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berrydunn.com | GAIN CONTROL THE AFFORDABLE CARE ACT WHATS IN IT FOR MY SMALL BUSINESS? TAX CONSIDERATIONS January 21, 2014 Slide 2 2 INDIVIDUAL MANDATE 1/1/2014 Small Employer Health Coverage Individual advance tax credits available Income requirements (100% to 400% of Fed. Poverty Level) 2013 Single @ 400%=$44,680 2013 Family of 4 @ 400% = $94,200 Coverage requirements May not be eligible for Medicaid or Medicare or private coverage May not be eligible for Employer coverage (Affordable & Minimum Value) Slide 3 3 INDIVIDUAL MANDATE 1/1/2014 Small Employer Health Coverage Pre-tax nature of employer coverage Employer premiums are fully deductible / payroll tax free Employee portion is income & payroll tax free (if paid through a Sec. 125 plan) Employers can provide pre-tax HRAs, Health FSAs and HSAs After-tax nature of Exchange coverage Employee cost, after subsidy (if any), is after-tax Any Employer bonus will be subject to income & payroll taxes HSAs available IF Exchange policy is a HDHP Slide 4 4 INDIVIDUAL MANDATE 1/1/2014 Small Employer Health Coverage Will an offer of Employer health coverage void Employees ability to qualify for an Exchange credit? Yes if coverage is Affordable & provides Minimum Value But Employer need not offer coverage to Spouse A way to leave Spouse credit eligible But Household Income may make spouse ineligible! Slide 5 5 INDIVIDUAL MANDATE 1/1/2014 Small Employer Health Coverage May an Employer use an HSA and/or an HRA to help make a health plan Affordable? HSA NO. May not use an HSA to pay premiums. HRA Yes, if integrated and $ only available for premiums. May an Employer use an HSA and/or an HRA to help make a health plan meet Minimum Value? HSA Yes. HRA Yes, if integrated and $ only available for cost-sharing. Slide 6 6 INDIVIDUAL MANDATE 1/1/2014 Small Employer Health Coverage Employer pre-tax payment for individual health insurance premiums prior to 1/1/2014 One way for small Employers to provide custom employee health coverage Direct Employer premium payment or reimbursement Use of HRAs possible Avoided income taxes and payroll taxes Non-discrimination rules have been non-existent Slide 7 7 INDIVIDUAL MANDATE 1/1/2014 Small Employer Health Coverage IRS Notice 2013-54 Effective 1/1/2014 HRA, Employer Payment Plan, Section 125 Health FSA These are group health plans subject to the ACA. Standing alone, they fail ACA requirements (e.g., prohibition on annual dollar limits & first $ preventative care) They may be integrated with an ACA compliant group health plan Integration with an individual policy is not allowed REVIEW ALL SUCH PLANS IF STILL EXISTENT Slide 8 8 INDIVIDUAL MANDATE 1/1/2014 Small Employer Health Coverage IRS Notice 2013-54 Effective 1/1/2014 Exceptions One-participant plans (sole-proprietors w/o employees) Standalone retiree-only plans Certain Health FSAs if carefully designed (excepted benefits) Use of HSA with individual HDHP Employer contributions must be comparable HSA $ can not be used to pay premiums (by law) Slide 9 9 SMALL BUSINESS HEALTH CARE TAX CREDIT IRC 45R - Maximum credit equals 35% of employer health insurance Premium cost (increases to 50% for 2014-2016) 25 or fewer FTEs to qualify for any credit Aggregation rules apply Average annual wages less than $50,000, and Employer pays 50% or more of insurance premiums Must use SHOP starting in 2014 Slide 10 10 SMALL BUSINESS HEALTH CARE TAX CREDIT DETERMINATION OF NUMBER OF FTES Divide total annual hours/2,080 = number of FTEs EE hours in excess of 2,080 do not count Excluded employees Owners & their family members Seasonal Workers (< 120 days/year) Slide 11 11 SMALL BUSINESS HEALTH CARE TAX CREDIT DETERMINATION OF AVERAGE ANNUAL WAGES Divide total wages by # of FTEs = Average annual wages All wages paid to qualifying employees are included even for hours in excess of 2,080. But exclude wages paid to: Owners & their family members Seasonal Workers (< 120 days/year) The relevant period is the Employers taxable year. Slide 12 12 SMALL BUSINESS HEALTH CARE TAX CREDIT MAXIMUM CREDIT EQUALS 35% OF EMPLOYER HEALTH INSURANCE PREMIUM COST (50% FOR 2014-2016) 10 or fewer FTEs to qualify for maximum credit $25,000 or less average wages to qualify for maximum CREDIT PHASE OUT BETWEEN 10-25 FTEs Average wages 25K-50K Slide 13 INTERESTED IN MORE? Contact Roger Prince, a Senior Manager in BerryDunns Employee Benefit Consulting Group, to learn more. rprince@berrydunn.com Phone 207.541.2314 Websiteberrydunn.com Blogberrydunn.com/firmfootingberrydunn.comberrydunn.com/firmfooting 13