1. You can listen to todays webinar using your computers speakers or you may dial into the teleconference. If you would like to join the teleconference,please dial 1.650.479.3208 and enter access code: 923 755 470 #. You will be on hold until the seminar begins. #CLOwebinar

2. Speaker: Monique Warren Partner Jackson Lewis LLPModerator: Todd Black Product Marketing Manager Kronos #CLOwebinar

3. Q&A Click on the Q&A icon on your floating toolbar on the top of your screen. Type in your question in the space at the bottom. Click on Send. #CLOwebinar

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6. Navigating the Affordable Care Act: Avoiding Penalties & Minimizing CostsMonique Warren Todd BlackPartner, Jackson Lewis LLP Product Marketing Manager, Kronos Incorporated KRONOS INCORPORATED March 13, 2013 6

7. KRONOS INCORPORATED March 13, 2013 7

8. Todays Guest SpeakerMonique WarrenPartner,Jackson Lewis LLPMonique Warren is a Partner in the White Plains, New York office of JacksonLewis LLP. Ms. Warren is a member of the Employee Benefits Counselingand Litigation group.Ms. Warren counsels employers on employee benefits compliance andadministrative matters, drafts plan documents and employee communicationmaterials, and represents employers to government agencies and inemployee benefit litigation. Her expertise includes health and welfare plansas well as retirement plans. KRONOS INCORPORATED March 13, 2013 8

9. Health Care Reform: Employer Shared Responsibility PenaltyMonique WarrenPartner, Jackson Lewis LLP KRONOS INCORPORATED March 13, 2013 9

10. Health Care Reform: Employer Shared Responsibility Penalty 2012 Jackson Lewis LLPThis presentation provides general information regarding itssubject and explicitly may not be construed as providing anyindividualized advice concerning particular circumstances.Persons needing advice concerning particular circumstances mustconsult counsel concerning those circumstances.IRS Circular 230 disclosure: Any tax advice contained in thiscommunication (including any attachments or enclosures) is not warrenm@jacksonlewis.comintended or written to be used, and cannot be used, for thepurpose of (i) avoiding penalties under the Internal RevenueCode or (ii) promoting, marketing or recommending to anotherparty any transaction or matter addressed in this communication.(The foregoing disclaimer has been affixed pursuant to U.S.Treasury regulations governing tax practitioners.)

11. Market Reforms and Mandates Insurance Exchanges Shared MedicaidResponsibility Expansion

12. US Supreme Court upheld constitutionality in2012Individual must have minimum essential coverage(employer-sponsored, Medicare, Medicaid,exchange, etc.) or pay tax penalty for periodswithout coverage thats greater of o 1% AGI or $95 for 2014o 2% AGI or $325 for 2015o 2.5% AGI or $695 for 2016

13. Internal Revenue Code 4980H Employer Shared Responsibilityaka Pay or Play penaltyNondeductible penalty applies to employers with50 or more fulltime employeesAssessable penalty - generally are assessedand collected in the same manner as taxesGuidance so far: Notice 2011-36, Notice 2012-58, Proposed Regulations

14. Applicable Large EmployerLarge means the employer had an average of 50 or morefulltime employees on business days in prior calendar yearEmployer status is determined on controlled group basis(aggregation, like for retirement plan); different EIN differentemployerSpecial rules for predecessor employers and new employersCommon-law employment principles apply when determiningemployment relationshipAnti-abuse rules

15. Parent-subsidiary group an entity has an 80% or more controllinginterest in another entityBrother-sister group same 5 or fewer people (or trusts/estates)together own at least 80% of each entity and, taking into account theownership interest of each owner only to the extent identical withrespect to each entity, the owners hold more than 50% of each entityAffiliated service group service organizations (e.g., medical practice,architectural firm) where one performs services for the other ormanagement function groupAttribution rules apply, too 15

16. P owns 100 percent of S-1 and S-2For all of 2013, P has 10 fulltime employees, S-1 has 40fulltime employees and S-2 has 60 fulltime employeesP, S-1, and S-2, collectively, are an applicable large employerand each one is an applicable large employer member for2014

17. Owner Axel Corp Bearing Identical Corp OwnershipWilliam 80% 20% 20%Xavier 10% 50% 10%Yolanda 5% 15% 5%Zoe 5% 15% 5%Total 100% 100% 40% 17

18. NewCo is incorporated on January 1, 2015 and on that dayNewCo has just three employees. However, prior toincorporation, NewCos owners bought a factory theyintended to open within two months of incorporation andthey intended to employ 100 employees. By March 15,2015, NewCo has over 75 fulltime employeesBecause NewCo can reasonably be expected to employ onaverage at least 50 fulltime employees on business daysduring 2015, and actually does, NewCo is an applicablelarge employer

19. Employee/Employer relationship determined based on common lawprinciples o Subject to the companys will and control not only as to what but also how o Facts and circumstances, not necessarily contract language o Revenue Ruling 1970-630Independent contractors are not employees (but be certain theyreindependent contractors!)Non-employee directors, sole proprietors, partners, 2-percent or moreshareholders in an S corporations and leased employees (if theyre notyour common law employees) are not treated as employees.

20. Fulltime = employed on average for 30 hours of service per week (130hours per month) o Hourly count actual hours o Non-hourly count actual hours or use equivalency rules (8hrs=1day, 40hrs=1week) Okay to use different methods for different groups Use reasonable method for commission-onlyService includes hours paid for performance of duties, vacation, sick,jury duty, layoff, military service, holiday, incapacity (e.g., disability)Service does not include work performed outside the USFor 2014, may use any 6-month period in 2013 (instead of all of 2013)to determine average

21. 1) Count your fulltime employees (including seasonal) for each month in 20132) Count your fulltime equivalents (including seasonal) for each month in 2013 a) Add total hrs for non-fulltime employees but count no more than 120/mo for any one non-fulltime employee b) Divide # obtained in substep a) by 120; the result is the number of fulltime-equivalents for that month3) Add the two #s obtained in steps 1) and 2) above for each month4) Add the twelve sums obtained in step 3) and divide the total by 12; the result is the average number of fulltime employees/equivalents5) If the # in step 4) is at least 50, determine whether seasonal employee exception applies

22. Seasonal employee exceptionAfter determining that your company had at least 50 fulltimeemployees/equivalents on average for 2013, determine whether o the number exceeded 50 for only 120 days/4 months (or fewer) and o the number in excess of 50 were seasonal employeesSeasonal = seasonal retail, agricultural and others included undergood faith reasonable interpretationIf the number of fulltime employees exceeded 50 for no more than120 days/4 months and the excess employees were seasonal, yourcompany is not a large employer for 2014

23. Elves Inc has 40 fulltime non-seasonal employees for the full 2015calendar year, Elves also has 80 seasonal fulltime workers who packand ship toys from September through December. Elves has no part-time employeesBefore applying the exception, Elves Inc has 40 fulltime employees for8 months of 2015 and 120 fulltime employees for 4 months of 2015,resulting in an average of 66 employees for the yearBut, since Elves workforce equaled or exceeded 50 fulltimeemployees for no more than 4 months and the number of fulltimeemployees would be less than 50 in those months if seasonal elveswere disregarded, its not an applicable large employer for 2016

24. o Play or Pay (4980H(a)): If minimum essential coverage is not offered to all fulltime employees and dependents and one or more fulltimer obtains subsidized Exchange coverage, employer must pay (annualized) penalty of $2,000 x (#fulltimers - 30)o Play and Pay (4980H(b)): If minimum essential coverage is offered but one or more fulltimer obtains subsidized Exchange coverage, employer must pay (annualized) penalty equal to lesser of $3,000 x #fulltimers who decline employer coverage and receive subsidized Exchange coverage or $2,000 x (#fulltimers - 30)

25. Control group and common law employer concepts applyWorks at least 30 hours per week with respect to a given month(non-fulltime employees do not trigger penalty)Since monthly determination is administratively burdensome,IRS offers safe harbor measurement/stability methodo Count hours during a look-back measurement period of 3-12 months to determine fulltime/non-fulltime status;o Treat as fulltime/non-fulltime for stability period, depending on status determined under measurement period

26. For ongoing employees (i.e., employed for at least as long as themeasurement period you use) count actual hours for a look-back measurement periodo If employee averages 30 hrs/wk in measurement period, treat as fulltime for a stability period of at least 6 months and no shorter than measurement period, regardless of actual hours worked during that stability periodo If the employee average less than 30 hrs/wk in measurement period, he or she is treated as non-fulltime for a stability period no longer than the measurement period

27. safe harbor ongoing employeeso 3-12month measurement periodo Different measurement and stability periods may be used for categories of employees: union/nonunion, different bargaining agreements, salaried/hourly, different stateso May change length of periods each year but not with respect to an employee whos measurement period has begun **o May use administrative period of up to 90 days between measurement and stability periods but it cannot reduce or lengthen the measurement or stability periodo For 2014 only can use 6-mo look-back with 12-mo stability

28. Your company is an applicable large employer that offerscoverage only to fulltime employees and chooses to use:o a 12-month stability period that begins January 1o a 12-month standard measurement period that begins October 15; ando an administrative period between the end of the standard measurement period (October 14) and the beginning of the stability period (January 1) to determine which employees were employed on average 30 hours per week during the measurement period

29. Al was employed on average 30 hours per week during the standardmeasurement period 10/15/2015 10/14/2016 and for the priormeasurement period o Because Al was employed for the entire standard measurement period, Al is an ongoing employee with respect to the stability period 1/1/2017 12/31/2017 o Because Al was employed on average 30 hours per week during that standard measurement period, Al is offered coverage for the entire 2017 stability period (including the administrative period 10/15/2017 12/31/2017) o Because Al was employed on average 30 hours per week during the prior standard measurement period, hes offered coverage for the entire 2016 stability period and, if enrolled, coverage would continue during the administrative period 10/15/2016 12/31/2016

30. Bob also was employed on average 30 hours per week for all prior standardmeasurement periods, but is not a fulltime employee during the standardmeasurement period 10/15/2015 - 10/14/2016 o Because Bob was employed for the entire standard measurement period 10/15/2015 10/14/2016, Bob is an ongoing employee with respect to the stability period in 2017 o Because Bob did not work full-time during this standard measurement period, you dont offer Bob coverage for the stability period in 2017 (including the administrative period from 10/15/2017 12/31/2017) o However, because Bob was employed on average 30 hours per week during the prior standard measurement period, Bob was offered coverage through the end of the 2016 stability period and, if enrolled, would continue such coverage during the administrative period from 10/15/2016 through 12/31/2016

31. For new employees (i.e., employed for less than one measurement period),determine if o Fulltime: reasonably expected to be employed on average at least 30 hours per week, non-seasonal; or o Variable-hour/Seasonal: unable to determine at start date whether he or she will be fulltime For 2014 only, employer may take into account an anticipated termination date (after 2014, employers must assume that an employee will be employed for the entire measurement period) Apply look-back measurement/stability safe harbor method and theres no penalty with respect to a new employee during measurement o If status changes during measurement period (reasonably expected to be fulltime), treat as fulltime starting on first day of 4th month after status change or, if earlier, first day of month after measurement period

32. Safe Harbor General RulesRehired employees (and employees returning from unpaid leave) aretreated as new hires if the period of no service was at least 26consecutive weeks o As alternative can use parity rule for shorter periods of pre-break employment o If treated as new, restart measurement period o If not treated as new, the rehired/resuming employee is treated as continuing for purposes of measurement/stability periodIf using safe harbor, careful recordkeeping is essential (not just hours measurement/stability periods, start dates, termination dates, leavedates, job category, coverage eligibility, coverage offers, enrollments,etc.)

33. An employees child under age 26o Child for federal tax purposes ( 152(f)(1)) son, daughter, stepchild, adopted child, child placed for adoption, foster childo May rely on employees representationAn employees spouse is not a dependentFor 2014 only, an employer not currently offeringdependent coverage will not be liable for a penalty solelyfor failure to offer dependent coverage as long as it takessteps in 2014 to begin offering dependent coverage

34. Remember, a fulltime employee must obtain subsidizedExchange coverage ( 36B) to trigger a penaltyNo subsidy unless o Household income between 100% and 400% federal poverty line (currently, $11,170 for a single person)o Not offered minimum essential coverageo Buys Exchange coverage

35. Employee must have effective opportunity to accept coverage atleast once per yearIf coverage is not affordable or does not meet minimum value,employee must also have had effective opportunity to declinecoverage (i.e., mandatory or automatic coverage thats notaffordable or of minimum value will not prevent employee fromobtaining subsidized Exchange coverage and triggering penalty)Offer is effective for a given month only if coverage is effectivefor full month if employee accepts offerOffer not negated by employer dropping employees coveragefor nonpayment of premium

36. Coverage under a grandfathered plan, an eligible employersponsored plan, an individual plan, Medicare, Medicaid, CHIP,TRICARE etc.Special rule: for employer-sponsored coverage to be minimumessential coverage, it must meet o Affordability test: self-only coverage costs no more than 9.5% of income (income safe harbors: W-2 wages, rate of pay, federal poverty level for single person) o Minimum value test: plans share of total allowed cost of benefits must be at least 60% of covered costs (HHS-IRS calculator, other safe harbors?)

37. Multiemployer plans Through 2014, an employer that makes contributions to a multiemployer plan will be treated as having satisfied 4980H if (i) it contributes to the plan pursuant to a collective bargaining agreement, (ii) the coverage is offered to fulltime employees and dependents, and (iii) the coverage is affordable and provides minimum valueNon-calendar year plans Delayed effective date first day of 2014 plan year if non-calendar year plan was in effect as of 12/27/2012 and offers affordable minimum value coverage no later than first day of 2014 plan year

38. Shrink/Dont grow your business and remain below largeemployer threshold really?!Dont let employees whore ineligible for health coverage workmore than 30 hours per week?Provide health coverage (with at least 60% value) for allemployees working at least 30 hours per week and theirchildren under age 26 and dont make any of those employeespay more than 9.5% of compensation for single coverage?o Dont have to subsidize dependent coverageo Can use alternate safe harbor to meet affordability test

39. How important is health coverage to recruitment and retentionof employees?o Whats common in industry/geographic area?o What does your company currently offer?How important is health coverage to other businessconsiderations (e.g., union avoidance, public relations)?If unionized, what does the collective bargaining agreementsay?If status quo, how much would it cost to avoid estimatedpenalties compared with the cost of paying estimatedpenalties?

40. Jackson Lewis Health Care Reform Resource Center http://www.jacksonlewis.com/healthcare/index.php Jackson Lewis Benefits Law Advisor Blog http://www.benefitslawadvisor.com/ Jackson Lewis e-mail updates http://jlmarketing.jacksonlewis.com/reaction/RSGenPage.asp?RSID= k5_c7IHYHsVmAKIhyttfRpWKlZt0NCGFtjTqbXpTSKkIRS website: http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions

41. The Reliable Data You Need to Make the Right Decisions KRONOS INCORPORATED March 13, 2013 41

42. Savvy Organizations Are Using WorkforceManagement to Minimize Drive FosterControl Labor Improve Compliance Operational Continuous Cost Productivity Risk Excellence ImprovementSave payroll expense Reduce overtimeEliminate administrative waste Improve serviceAvoid lawsuits, penalties and settlements Consolidate acquisitionsReduce absenteeism Standardize and control expansionImprove sales Find growth using Big DataStreamline hiring and reduce turnover Allocate labor costs to grants & programs KRONOS INCORPORATED March 13, 2013 42

43. Benefits of Automated and IntegratedWorkforce Management Processes Minimize Control Improve Compliance Costs Productivity Risk Eliminate redundant Establish single Gain control of data entry source for all employee Lower total cost of employee processes and ownership information performance Gain better visibility Monitor and Empower to information for enforce employees and better decision compliance managers with making automation KRONOS INCORPORATED March 13, 2013 43

44. A workforce management solution canhelp you cope with ACA compliance by Providing accurate information about average hours worked by full-time and part-time employees to comply Delivering timely analysis of employee benefit eligibility, thus improving compliance and reducing financial penalties Monitoring your workforce by analyzing schedules, time records, and benefits enrollment in real time Notifying the appropriate agencies of ACA compliance through auditing and reports built into our solution KRONOS INCORPORATED March 13, 2013 44

45. Automated Workforce Management Helps youto Cope with the Affordable Care Act Ability Change Enroll Work Monitor Status & Electronically Through Report to to do Workforce Provide with Self Stability IRSLook-Back On-Going Benefits Service Period KRONOS INCORPORATED March 13, 2013 45

46. Summary Control labor costs Manage part-time hours Prevent overtime Optimize scheduling and staffing Ensure employee satisfaction Provide stable schedules Deliver timely benefits eligibility information Support ACA compliance Monitor time worked Monitor benefits enrollment Provide necessary audits and reports KRONOS INCORPORATED March 13, 2013 46

47. Thank you for joining us! QA & Q&A KRONOS INCORPORATED March 13, 2013 47

48. About Kronos Kronos is the global leader in delivering workforce managementsolutions in the cloud. Tens of thousands of organizations in more than100 countries including more than half of the Fortune 1000 use Kronos to control labor costs, minimize compliance risk, and improveworkforce productivity. Learn more about Kronos industry-specific time and attendance, scheduling, absence management, HR and payroll, hiring, and labor analytics applications at www.kronos.com. Kronos: Workforce Innovation That Works. For more information contact your Kronos representative, call (800) 225-1561 or visit www.kronos.com. KRONOS INCORPORATED March 13, 2013 48

49. Monique WarrenPartnerJackson Lewis LLP #CLOwebinar

50. Join Our Next Workforce Webinar The Innovative Workforce Wednesday, March 27, 2013Workforce Webinars start at 2 p.m. Eastern / 11 a.m. Pacific Register for upcoming Workforce Webinars at www.workforce.com #CLOwebinar