the affordable care act “what’s in it for my small business?”
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The Affordable Care Act “What’s in it for my small business?”. TAX CONSIDERATIONS October 9, 2014. INDIVIDUAL MANDATE 1/1/2014. Individual advance tax credits available Income requirements (100% to 400% of Fed. Poverty Level) 2014 2013 S ingle @ 400%= $46,680$45,960 - PowerPoint PPT PresentationTRANSCRIPT
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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.
[email protected] 207.541.2314Website berrydunn.comBlogberrydunn.com/firmfooting