Oracle HCM Cloud (US) Position Statement:

Affordable Care Act 2010

Employer Shared Responsibility Payments Provision
An Oracle HCM Cloud (US) White Paper
May 2015

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Disclaimer:

The following is intended to outline general product direction. It is intended for informational purposes
only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code
or functionality, and should not be relied upon in making purchasing decisions. The development, release
and timing of any features or functionality described for Oracle’s product remains at the sole discretion of
Oracle.

The legislative information in this document is based on information published from various sources. The
Affordable Care Act and its associated laws are a moving target and are subject to change and to various
interpretations of law. This white paper should only be used to determine Oracle HCM Cloud (US) product
direction as it relates to the legislative requirements.

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Copyright © 2015, Oracle. All rights reserved.

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 Table of Contents

Target Audience .......................................................................................................... 6

Executive Summary: .................................................................................................... 6
Oracle Fusion HCM (US) High-level Development Position:....................................... 7
Which Employers are required to comply with ESRP ................................................... 9
Definition of Applicable Large Employer: ................................................................. 9
Shared Responsibility Provisions will apply to controlled groups and related
organizations or affiliated service groups ................................................................. 9
New Employers ...................................................................................................... 10
Oracle Fusion HCM (US) Development Position: .................................................... 10
How Employees are defined as Full-time ................................................................... 11
Full-time Employee Definition ............................................................................... 11
Hours of Service Rule ............................................................................................. 11
New Employees Might be considered Seasonal or Variable Hour ........................... 13
Unpaid Leave under FMLA, USERRA, or Jury Duty .................................................. 13
Employees of Educational Organizations ............................................................... 14
Employees Compensated on Commission Basis, Adjunct Faculty, Transportation
Employees, and Analogous Employment Positions ................................................ 14
Rehiring after Termination or Resuming Service after Other Absence .................... 15
Change in Full-time Status during the initial measurement period ..................... 1516
Services Performed Outside the United States....................................................... 16
Oracle Fusion HCM (US) Development Position ..................................................... 17
Periods of Time Used in Determining Eligibility .......................................................... 19
Measurement Period ............................................................................................. 19
Stability Period ...................................................................................................... 19
Administrative Period ............................................................................................ 20
Oracle Fusion HCM (US) Development Position ..................................................... 20
Cost of Coverage (Definition of Affordability) ............................................................ 21
Definition of Affordability ...................................................................................... 21
W-2 Safe Harbor .................................................................................................... 21
Rate of Pay Safe Harbor ......................................................................................... 22
Federal Poverty Line (FPL) Safe Harbor .................................................................. 23

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 Oracle Fusion HCM (US) Development Position ..................................................... 23
Definition of Minimum Essential Coverage and Minimum Value ............................... 24
Minimum Essential Coverage ................................................................................. 24
Minimum Value ..................................................................................................... 24
Oracle Fusion HCM (US) Development Position ..................................................... 25
Annual Reporting Requirements ................................................................................ 26
Substitute forms .................................................................................................... 26
Alternative Reporting Methods ............................................................................. 26
Electronic Reporting .............................................................................................. 28
Oracle Fusion HCM (US) Development Position ..................................................... 29
Forms 1094 and 1095-C......................................................................................... 30

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 Oracle Fusion HCM (US) Affordable Care Act Employer Shared Responsibility
Payments Provision Position Statement

Target Audience

United States customers using the following applications:

 Fusion Human Capital Management Base Cloud Service (includes Oracle Fusion
Global Human Resources, Oracle Fusion Benefits, and Oracle Fusion Payroll
Interface)
 Fusion Global Payroll Cloud Service
 Fusion Time and Labor Cloud Service

Executive Summary:

The "Patient Protection and Affordable Care Act" (PPACA) (P.L. 111-148) was signed
into law on March 23, 2010. The "Health Care and Education Reconciliation Act of
2010" (H.R. 4872), which makes changes to PPACA, was signed into law on March 30,
2010. Also known as the Affordable Care Act or ACA, a number of provisions of the Act
have already been implemented since the passing of the law, most of which are related
to health plans with limited exceptions.

The ACA provision having the greatest impact on employers is referred to as the
Employer Shared Responsibility Payments provision (§ 6056). ESRP describes the
following requirements:

 Definition of which employers must comply with the provision of the law and
how they must comply
 How employees are defined as eligible for coverage
 What periods of time employees are eligible for coverage
 Cost of the coverage to the employee (Definition of Affordability)
 Minimum Essential Coverage and Minimum Value definitions
 Reporting to the employee and to the federal government

ACA reporting requirements require extensive data input from the benefits module.
Therefore the following applications will be expected to support the reporting
requirements:

 Oracle Fusion HCM (US) utilizing Global Human Resources and Benefits, and
optionally, using Global Payroll or Payroll Interface.

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If the customer is using Global Human Resources only and outsourcing benefits, or using
Global Human Resources and Global Payroll and outsourcing benefits, the application
will not be able to support the 6056 reporting requirements.

Please see the following links for further details:

Final Regulations for the Employer Shared Responsibility Payments Provision § 6056:
http://www.gpo.gov/fdsys/pkg/FR-2014-03-10/pdf/2014-05050.pdf

IRS FAQ on Employer Reporting Responsibilities for § 6056:

http://www.irs.gov/uac/Questions-and-Answers-on-Reporting-of-Offers-of-Health-
Insurance-Coverage-by-Employers-Section-6056

IRS Affordable Care Act Home Page

http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions-Home

Healthcare.gov is a site maintained by the US Department of Health and Human

Services. Here you will find a question and answer section relating to Healthcare
Reform.
https://www.healthcare.gov/

Final Form 1094-C: Transmittal of Employer-Provided Health Insurance Offer and

Coverage Information Returns
http://www.irs.gov/pub/irs-pdf/f1094c.pdf

Final Form 1095-C: Employer-Provided Health Insurance Offer and Coverage

http://www.irs.gov/pub/irs-pdf/f1095c.pdf

Oracle Fusion HCM (US) High-level Development Position:

We have delivered functionality for tracking eligibility and making healthcare enrollment
changes based on that eligibility. Our current efforts are focused on the reporting
requirements. Note that we are working off of 2014 forms and instructions, so the
forms and instructions for 2015 reporting could change (but we expect the change to be
minimal). The IRS has only just published their draft electronic transmission
requirements, but this does not contain the business rules specifications, nor is there
any information available yet on the substitute forms that we hope to utilize for
employee 1095-Cs.

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We have a placeholder enhancement for the ACA reporting compliance logged under
Bug 21032959 - FORM 1095-C 1094-C AFFORDABLE HEALTH REQUIRED
FOR 2015. If you do not have an SR associated with this bug (enhancement), then I
would recommend opening one with Oracle Support. This bug is updated periodically
with the latest status. We also have the following whitepapers on My Oracle Support
that cover various aspects of the Affordable Care Act, most of which focus on the
Employer Shared Responsibility provision. The top one focuses on the reporting
requirements.

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Which Employers are required to comply with ESRP

The IRS released rules regarding the ACA Shared Responsibility provisions, which affect
large employers or those with more than 50 full-time equivalent employees. How full-
time equivalents are defined within these regulations is quite different than a payroll
traditional 40 hour a week definition. Please be aware of the changes that will impact
each employer that may be defined below.

Definition of Applicable Large Employer:

An Applicable Large Employer (ALE) is defined according to Section 4980H(c)(2) as being

an employer that employed an average of at least fifty (50) full-time equivalent
employees (“FTEs”) on business days for the prior year with respect to a calendar year
measurement period. (See § 54.4980H-2)

The regulations in Section 4980H also define special rules addressing an employer’s first
year of existence, predecessor, and successor eligibility requirements.

Shared Responsibility Provisions will apply to controlled groups and related

organizations or affiliated service groups

The regulation clarifies the treatment of related employers (“controlled groups”). The 50
employee threshold applies on a controlled group basis, which generally means that
companies with 80% or more common ownership or control, or that are otherwise
treated as a single employer under the IRC section 414 (b), (c),(m), or (o) are treated as
a single employer, and combined together for purposes of determining whether they
employ fewer than 50 full-time employees, including FTEs.

Employees of a controlled group are combined in determining whether the employer is

an applicable large employer (has 50 or more full-time employees, including FTEs) and is
therefore subject to Shared Responsibility requirements. However Shared Responsibility
penalties under section 4980H are assessed on a member by member basis and related
entities can make different decisions as to coverage offered, whether to provide
coverage or pay penalties, and in establishing measurement and stability periods.

Example: In 2014, Entity X has 25 full-time employees, including FTEs. Subsidiary

Y has 25 full-time employees, including FTEs. Both entities are combined to
determine that they meet the 50 Full-time Employee and FTE threshold for
Section 4980H. Subsidiary Y may offer qualified affordable health coverage to
full-time employees, while Entity X does not. Entity X might even be the parent
company; it would be subject to a penalty, which is generally calculated as

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 $2,000 times the total number of full-time employees of Entity X, minus the first
30.
However, the 30 employee reduction, when calculating Shared Responsibility payments,
applies to the entire controlled group, so that the reduction must be allocated ratably
among members of the controlled group based on each member’s population of full-
time employees.

In the example above, entity X would be assessed an annual penalty equal to

$2,000 times 10 full-time employees (25 minus 15, the proportionate share of
the 30 employee reduction).

If an employer has more than 30 employer members, with some or all of the members
receiving a ratable allocation of a fraction of one full-time employee, the regulations
provides that each member’s share of the 30 employee reduction will be rounded up to
one full-time employee which may result in an overall reduction to all members of the
employer of more than 30 employees.

Each employer within a controlled group will be liable for (and assessed) Shared
Responsibility payments separately.

New Employers

The regulation provides that a new employer, not in existence during an entire
preceding calendar year, is an applicable large employer for the current calendar year if
it is reasonably expected to employ an average of at least 50 full-time employees or
FTEs on business days during the current calendar year, and it actually employs at least
50 full-time employees or FTEs during a calendar year.

Oracle Fusion HCM (US) Development Position:

Customers will be expected to make the determination as to whether their organization

qualifies as an applicable large employer under the auspices of the law. All employees
expected to be reported under ACA section 6056 must be assigned to a legal employer.
Customers can run 6056 tax forms by legal employer and tax reporting unit.

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How Employees are defined as Full-time

Full-time Employee Definition

Employers might be liable for the “Shared Responsibility” penalties based on the
number of workers who are defined as full-time employees under ACA. As provided in
the regulations, the definition of full-time is an employee that works an average of 30 or
more hours per week, or 130 or more hours per month, using the Hours of Service rules
to determine worked hours. (See §54.4980H-3 for determination of full-time employee
status.)

Hours of Service Rule

Hours of service are used in determining whether an employee is a full-time employee
for purposes of section 4980H, and in calculating an employer's FTEs. Section
4980H(c)(4)(B) provides that the “Secretary, in consultation with the Secretary of Labor,
shall prescribe regulations, rules, and guidance as may be necessary to determine the
hours of service of an employee”, including for employees who are not compensated on
an hourly basis. Notice 2011-36 suggested rules for determining hours of service for
purposes of section 4980H. As required by section 4980H(c)(4)(B), the Treasury
Department and the IRS consulted with the Department of Labor (DOL) about the
definition of hours of service in developing the rules described in Notice 2011-36 and
these regulations. Consistent with existing DOL regulations and other guidance under
the ACA (for example, Notice 2010-44 (2010-22 IRB 717)), and with Notice 2011-36, the
regulations provide that an employee's hours of service include the following:

 Each hour for which an employee is paid, or entitled to payment, for the
performance of duties for the employer.
 Each hour for which an employee is paid, or entitled to payment by the
employer on account of a period of time during which no duties are performed
due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty,
military duty or leave of absence (29 CFR 2530.200b-2(a)).

For purposes of calculating an employee's average hours of service under the look-back
measurement method, the regulations would limit the number of hours an educational
organization employer is required to take into account in a calendar year with respect to
most periods of absence with zero hours of service. The limit is 501 hours based on a
longstanding 501-hour limit that applies in a different but related context under the
service crediting rules applicable to retirement plans which are familiar to and administered
by many employers.

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For purposes of calculating an employee's hours of service, the regulations provide rules
for hourly employees and non-hourly employees. For employees paid on an hourly
basis, employers must calculate actual hours of service from records of hours worked
and hours for which payment is made or due for vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty, or leave of absence.

For employees not paid on an hourly basis, employers are permitted to calculate the
number of hours of service under any of the following three methods:

 Counting actual hours of service (as in the case of employees paid on an hourly
basis) from records of hours worked and hours for which payment is made or
due for vacation, holiday, illness, incapacity (including disability), layoff, jury
duty, military duty or leave of absence.
 Using a days-worked equivalency method whereby the employee is credited
with eight hours of service for each day for which the employee would be
required to be credited with at least one hour of service under these service
crediting rules.
 Using a weeks-worked equivalency of 40 hours of service per week for each
week for which the employee would be required to be credited with at least one
hour of service under these service crediting rules. These equivalents are based
on DOL regulations (29 CFR 2530.200b-2(a)).

Although an employer must use one of these three methods for counting hours of
service for all non-hourly employees, under these regulations, an employer need not
use the same method for all non-hourly employees. Rather, an employer may apply
different methods for different classifications of non-hourly employees, so long as the
classifications are reasonable and consistently applied. In addition, an employer may
change the method of calculating non-hourly employees' hours of service for each
calendar year. For example, for all non-hourly employees, an employer may use the
actual hours worked method for the calendar year 2014, but may use the days-worked
equivalency method for counting hours of service for the calendar year 2015.

However, consistent with Notice 2011-36, these regulations prohibit the use of the
days-worked or weeks-worked equivalency method if the result would be to
substantially understate an employee's hours of service in a manner that would cause
that employee not to be treated as a full-time employee. For example, an employer may
not use a days-worked equivalency in the case of an employee who generally works
three 10-hour days per week, because the equivalency would substantially understate
the employee's hours of service as 24 hours of service per week, which would result in
the employee being treated as not a full-time employee. Rather, the number of hours of
service calculated using the days-worked or weeks-worked equivalency method must
reflect generally the hours actually worked and the hours for which payment is made or
due.

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For purposes of identifying the employee as a full-time employee, all hours of service
performed for all entities treated as a single employer under section 414(b), (c), (m), or
(o) must be taken into account.

New Employees Might be considered Seasonal or Variable Hour

Newly hired employees who are expected to work 30 hours per week, on average,
during the initial measurement period should be considered full-time as of the date of
hire; and if the employer offers healthcare coverage, this should be offered within the
first 90 days of hire.

Newly hired employees may be considered “variable hour” employees if, based on the
facts around the start date, it cannot be determined whether they are reasonably
expected to work an average of at least 30 hours a week during the initial measurement
period.". Employers may apply a 12 month measurement period and a limited
administrative period to assess the hours of service for this type of employee to
determine whether they are full-time. A Shared Responsibility assessment would not
apply for failure to offer health coverage during this period.

Regulations define who might be considered a “variable hour” employee:

Beginning 2014, an employee’s status as a variable hour employee cannot be

based on employer expectations regarding aggregate turnover. There must be
real facts and issues specific to the newly hired employee at the start date that
would demonstrate the person’s employment is expected to be of a limited time
frame within the initial measurement period.
Effective January 1, 2015, except with respect to a seasonal employee, the
employer must assume that the employee will continue to be employed for the
entire initial measurement period and therefore cannot take into account the
likelihood that the employee’s employment will terminate before the end of the
initial measurement period.

More details are contained within the regulation which reserves the definition of
“seasonal employee” for purposes of determining full-time status. Until the IRS issues
other guidance, employers should use a reasonable, good faith interpretation of
“seasonal employee”.

Unpaid Leave under FMLA, USERRA, or Jury Duty

With unpaid leave as it occurs with the Family and Medical Leave Act (FMLA),
Uniformed Services Employment and Reemployment Rights Act (USERRA), and/or jury
duty or “special unpaid leave”, the regulations require an employer to determine hours
of service by either:

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 Determining the average hours of service per week for the employee during
the measurement period, excluding the special unpaid leave period, and using
that average for the employee for the entire measurement period; or
Crediting the employee with hours of service for special unpaid leave at a
rate equal to the average weekly rate at which the employee was credited
during the other weeks in the measurement period.

These methods apply only to employees who are treated as continuing employees for
shared responsibility purposes upon their return, but not to employees who are treated
as terminated and rehired, as described under the section Rehiring after Termination or
Resuming Service after Other Absence below.

Employees of Educational Organizations

For employees of educational organizations who work on an academic year basis, the
regulations provide an averaging method for employment break periods that generally
would result in an employee who works full time during the academic year being
treated as a full-time employee for shared responsibility. For employment breaks of four
or more consecutive weeks (other than for FMLA, USERRA, or for jury duty as noted
earlier), the employer must credit hours of service using one of the following methods:

Determine the average hours of service per week for the employee during
the measurement period, excluding the employment break period, and use that
average for the employee for the entire measurement period
Credit the employee with hours of service for the employment break period
at a rate equal to the average weekly rate at which employee was credited
during the other weeks in the measurement period.

Educational organizations are not required to credit employees with more than 501
hours of service for any employment break period in a calendar year. The rules
governing employment break periods for educational organizations apply only to an
employee treated as a continuing employee upon the resumption of services, and not to
an employee treated as terminated and rehired.

Employees Compensated on Commission Basis, Adjunct Faculty, Transportation

Employees, and Analogous Employment Positions

Many employees are compensated on a basis other than hours of service (salespeople
via commission, truck drivers, etc.). Educational organizations often compensate adjunct
faculty on the basis of credit hours taught. Employers of employees in these types of
positions raise issues with respect to crediting of hours of service and must use a
reasonable method for crediting hours of service that is consistent with the purposes of
shared responsibility.

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A method of crediting hours would not be reasonable if it took into account only some
of an employee’s hours of service with the effect of characterizing as not full-time, and
with the effect of characterizing as not full-time, an employee whose responsibilities
traditionally involve more than 30 hours of service per week of service per week. It
would not be reasonable to exclude travel time for traveling salespeople who are
compensated on a commission basis. It would not be reasonable, in the case of
instructors such as adjunct faculty, to take into account only classroom time but not
other hours necessary to perform their duties such as class preparation time.

Rehiring after Termination or Resuming Service after Other Absence

The regulations provide the following rules regarding rehired employees or those
returning to work from a leave of absence:

If an individual has no hours of service for at least 26 consecutive weeks and
later returns to work; the employer can treat the individual as a new employee.
If the break in service is less than 26 weeks, the employer can still treat the
individual as a new employee if the break in service is at least 4 weeks, and is
longer than the preceding period of employment.

For example this optional “rule of parity” could apply if an employee works three weeks
for an employer, terminates employment, and is rehired to that employer ten weeks
after terminating employment. In this case, the individual may be treated as a new
employee.

For an employee who is treated as a “continuing employee” (as opposed to an

employee who is treated as terminated and rehired), the measurement and stability
period that would have applied to the employee had the employee not discontinued
employment would continue to apply upon the employee’s resumption of service.

If the continuing employee returns during a stability period in which the
employee was being treated as a full-time employee, the employee is treated as
a full-time employee upon returning and through the end of that stability period.

A continuing employee qualifying as full time will be treated as offered coverage when
services or duties resume, if offered coverage as of the first day that the employee is
credited with an hour of service, or as soon as administratively practical.

Change in Full-time Status during the initial measurement period

For new variable hour or new seasonal employees, material changes in employment
status, such as a promotion to a full-time position, must be recognized for the purpose
of full-time employee determination within a short time of the event. The status change

15
would generally be such that, had the employee begun employment in the new status,
they would have been reasonably expected to average 30 plus hours of service per
week.

If this occurs during an initial measurement period, the employer must treat the
employee as full-time not later than the first day of the fourth month after the change
in status, or if earlier, by the first day of the first month following the end of the initial
measurement period (including any administrative period) if the employee averaged
more than 30 hours of service during the initial measurement period.

The ACA provides that a full-time employee is an employee who is employed, on

average, for at least 30 hours of service per week in any month. The number of FTEs for
a given month is determined by calculating the aggregate number of hours of service
(up to 130 hours of credited service per employee) for all employees (including seasonal
workers) who had less than 30 hours of credited service per week in a month, and
dividing the total hours of service by 130. For example, if for a calendar month,
employees who were not employed on average at least 30 hours of service per week
have 1,260 hours of service in the aggregate, there would be 10.5 FTEs for that month.
To determine whether an employer is subject to Shared Responsibility requirements,
the monthly totals of full-time employees and FTEs are combined and divided by 12. If
the result is 50 or more, the employer is subject to Shared Responsibility. (Fractions are
disregarded in this calculation; 49.9 FTEs for the preceding calendar year would be
rounded down to 49.)

FTEs are only relevant for determining which employers are subject to the Shared
Responsibility provision. Any actual Shared Responsibility penalties will be based on the
number of full-time employee’s only – not full-time equivalents.

Services Performed Outside the United States

The regulation clarifies that “hours of service” do not include hours worked outside the
United States, regardless of employee’s residency or citizenship status. Employers
should exclude hours of service that constitute foreign source income in determining
whether the employer is subject to the Shared Responsibility provisions, as well as
determining an employee’s full-time status, and in calculating a Shared Responsibility
penalty. However, all hours of service for which an individual receives US source income
are hours of service for purposes of Section 4980H.

Because compensation received for services performed in US territories is considered

income from sources outside of the US, even those employees who work on average
more than 30 hours a week in a US territory will not be considered full-time employees
for purposes of the shared responsibility requirements because their hours will not be
treated as “hours of service.”

16
This means that these employees do not have to be taken into account in determining
whether an employer employed the requisite number of employees to be become
subject to the shared responsibility rules.

They also don’t have to be taken into account in determining whether an employer has
offered coverage to at least 70% of its full-time employees or counted in determining
the amount of any assessment

Oracle Fusion HCM (US) Development Position

 Employers are required to track an employee’s full-time status for ACA purposes.
 Employers must determine whether an employee meets the definition of full-
time according to ACA. This information may deviate from the existing full-time
designation as employers may have different criteria for defining full-time for
other benefits and compensation. A new ACA eligible check box will be delivered
providing customers the ability to track those employees considered eligible for
ACA who will receive a 1095-C form. Benefits can reference this field for life
event triggering, and existing eligibility and derived factor functionality can be
used to enroll and de-enroll employees from benefits plans when their hours
warrant. Customers can use extract functionality to report on the ACA plan
enrollments. Note: There is not currently an automated solution for selecting
this check box.
 Employers must track rehire dates. Rehires have special consideration in
determining eligibility based upon the length of time between termination and
rehire date. Within a certain time period, service must be bridged. This
determination must be completed by the employer using rehire data in Global
Human Resources.
 Employers must be able to track hours used to determine full-time eligibility that
are not paid or tracked in payroll or a time keeping system (e.g. military leave,
disability leave, workers compensation leave. A new informational balance will
be delivered for those Global Payroll or Payroll Interface customers to track
hours for non-paid employee service hours not normally available in payroll or
time and labor (Example: Disability, Military Leave, Workers Compensation, etc.).
Customers must define balance feeds in order to accumulate the appropriate
hours.
 Employers will use various methods to accumulate and calculate the hours
needed for each employee. If Fusion Time and Labor or Global Payroll is used,
then the data can be accessed and referenced in benefits formulas and used to
calculate eligibility. If Fusion products are not used to store time, customers will
have to access hours outside of the Fusion suite. This may require importing of
hours into payroll elements and using the batch element loader to import.

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18
Periods of Time Used in Determining Eligibility

An employer would determine each employee’s full-time status by looking back over a
defined period to determine whether the employee averaged at least 30 hours per
week. Then the employee would be treated as full-time or non-full-time during the
subsequent stability period.

There are three periods of time defined within ACA:

 Measurement
 Administrative
 Stability

Measurement Period

Employers establish a look-back period to analyze hours of service to establish full-time

status:
• 6 to 12 months
• Employer chooses period start and end
• Employers can use weekly, biweekly, or semi-monthly payroll periods rather
than months as measurement periods
• e.g., begin a 12-month measurement period on Jan 7, 2013, ending
Jan 5, 2014

Stability Period

Period of time the employee must be eligible for coverage:

• If employee determined to be full-time, then:

o Employee is treated as full-time during stability period (regardless of
hours in stability period)
o Stability period should be six consecutive calendar months or the length
of the measurement period, whichever is greater
• If employee determined NOT to be full-time, then:
o Employee is treated as not full-time during stability period
o Stability period cannot exceed measurement period
• Stability periods can differ in length or start and end dates for:
o Collectively and non-collectively bargained employees
o Salaried and hourly employees
o Employees located in different states

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Administrative Period

The employer has the option of an optional administrative period in between the
measurement and stability periods, which:
• Allows time to do the look-back, notify employees of eligibility, and enroll in
coverage
• Has a length of up to 90 days
• Cannot reduce or lengthen the measurement or stability periods

Oracle Fusion HCM (US) Development Position

 Customers will need to determine appropriate measurement and stability

periods for each defined applicable large employer and track per employee.

20
Cost of Coverage (Definition of Affordability)

Employees are eligible for premium tax credits to help purchase coverage for
themselves in a public exchange if employer-sponsored coverage is not offered, or does
not meet certain affordability or minimum value requirements. Applicable large
employers may be assessed a Shared Responsibility penalty by the IRS if employees are
awarded such premium tax credits through a public exchange. Employers could remain
liable for a penalty even if they have offered healthcare to all full-time workers; if for
example the plan (or plans) does not meet either the minimum value or affordability
requirements.

Definition of Affordability

Coverage is considered affordable if the premium amount an employee has to pay for
the lowest cost single coverage for insurance that meets the minimum essential
coverage requirements does not exceed 9.5% of the employee’s household income.
The 9.5% rate will change every year to adjust for inflation and cost of living.

As no employer can ascertain the employee’s household income, the IRS and
Department of the Treasury have defined three methods to calculate affordability:

 Current Year Box 1 wages from the Federal W-2

 Rate of Pay
 Federal Poverty Level

W-2 Safe Harbor

To qualify for this safe harbor, the employee’s required premium contributions must
remain a consistent amount or percentage of all W-2 wages for plans with non-calendar
year plan years, however, premium contributions may be subject to dollar limits set by
the employer to dollar limits set by the employer. An employer can apply this safe
harbor at the end of the calendar year or prospectively to set the employee contribution
so that the contribution does not exceed 9.5%.

For employees who are not full-time for the whole calendar year, wages must be
adjusted to reflect the period when they employee was offered coverage. In this case,
Box 1 wage amounts should be adjusted by multiplying the Box 1 wages by a fraction,
which is the number of calendar months during which coverage was offered, over the
number of calendar months the employee was employed during the calendar year.
This wage amount is compared to the employee premium for the months coverage was
offered to determine if the premium exceeds 9.5% of wages during the period coverage
was offered. As long as coverage was offered or the individual was employed for at

21
least one day during the calendar month, the entire month is counted for purposes of
this calculation.

For example, if the employee worked eight months of a calendar year, during five
months of which the employee was offered coverage, and received a Form W-2
reflecting Form W-2 wages of $24,000, the adjusted wages would be $24,000 multiplied
by 5/8 or $15,000. That $15,000 is then treated as the adjusted Form W-2 wages for
purposes of determining whether the employee share of the premium for each of the
five months of coverage offered was affordable under the section 4980H safe harbor
(meaning the employee would be treated for this purpose as earning $3,000 per month
during that five-month period).

Rate of Pay Safe Harbor

The regulations provide a rate of pay safe harbor under which the employer would:

(1) Take the hourly rate of pay for each hourly employee who is eligible to
participate in the health plan as of the beginning of the plan year,
(2) Multiply that rate by 130 hours per month (the benchmark for full-time status
for a month under section 4980H), and
(3) Determine affordability based on the resulting monthly wage amount.
Specifically, the employee’s monthly contribution amount (for the self-only
premium of the employer’s lowest cost coverage that provides minimum value)
is affordable if it is equal to or lower than 9.5 percent of the computed monthly
wages (that is, the employee’s applicable hourly rate of pay x 130 hours).

For salaried employees, monthly salary would be used instead of hourly rate multiplied
by 130.

An employer may use this safe harbor only if, with respect to the employees for whom
the employer applies the safe harbor, the employer did not reduce the hourly wages of
hourly employees or the monthly wages of salaried employees during the year,
including by transferring the employee to another employer within the same controlled
group.

The rate of pay safe harbor is a design-based safe harbor that should be easy for
employers to apply and allows them to prospectively satisfy affordability without the
need to analyze every employee’s wages and hours.

Example: Employee XYZ is employed for the full year of 2015 with an
employer that offers minimum essential coverage that provides minimum
value. The employee contribution for self-only coverage is $75 per calendar

22
 month. Employee XYZ is paid $7.25 per hour for the entire year. The
employer may multiply 130 hours of service by $7.25 per hour and compare
the result ($942.50) to the employee contribution per month ($75). Because
$75 is less than 9.5% of Employee XYZ’s assumed income, the coverage
offered is treated as affordable for 2015 ($75 is 7.96% of $942.50).

Federal Poverty Line (FPL) Safe Harbor

The regulations added an additional affordability safe harbor based on the Federal
Poverty Line (FPL). (Individuals below the FPL will generally qualify for Medicaid.) The
regulations provide that an employer may also rely on a design-based safe harbor using
the Federal poverty line (FPL) for a single individual. Specifically, for purposes of section
4980H, employer-provided coverage offered to an employee is affordable if the
employee’s cost for self-only coverage under the plan does not exceed 9.5 percent of
the FPL for a single individual. For households with families, the amount that is
considered to be below the poverty line is higher, so using the amount for a single
individual ensures that the employee contribution for affordable coverage is minimized.
In the interest of administrative convenience, employers are permitted to use the most
recently published poverty guidelines as of the first day of the plan year of the
applicable large employer member’s health plan. One caveat to this safe harbor is that
employers need to be aware that the FPL differs between the 48 contiguous states and
Alaska and Hawaii, so depending on the state the employee works, the FPL rate may
differ.

Oracle Fusion HCM (US) Development Position

 Customers must decide on the best course of action to determine whether a
plan is affordable based upon the 3 choices the IRS gives an employer (current
year W-2 wages; rate of pay multiplied by average hours; or federal poverty
level). Oracle Fusion will allow the storage of safe harbor choices and provide
data capture needed to complete 1095-C reporting.

23
Definition of Minimum Essential Coverage and Minimum Value

Minimum Essential Coverage

Minimum Essential coverage (MEC) is defined in section 5000A(f). Section 5000A(f)(1)(B)

provides that MEC includes coverage under an eligible employer-sponsored plan. Under
section 5000A(f)(2), an eligible employer-sponsored plan is a group health plan or group
health insurance coverage offered by an employer to an employee that is a
governmental plan (within the meaning of section 2791(d)(8) of the Public Health
Service Act (42 U.S.C. 300gg-91(d)(8))), any other plan or coverage offered in the small
or large group market, or a grandfathered plan offered in the group market. Section
5000A(f)(3) provides that MEC does not include health insurance coverage which
consists of coverage of excepted benefits described in section 2791(c)(1) of the Public
Health Service Act, or sections 2971(c)(2), (3) or (4) of the Public Health Service Act if the
benefits are provided under a separate policy, certificate, or contract of insurance.
Future regulations under section 5000A are expected to provide further guidance on the
definition of MEC and eligible employer-sponsored plans. These regulations under
section 5000A are expected to provide that an employer-sponsored plan will not fail to
be MEC solely because it is a plan to reimburse employees for medical care for which
reimbursement is not provided under a policy of accident and health insurance (a self-
insured plan).

Minimum Value

If the coverage offered by an applicable large employer fails to provide minimum value,
an employee may be eligible to receive a premium tax credit. Under section
36B(c)(2)(C)(ii), a plan fails to provide minimum value if the plan’s share of the total
allowed costs of benefits provided under the plan is less than 60 percent of those costs.
Section 1302(d)(2)(C) of the Affordable Care Act sets forth the rules for calculating the
percentage of total allowed costs of benefits provided under a group health plan or
health insurance plan.

On November 26, 2012, the Department of Health and Human Services (HHS) issued
regulations providing guidance on methodologies for determining minimum value (77
FR 70644). Those HHS regulations provide that the percentage of the total allowed cost
of benefits will be determined using one of the main methodologies described in those
regulations and Notice 2012-31. These methodologies include a minimum value
calculator which is available from both HHS and the IRS. The regulations also provide
that minimum value for employer-sponsored self-insured group health plans and
insured large group health plans will be determined using a standard population that is
based upon large self-insured group health plans. Also, as there is no requirement that
employer-sponsored self-insured and insured large group health plans offer all
categories of essential health benefits or conform to any of the essential health benefit

24
benchmarks, the regulations describe how to take account of a benefit that an employer
offers that is outside the parameters of the minimum value calculator. The Treasury
Department and the IRS intend to propose additional guidance under section 36B with
respect to minimum value.

Oracle Fusion HCM (US) Development Position

It is the customer’s responsibility to work with their third-party vendor (for fully insured
plans) or plan administrator (for self-insured plans) to determine whether their plans
are in compliance with the laws in regards to Minimum Essential Coverage and
Minimum Value. For reporting purposes, plans defined within Fusion Benefits will allow
a designation as to whether they meet minimum essential coverage and minimum
value.

25
Annual Reporting Requirements

Effective in 2016, Applicable Large Employers (ALEs) must provide to the IRS and
individuals an annual statement reflecting the months during the calendar year for
which the individual had “minimum essential coverage.” Section 6056 outlines the
reporting requirements for employers.

• For the purposes of this document and the current direction of Oracle Fusion
HCM (US), Section 6056 reporting will be highlighted. Reporting for Health
Insurance Carriers (Section 6055) is not in the current or future roadmap at this
time.

Under the general method of reporting, Form 1094-C is the transmittal form to the IRS
containing information on eligibility, coverage offered, and who is covered; provided to
each full-time employee, similar to the W-3, Transmittal of Wage and Tax Statements,
filed as a transmittal form for the Forms W-2. Form 1095-C is an individual statement to
be provided to the employee (and to the IRS) detailing their coverage information
during the reporting year, similar to the individual form W-2.

Forms 1094-C and 1095-C consolidate the reporting requirements of Sections 6055 and
6056. Employers who self-insure healthcare benefits can meet their reporting
requirements using these single forms by filling out all sections of each form.

Substitute forms

The IRS states that the section 6056 return (and, if the employer maintains a self-
insured plan, the section 6055 return) also may be made by filing a substitute form. But
the substitute form must include all of the information required on Forms 1094-C and
1095-C or any other forms the IRS designates, and satisfy all form and content
requirements as specified by the IRS.

Alternative Reporting Methods

The IRS regulations contain alternative methods of reporting under section 6056 that
were developed to minimize the cost and administrative tasks for employers, consistent
with the statutory requirements to file an information return with the IRS and furnish an
employee statement to each full-time employee. The alternative reporting methods, in
certain situations, may permit employers to provide less detailed information than
under the general method for reporting. These simplified alternative reporting methods
and the conditions for using them are described in detail in Subsections A through D of
the preamble to the section 6056 regulations.

26
The alternative reporting methods are:

 Reporting based on Certification of Qualifying Offers

 Option to report without separate identification of Full-Time Employees if
certain conditions related to Offers of Coverage are satisfied (98 Percent Offers)

In many situations, not every full-time employee of an employer fits into the groups of
employees for which an alternative reporting method is available. In that case, the
employer would continue to use the general reporting method in the regulations for
those full-time employees for whom an alternative reporting method is not applicable.
The Federal Register released on March 10, 2014 covers four different possible (and
optional) alternative reporting methods:

1) Reporting Based on Certification of Qualifying Offers

a) Under this alternative method, the ALE member could provide a simplified
employee statement in lieu of a copy of the Form 1095-C to each full-time
employee who received a qualifying offer for all 12 months of the calendar year.
To be eligible to use this alternative method with respect to full-time employees,
the ALE member must certify that for all months during the year in which the
employee was a full-time employee with respect to whom a section 4980H
assessable payment could apply, the ALE member (1) offered minimum essential
coverage providing minimum value at an employee cost for employee-only
coverage not exceeding 9.5 percent of the mainland single federal poverty line
to one or more of its full-time employees, and (2) offered minimum essential
coverage to the employee's spouses and dependents (a qualifying offer).

Solely for 2015, an ALE member may use this alternative reporting method if
it(1) certifies that it has made a qualifying offer to at least 95 percent of its full-
time employees and to their spouses and dependents, and (2) in lieu of providing
a Form 1095-C (or another form the IRS designates) to its employees, satisfies its
section 6056 furnishing requirement with respect to all of its full-time employees
by furnishing a statement to each of its full-time employees, by January 31 of the
year following the year to which the statement relates.

2) Option To Report Without Separate Identification of Full-Time Employees If

Certain Conditions Related to Offers of Coverage Are Satisfied (98 Percent
Offers)
a) To be eligible to use this method under the final regulations, an employer must
certify that it offered affordable coverage with minimum value, to at least 98
percent of the employees on whom it reports in its section 6056 return. For this
purpose, coverage is treated as affordable if the cost of employee-only coverage

27
 satisfies any applicable affordability safe harbor under the section 4980H final
regulations.
3) Reporting for Applicable Large Employers With Fewer Than 100 Full-Time
Employees Eligible for Transition Relief under Section 4980H

a) As part of this transition relief, the ALE member must certify on its section 6056
transmittal form for calendar year 2015 (that is, for the section 6056 transmittal
form that will be filed in 2016), as prescribed by the form and instructions, that it
meets the eligibility requirements set forth in section XV.D.6(a)(1) through (3) of
the preamble to the final regulations under section 4980H. See section XV.D.6 of
the preamble to the final regulations under section 4980H for a description of
eligibility conditions for transition relief.

4) Combinations of Alternative Reporting Methods

a) An employer is permitted to use different alternative reporting methods for
different employees at the employer's election.

Details on the alternative reporting methods can be found in the March 10, 2014
Federal Register: “Information Reporting by Applicable Large Employers on Health
Insurance Coverage Offered Under Employer-Sponsored Plans” in Section titled X.
Alternative Methods for Section 6056 Information Reporting for Eligible ALE Members.

Electronic Reporting

An applicable large employer member required by § 301.6056-1 to furnish a statement

to a full-time employee (a recipient) as required by section 6056 may furnish that
statement in an electronic format in lieu of a paper format, provided that the furnisher
meets the IRS requirements outlined in paragraphs (a)(2) through (a)(6) of section §
301.6056-2 Electronic furnishing of statements of the Federal Register issued on March
10, 2014.

Electronic furnishing of section 6056 employee statements is allowed if notice, consent,

and hardware and software requirements modeled on existing rules are met. It is to be
a process substantially similar to the process currently in place for the electronic
furnishing of employee statements (that is, Forms W-2). Any consent given must
specifically identify the section 6056 return. An employee's consent to receive the Form
W-2 electronically will NOT be deemed consent to also receive the employee statement
under section 6056 electronically.

According to the IRS 2014 instructions for Forms 1094-C and 1095-C, these forms are
subject to the electronic filing requirements: Filers of 250 or more information returns
must file the returns electronically. In its instructions for forms 1094-C and 1095-C, the
IRS states that Pub. 5165, Affordable Care Act (ACA) Information Returns (AIR) Guide for

28
Software Developers and Transmitters, will contain the necessary specifications and
other details on how to file. This publication is currently under development by the IRS
and is not yet available.

Oracle Fusion HCM (US) Development Position

We will deliver the tax forms 1094 and 1095-C.

In order to support the reporting of 1095-C in the Oracle Fusion HCM (US) application
you will need the following:

 Legal Employer defined as an Applicable Large Employer

 A valid address for the Legal Employer
 A valid contact name and telephone number (including extension) available for
the Legal Employer
 Benefit plans must designate whether they provide minimum essential coverage
(1095-C, Part II, Line 14)
 Benefit plans must designate whether they provide minimum value (1095-C, Part
II, Line 14)
 A designated self-only option must be defined
 A designated employee and spouse only option must be defined
 A designated employee and dependent(s) only option must be defined
 A designated spouse and dependent option must be defined
 A lowest cost self/employee-only healthcare plan that provides minimum
essential coverage and minimum value must be designated
 Eligible plans must designate whether self-insured or not to satisfy § 6055
reporting
 Social security numbers for spouses and dependents must be obtained and
stored (good faith effort)
 The length of time the affordable health care coverage is offered and the months
of the year in which the employee is eligible as well as enrolled (must include
what months an employee may not be eligible or enrolled as well)

29
Forms 1094 and 1095-C

1094-C - Transmittal of Employer-Provided Health Insurance Offer and Coverage

Information Returns (Page 1)

30
1094-C - Transmittal of Employer-Provided Health Insurance Offer and Coverage
Information Returns (Page 2)

31
1094-C - Transmittal of Employer-Provided Health Insurance Offer and Coverage
Information Returns (Page 3)

32
1095-C – Employer-Provided Health Insurance Offer and Coverage (front)

33
1095-C – Employer-Provided Health Insurance Offer and Coverage (Back)

34