Affordable Healthcare Act and Your Business

Doug Dreger, RHU, REBC, CBCManager, Employee BenefitsMacLean Agency(609) 683-9300 x 229

Steve Sciortino, Jr., CPA, MaccSupervisorLear & Pannepacker, LLP(609) 452-2200

Affordable Care Act

• Legislative Changes

Simple Cafeteria Plans

• ACA established simple cafeteria plans– Certain small employers (employing 100

or fewer employees) are eligible to establish a simple cafeteria plan

– Simple cafeteria plans deemed to meet applicable nondiscrimination rules

OTC Medication Reimbursement

• Effective January 1, 2011, OTC medications no longer qualify as medical expenses for HRAs and health FSAs

• Distributions from HSAs or Archer MSAs for OTC medications are nonqualified distributions– Subject to income tax and penalty tax

Health FSA Contributions

• Effective for plan years beginning after December 31, 2012, employee pre-tax salary contributions are limited to $2,500 per year

• Dollar amount indexed for inflation for plan years beginning after 2013.

Health Coverage on Form W-2

• Beginning with 2012 forms, employers must report cost of employer-sponsored health insurance coverage on employee’s Form W-2

• Certain small employers exempt from 2012 reporting

Medical Expense Deduction

• For tax years beginning after December 31, 2012, itemized deduction for medical expenses threshold now 10% of AGI– Threshold in previous years was 7.5%

• Taxpayers aged 65 and older will not have increased threshold until tax years beginning after December 31, 2016

Medicare Tax Expanded

• Unearned Income Medicare tax enacted– 3.8% tax on investment income– Married Filing Joint taxpayers with AGI over

$250,000 ($200,000 for Single and Head of Household)

• Additional Medicare tax on wages exceeding $250,000 for MFJ ($200,000 for Single)– Additional 0.9% tax withheld on wages over

$200,000– Self-employed persons subject to 3.8% tax

on the same thresholds

Annual Certification of Coverage

• After 2013, employers must provide plan information regarding health insurance coverage to the IRS and covered employees

• Small Plan Definition / Credits

Small Employer Health Insurance Tax Credit

• Employer must:– Employ 25 full-time employees– Pay average annual wages of less than $50,000

per employee– Pay a uniform percentage of health insurance

premiums for enrolled employees

• 35% maximum credit (25% for tax-exempt) if:– 10 or fewer full-time employees with average

wages of $25,000 or less– Credit decreases as employees or wages

increase

Small Employer Health Insurance Tax Credit (continued)

• Credit offsets regular income taxes and AMT– Unused portion can be carried back 1 year

or forward 20 years

• After 2013, maximum credit increases to 50% (35% for tax-exempt) if employer purchases health insurance through small business health options program (SHOP)

• Large Employer Definition / Penalties

Penalty for Lack of Health Insurance

• Employers > 50 FTE subject to penalty if:– Not offering health insurance all full-time

employees > 30 Hr/Wk (look-back, stability, and seasonal periods)– Insurance is unaffordable (> 9.5% Wages) or

does not provide certain minimum value– ‘Wages’ net of 401(k) and health premiums

• Non-deductible penalty ($250 / Mo) if any employee is (allowed) or paid a premium assistance credit or cost subsidy

• Employee Mandate / Premium Credit

• Number Crunching

Plan Pricing Options

Will staff give up 9.5% of their wages compared to a $95/yr tax?

Hourly Rate 7.25 10 15 20 25

Hrly Cost Hrs 30 0.63 0.87 1.30 1.73 2.17

Empl Cost $75 $103 $155 $207 $259

Hrly Cost Hrs 35 0.73 1.01 1.52 2.02 2.53

Empl Cost $87 $121 $181 $242 $303

Hrly Cost Hrs 40 0.84 1.15 1.73 2.31 2.89

Empl Cost $100 $138 $207 $277 $346

EMPLOYEE COSTS Based on $400/Month plan, employee pays 9.5%

Do employer contributions cost more than the “affordability” fine?

Hourly Rate 7.25 10 15 20 25

Hrly Cost Hrs 30 2.71 2.47 2.03 1.60 1.17

Emplr Cost $324 $296 $244 $192 140

Hrly Cost Hrs 35 2.94 1.99 1.56 1.13 0.69

Emplr Cost $312 $278 $218 $157 96

Hrly Cost Hrs 40 2.5 1.63 1.20 0.77 .34

Emplr Cost $299 $261 $192 122 53

EMPLOYER COSTS based on $400/Month plan, employee pays 9.5%

** Notice - everyone at/under $10/Hr costs more than the $250 penalty!

Family coverage & 401(k) could increase employer health subsidies …

Filing Status: Effective Income “Affordable” Maximum

Filing Status: Effective Income “Affordable” Maximum

Affordable Healthcare Act and Your Business

Doug Dreger, RHU, REBC, CBCManager, Employee BenefitsMacLean Agency(609) 683-9300 x 229

Steve Sciortino, Jr., CPA, MaccSupervisorLear & Pannepacker, LLP(609) 452-2200