinking in recent years. The cost of premiums in 2003
of employers being unaware of their employees’ family saw a 13 percent increase from the previous year, and a 10 percent
members’ income levels, the safe harbor allows only the increase in 2004.
employee’s wages from the employer that is providing
coverage to determine coverage affordability. The broader trend also indicates a reduction in the rate of
increase; the cost of family coverage increased 51 percent from
In order to be eligible for the affordability safe harbor, an 2002 through 2007, and only 30 percent from 2007 to 2012.
employer must offer its full-time employees and their
dependents the opportunity to enroll in minimum essential The low level of increase is generally attributed to the slow
coverage under an employer sponsored plan, and the economy. In the current economic climate, individuals have been
employee portion of the self-only premium for the reluctant to use more health care services, and many are practicing
employer’s lowest cost coverage that provides minimum better consumerism by opting for less expensive procedures, or
deferring elective surgery altogether.
The modest rise may also reflect the higher deductibles that are
becoming increasingly common. Around half of employer-
covered workers currently have a deductible of at least $1,000 for
individual coverage, compared to 21 percent in 2007.
Flood and Peterson
www.FloodPeterson.com

3. Fourth Quarter, 2012
Obama Wins Re-Election: Health Care Reform Law Here To Stay (cont.)
Employers may decide that paying the penalty is more cost-effective than continuing to pay the ever-increasing costs of health care for
employees and their families. On the other hand, uncertainty among employees about the quality and cost of individual health coverage
continues to make employer-provided health coverage an attractive recruiting and retention tool.
The additional uncertainty for employers, with compliance obligations hinging on court decisions and the political process, has made
many companies hesitant to make any large-scale changes. Most employers plan to continue offering coverage for now.
Whatever their future decisions may be, employers that will continue to sponsor group health plans for the near future must prepare for
upcoming deadlines. Significant health care reform provisions with looming effective dates include:
 Summary of Benefits and Coverage. Health plans and issuers must provide an SBC to participants and beneficiaries that
includes information about health plan benefits and coverage in plain language. The deadline for providing the SBC to
participants and beneficiaries who enroll or re-enroll during an open enrollment period is the first open enrollment period that
begins on or after Sept. 23, 2012. The SBC also must be provided to participants and beneficiaries who enroll other than
through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees) effective for
plan years beginning on or after Sept. 23, 2012.
 60-Days’ Notice of Plan Changes. A health plan or issuer must provide 60 days’ advance notice of any material
modifications to the plan that are not related to renewals of coverage. Notice can be provided in an updated SBC or a separate
summary of material modifications. This 60-day notice requirement becomes effective when the SBC requirement goes into
effect for a health plan.
 $2,500 Limit on Health FSA Contributions. The health care law will limit the amount of salary reduction contributions to
health flexible spending accounts to $2,500 per year for plan years beginning on or after Jan. 1, 2013.
 W-2 Reporting. Beginning with the 2012 tax year, employers that are required to issue 250 or more W-2 Forms must report the
aggregate cost of employer-sponsored group health coverage on employees’ W-2 Forms. The cost must be reported
beginning with the 2012 W-2 Forms, which are issued in January 2013.
 Preventive Care for Women. Effective for plan years beginning on or after Aug. 1, 2012, non-grandfathered health plans must
cover specific preventive care services for women without cost-sharing requirements. Calendar year plans must comply effective
Jan. 1, 2013.
 Employee Notice of Exchanges. Effective March 1, 2013, employers must provide a notice to employees regarding the
availability of the health care reform insurance exchanges. HHS has indicated that it plans on issuing model exchange notices in
the future for employers to use.
 Additional Medicare Tax for High-wage Workers. In 2013, health care reform increases the hospital insurance tax rate by 0.9
percentage points on wages over $200,000 for an individual ($250,000 for married couples filing jointly). Employers will have to
withhold additional amounts once employees earn over $200,000 in a year.
WHAT GUIDANCE WILL WE SEE?
Regulations on a number of issues remain outstanding. The regulatory agencies responsible for implementation and enforcement of the
health care reform law—the Departments of Labor, Treasury and Health and Human Services—began issuing additional guidance once
the Supreme Court upheld the law. Additional guidance is expected now that the election is over
CONTINUED ON PAGE 4
Flood and Peterson
www.FloodPeterson.com

4. Fourth Quarter, 2012
Obama Wins Re-Election: Health Care Reform Law Here To Stay (cont.)
Issues that will likely be addressed in future guidance include:
 Employer Pay or Play Mandate. The agencies are expected to, and have indicated that they will, issue more guidance for
.
employers to help them determine how to comply with the shared responsibility provisions of the law.
 Automatic Enrollment. The Department of Labor is required to issue regulations implementing the rule requiring large
employers that offer health coverage to automatically enroll new employees in the health plan (and re-enroll current
participants).
 Nondiscrimination Rules for Fully-insured Plans. Under health care reform, non-grandfathered fully-insured plans will
not be able to discriminate in favor of highly-compensated employees with respect to their health benefits. The
IRS delayed the effective date of this rule for additional regulations, which have yet to be issued.
State governments may also take further steps to establish the health insurance exchanges required by the health care reform law. The
federal government will step in and set up exchanges for states that fail to establish their own exchanges. Many states have delayed
implementation and will need to accelerate their efforts if they want to run their own exchanges.
CHALLENGES FOR IMPLEMENTATION
As we get closer to full implementation of the health care reform law, questions linger about whether the framework is in place for all
pieces to be operational by their deadlines. Insufficient staffing of the responsible agencies is one potential issue, along with employer
and state government hesitation or inability to implement certain parts of the law. Compliance efforts are likely to pick up now that the
election is over.
Flood and Peterson will continue to monitor progress of the health care reform law and its implementation and will keep you informed
of important developments.
Wellness Programs Save
A recent report from the International Foundation of Employee Benefit Plans shows that North American employers on average save $1
to $3 for every dollar invested in employee benefits.
Investing money in workplace wellness programs is one way to increase your health care savings. Many employers that invest in
workplace wellness actually show a savings of $3 or more for each dollar spent. Along with this, wellness programs have been associated
with higher employee morale, increased productivity and lower absenteeism.
Many employers fear that implementing a wellness program will be a waste of money—some even try it for a few months, or a year, and
then throw the idea aside. The mistake here is assuming that positive ROI will be immediate. While a wellness program targeted at one
department and its issues may reveal savings within the first year, it may take three to five years to see measurable results in a more
general wellness program.
While there is no single way to run your wellness program, Closer Look: Wellness ROI shows that organizations that report positive ROI
for their wellness plans commonly offer incentives as a component of their programs, such as health insurance premium discounts, gift
cards or non-cash prizes. In addition, communication is key to a successful wellness program. Providing regular emails, newsletters, and
information on social networks to remind employees of the program and giving them tips is a good way to get more employees to
participate, leading to greater savings.
The information contained in this newsletter is not intended as legal or medical advice. Please consult a professional for more information. © 2012 Zywave, Inc. All rights reserved
Flood and Peterson
www.FloodPeterson.com