berrydunn.com | GAIN CONTROL

THE AFFORDABLE CARE ACT“WHAT’S IN IT FOR MY SMALL BUSINESS?”

TAX CONSIDERATIONSOctober 9, 2014

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INDIVIDUAL MANDATE 1/1/2014

Individual advance tax credits available• Income requirements (100% to 400% of Fed. Poverty Level)

2014 2013• Single @ 400% = $46,680 $45,960• Family of 4 @ 400% = $95,400 $94,200

• Credit amount lessens as income goes up / sliding scale

• Coverage requirements• May not be eligible for Medicaid or Medicare or private coverage• May not be eligible for Employer coverage (Affordable & Minimum

Value)

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INDIVIDUAL MANDATE 1/1/2014

Individual cost sharing subsidies available• Income requirements (100% to 250% of Fed. Poverty Level)

2014 • Single @ 250% = $29,175• Family of 4 @ 250% = $59,625

• Applied automatically• Must buy a silver plan• Out-of-pocket expenses partially paid by government (sliding scale)• Out-of-pocket maximums are also lowered

• Qualifying person: Buy Bronze (no subsidy) or Silver (subsidy)?• Requires analysis

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INDIVIDUAL MANDATE 1/1/2014

Will an offer of Employer health coverage void Employee’s 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!

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Small Employer Health Coverage

• Small & Medium sized Employers 2014 - 2015

• Small Employer• Less than 50 Employees (full-time & full-time equivalents)

• Final 4980H Employer penalty regulations issued 2/10/2014• 2015 Transition rule exemption for medium sized ERs• 50-99 Employees (full-time & full-time equivalents)• Certification and various other requirements

• Can’t reduce workforce• Can’t reduce current coverage

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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

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Small Employer Health Coverage

Employer pre-tax payment for individual health insurance premiums

• Virtually impossible due to Notice 2013-54• No stand alone HRAs, Section 125 Plans, or Employer Payment

plans• Effective 1/1/2014

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Small Employer Health Coverage

Employer pre-tax payment for individual health insurance benefits

• Consider a HDHP + HSA strategy• Employee individual HDHP policy (on or off Exchange)• Tax-free HSA contributions by Employer – comparability rule

• Note: HSA $ may NOT be used to pay premiums!

• Plus – if individual HDHP is on the Exchange• Potential Employee premium subsidy!

• The Maine Exchange now offers HSA eligible (HDHP) individual policies

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Small Employer Health Coverage

Private Exchanges• Defined contribution health plans• Large companies are adopting• A way to provide EEs with a variety of health plan

choices• New exchanges are available for smaller companies• ER premium payments are pre-tax

• When structured properly as a group policy

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SMALL BUSINESS HEALTHCARE TAX CREDIT

IRC §45R - Maximum credit equals 50% [35% for 501c NFPs]

• 25 or fewer FTE’s to qualify for any credit• Aggregation rules apply

• Average annual wages less than $50,800 (2014), and• Employer pays 50% or more of insurance premiums• Must use SHOP starting in 2014• Two consecutive taxable year limit starting in 2014

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SMALL BUSINESS HEALTHCARE TAX CREDIT

MAXIMUM CREDIT (50% / 35%)

• 10 or fewer FTEs to qualify

• $25,400 (2014) or less average wages to qualify

CREDIT PHASE OUT BETWEEN

• 10-25 FTE’s

• Average wages 25K-50K

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SMALL BUSINESS HEALTHCARE 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)

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SMALL BUSINESS HEALTHCARE 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 Employer’s taxable year.

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SMALL BUSINESS ANNUAL ACA REPORTING

ACA REPORTING UNDER IRC SECTIONS 6055 & 6056

• Section 6055 – Minimum Essential Coverage reporting

• Any size ER with a self-insured plan providing MEC [Insurers report for insured plans]

• Voluntary for 2014; required for 2015

• Form 1095-B information return [Form 1094-B is the Transmittal]

• Section 6056 – Large Employer FT EE reporting

• Only applies to Applicable Large Employers (incl. medium-sized ERs for 2015)

• Voluntary for 2014; required for 2015

• Form 1095-C information return [Form 1095-B is the Transmittal]

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INTERESTED IN MORE?

Contact Roger Prince, a Senior Manager in BerryDunn’s Employee Benefit Consulting Group, to learn more.

rprince@berrydunn.comPhone 207.541.2314Website berrydunn.comBlogberrydunn.com/firmfooting