Your Guide to the Small Employer Health Insurance Credit

Transcription

1 Your Guide to the Small Employer Health Insurance Credit Time Insurance Company John Alden Life Insurance Company Union Security Insurance Company Assurant Health is the brand name for products underwritten and issued by Time Insurance Company, John Alden Life Insurance Company and Union Security Insurance Company. This Guide and the documents included in this Guide are the sole and exclusive property of Union Security Insurance Company; Julie Welch; Meara Welch Browne, P.C.; and Wealth Builders Press, LLC. Any unauthorized use, reproduction, or distribution of these copyrighted materials is strictly prohibited without the express, written consent of each of the four listed owners.

2 Disclaimer: This Guide is made available by Assurant Health, under license from Union Security Insurance Company for informational purposes only. Union Security Insurance Company received assistance in the creation of this Guide from Julie Welch and Meara Welch Browne, P.C. ( Welch ). Neither Welch nor Union Security Insurance Company, nor Assurant Health assumes liability with respect to the general compliance, tax, accounting or other information provided herein. This Guide is designed to provide only general information with respect to certain aspects of the small employer health insurance credit. No representation is made that the information provided in this Guide is comprehensive or anything more than an overview. The information contained in this Guide is not intended and should not be viewed as compliance, tax, accounting or legal advice. Specific questions about the compliance, tax, accounting or legal implications of the small employer health insurance credit and related matters should be referred to your qualified tax and legal professional. This Guide is not and should not be deemed to be in any way made available as an inducement to establish or maintain a business relationship with Union Security Insurance Company, Welch, or Assurant Health. IRS Circular 230 Notice: To ensure compliance with requirements imposed by the IRS and other taxing authorities, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purposes of (i) avoiding penalties that may be imposed on any taxpayer, (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein, and (iii) you should seek advice based on your particular circumstances from an independent advisor. Assurant Health is the brand name for products underwritten and issued by Time Insurance Company, John Alden Life Insurance Company and Union Security Insurance Company.

3 Small Employer Health Insurance Credit Many new things are associated with the passage of healthcare reform and it isn t always easy to figure out which ones will benefit your business. This guide has been designed to help you understand the new Small Employer Health Insurance Credit. Many small employers will be eligible to take advantage of this credit with the right information and the help of their tax professional. The credit might actually benefit you more than you think it will - Did you know that the credit includes more than medical insurance premiums? Your dental, vision, cancer, critical illness and gap premiums also can qualify for the credit. Just that little piece of information may help you maximize your credit this year. We have even more details included in this guide and at to help you understand and take advantage of this new credit.? 2010 Tax Year Checklist Could Your Company Be Eligible? 2010 to 2013 Tax Year Checklist 1. Does your company have less than 25 full-time Employees (excluding Business Owners, their Family and Household Members and Seasonal Workers)? q Yes q No 2. Is the Average Annual Wage per Employee (excluding Business Owners, their Family and Household Members and Seasonal Workers), less than $50,000? q Yes q No 3. Does your company provide any medical insurance benefits (including dental, vision, cancer, critical illness, or gap) to your Employees? q Yes q No 4. For any one or more of the medical insurance benefits provided, does your company pay at least 50% of the cost of single coverage for the Employees? q Yes q No If you answered yes to all questions, you should consult your tax professional as you may be eligible for the Small Employer Health Insurance Credit. This guide and the Small Employer Health Insurance Credit Calculator Tool may assist in determining if you are eligible for the Small Employer Health Insurance Credit and the potential amount of the credit available to you. Note: Any change to your responses should be reevaluated by your tax professional as changes may impact your eligibility for and the amount of the Small Employer Health Insurance Credit. Disclaimer: This information is provided for informational purposes. It is not and should not be viewed as tax or legal advice. Specific questions about the tax or legal issues relating to the Small Employer Health Insurance Credit should be discussed with your qualified tax and legal professional. IRS Circular 230 Notice: To ensure compliance with requirements imposed by IRS and other taxing authorities, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purposes of (i) avoiding penalties that may be imposed on any taxpayer, (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein and (iii) you should seek advice based on your particular circumstances from an independent advisor.

4 For an electronic calculator, step-by-step guide and definitions of capitalized words and phrases visit Small Employer Health Insurance Credit Calculator NO # of FTEEs (Full Time Equivalent Employees) # hours worked by all Employees* (limit to 2,080 per Employee) Divide by 2,080 Equals number of FTEEs round down to whole # *Exclude Business Owners, Family and Household Members and Seasonal Workers from calculations and premiums Is the number of FTEEs more than 24? 2080 A YES Average Annual Wages Total wages paid to above FTEEs Divided by number of FTEEs Equals Average Annual Wages/ FTEE round down to the next $1,000 A B NO CREDIT NO NO Is the Average Annual Wages $50,000 or more? Calculate the credit Employer-Paid Premiums* exclude amt. Employee pays Avg. prem. for small group market for State (Rev Rul ) Times number of covered FTEE State average small group premium Times % of Employer-Paid Premium Lesser of actual Employer-Paid or State average small group premium Credit % (35% for-profit; 25% for tax-exempt) Maximum credit available Is the # of FTEEs less than 11 AND the Average Annual Wages $25,000 or less? Reduced Credit Available Calculate below: Reduction FTEEs exceeds 10 Number of FTEEs (per A above) Less 10 Excess FTEEs Divided by 15 Maximum credit (per D above) FTEE Credit reduction ( 1 times 2) A 1 2 YES C 35% D YES (10) E For 2010, tax credit can be used to offset tax liability and any excess over the tax liability can be carried forward up to 20 years. Beginning in 2011, the excess credit can be carried back one year, and then forward up to 20 years. If eligible for state subsidies or tax credits see website above. MAXIMUM CREDIT REMEMBER TO REDUCE DEDUCTION Reduction Average Annual Wages/FTEE exceeds $25,000 Average Annual Wages/FTEE (per B above) Less $25,000 Excess Average Annual Wages Divided by $25,000 Maximum credit (per D above) Average Annual Wages credit reduction (3 times 4 ) B 3 4 ($25,000) F Reduced Credit Available Calculate below: Maximum credit available (per D above) Less FTEE credit reduction (per E above) Less Average Annual Wages credit reduction (per F above) Actual credit available (Remember to reduce deduction) D E F G Reduced Federal income tax deduction for health insurance premiums Premiums paid Less credit available Deduction allowed C D or G IRS Circular 230 Notice: To ensure compliance with requirements imposed by IRS and other taxing authorities, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purposes of (i) avoiding penalties that may be imposed on any taxpayer, (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein and (iii) you should seek advice based on your particular circumstances from an independent advisor. Copyright, 2010 Julie Welch; Meara Welch Browne, PC.; Wealth Builders Press, LLC.

5 Top 10 Questions to Ask Your Tax Professional 1 If my company is eligible for the Small Employer Health Insurance Credit, how much is the available credit? 2 My company has less than 25 Employees (excluding Business Owners, their Family and Household Members and Seasonal Workers) and the Average Annual Wage for those Employees is less than $50,000. Is my company automatically eligible for the maximum credit? 3 Do my company s part-time employees affect the Small Employer Health Insurance Credit? 4 If my company is eligible for the Small Employer Health Insurance Credit in 2010, is my company eligible for each year thereafter so long as the company does not change its medical plans? 5 If my company takes the credit, does it reduce the tax deduction that could otherwise be taken for these benefits? If so, by how much? 6 Is my company better off taking the tax credit or taking the full tax deduction in lieu of the credit? 7 If my company is eligible for the Small Employer Health Insurance Credit but unable to use it this year, is it lost? 8 If my company currently does not provide insured medical coverage for employees, would there be a tax benefit if we offered and paid 50% of the cost on a uniform basis for medical insurance coverages including dental, vision or other eligible coverages? 9 What can my company do to maximize the Small Employer Health Insurance Credit? 10 How much will it cost to determine if I am eligible for the Small Employer Health Insurance Credit? Information Your Tax Professional Needs 1 A list by Employee showing the number of hours worked and annual wages paid to each Employee (excluding Business Owners, their Family and Household Members and Seasonal Workers). 2 A list of each Business Owner, the Family and Household Members of that owner and any person who owns 5% or more of another business. 3 A list of each Seasonal Worker including the number of days worked during the year, and the annual wages paid to each seasonal worker. 4 A list of each type of health insurance coverage provided to Employees for which your company pays at least 50% of the cost on a uniform basis. Note: Health insurance coverage is any type of coverage that provides medical benefits and can include dental, vision, and certain other insurance coverages. 5 A list showing the amount of Employer-Paid Premium (indicating self-only or family coverage) for each Employee, Business Owner, Family or Household Member of that owner, and Seasonal Worker for each coverage listed in 4 above. 6 The prior calendar year s federal income tax return (for tax years after 2010). 7 Year-to-date income and expense information to estimate the current year s tax liability and to determine the impact upon estimated tax payments as well as the impact of taking a deduction versus the Small Employer Health Insurance Credit. IRS Circular 230 Notice: To ensure compliance with requirements imposed by IRS and other taxing authorities, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purposes of (i) avoiding penalties that may be imposed on any taxpayer, (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein and (iii) you should seek advice based on your particular circumstances from an independent advisor. Copyright, 2010 Julie Welch; Meara Welch Browne, PC.; Wealth Builders Press, LLC.

6 For definitions of capitalized words and phrases and more detailed information visit Frequently Asked Questions What employers need to know 1. What is the Small Employer Health Insurance Credit? The Small Employer Health Insurance Credit ( Small Employer Credit ) provides an income tax credit to certain Small Employers who provide Qualifying Health Coverage(s) which are a Qualifying Arrangement for their Employees. The Small Employer Credit was enacted as part of the 2010 Health Care Reform legislation that was signed into law on March 23, Who is a Small Employer? A Small Employer is an employer who has fewer than 25 Full-Time Equivalent Employees (FTEE) during the tax year with an Average Annual Wage per FTEE for that same tax year of less than $50, Does the Small Employer Credit apply to not-for-profit organizations? Yes, not-for-profit organizations that are tax-exempt under I.R.C. 501(c) ( tax-exempt employers )may be eligible for the Small Employer Credit. Tax-exempt employers must meet all of the same requirements to be eligible for the Small Employer Credit as for-profit employers but special rules apply to the calculation of the available credit. The Small Employer Credit is not available to governmental and tribal employers. This guide does not provide guidance regarding the Small Employer Credit as applied to tax-exempt employers. See IRS Notice for more information. 4. Is the Small Employer Credit available to Small Employers regardless of the type of business entity in which the Small Employer conducts its business? Yes. The Small Employer Credit is available to any eligible Small Employer regardless of whether the Small Employer is a C corporation, an S corporation, a partnership, a limited liability company, or a sole proprietorship. See IRS Notice for more information. 5. What is the Maximum Credit available? For tax years 2010 through 2013, the Maximum Credit available for Small Employers is 35% of the lesser of the Employer-Paid Premium for Qualifying Coverage(s) that are Qualifying Arrangements (25% for tax-exempt Small Employers), or the premium that would have been paid by the Small Employer using the Average Small Group Rates for the state or the area of a state where the Small Employer is located. 6. For what tax years will the Small Employer Credit be available to Small Employers? The Small Employer Credit is available for the 2010 tax year, as well as for tax years 2011, 2012, and In 2014 and 2015, the Small Employer Credit will continue, but will be subject to different rules. These materials discuss only the Small Employer Credit that is available for tax years 2010 through What happens to the Small Employer Credit in 2016? The Small Employer Credit expires as of January 1, However, any unused Small Employer Credit for any calendar year prior to 2014 can be carried forward for up to 20 years. 8. Are all Small Employers eligible for the Maximum Credit? No, only Small Employers with 10 or fewer FTEEs and whose Average Annual Wage per FTEE is $25,000 or less, will be eligible for the Maximum Credit. For Small Employers with more than 10 FTEEs but less than 25 FTEEs and whose Average Annual Wage per FTEE is more than $25,000 but less than $50,000, a reduced credit may be available. 9. Are all Small Employers eligible for the Small Employer Credit? No. To be eligible the Small Employer must offer a Qualifying Health Coverage under a Qualifying Arrangement. 10. If an Employee pays all or a portion of the premium for a Qualifying Health Coverage with pre-tax dollars under the Small Employer s Section 125 (cafeteria) plan, are the pre-tax contributions considered to be Employer-Paid Premium for purposes of the Small Employer Credit? No, premiums paid under the Small Employer s Section 125 (cafeteria) plan with pre-tax dollars are not considered Employer-Paid Premiums for purposes of the Small Employer Credit. Only the premiums actually paid by the Small Employer are considered Employer-Paid Premium.

7 Q&A 11. How does an eligible Small Employer claim the Small Employer Credit? Frequently Asked Questions What employers need to know An eligible Small Employer claims the Small Employer Credit on IRS Form 8941 that is filed with the Small Employer s federal income tax return. If the eligible Small Employer is a partnership, subchapter S corporation or trust, the individual owners must also file IRS form Is the Small Employer Credit a refundable credit for Small Employers other than tax-exempt employers? No, the Small Employer Credit is not refundable, but any unused credit can be carried back one year or carried forward 20 years; except, that any 2010 unused Small Employer Credit can only be carried forward. This guide does not provide guidance regarding the Small Employer Credit as applied to tax-exempt employers. 13. If a Small Employer is eligible for the Small Employer Credit, can that Small Employer also deduct, for federal income tax purposes, the cost of the Employer-Paid Premium for the Qualifying Health Coverage(s) provided to its Employees? If the Small Employer Credit is claimed on the Small Employer s federal income tax return, the amount of any deduction otherwise available for the Employer-Paid Premium on the Qualifying Health Coverage(s) must be reduced by the amount of the Small Employer Credit. The Small Employer can deduct the full cost of the employer-paid premium for Business Owners and their Family and Household Members who are not treated as Employees for purposes of the Small Employer Credit. 14. Can the Small Employer take the projected Small Employer Credit into account in determining any estimated tax payments due for the tax year? Yes. The Small Employer can take the projected Small Employer Credit for the tax year into account in determining its estimated tax payments using the regular estimated tax rules. 15. Can the Small Employer reduce its employment tax payments (i.e., withheld income tax, social security tax, and Medicare tax) during the tax year in which the Small Employer Credit is expected to be claimed? No. The Small Employer Credit as applied to for-profit employers is an income tax credit, not a credit against employment taxes. 16. What Assurant Health products are considered to be Qualifying Health Coverage? Assurant Health s fully insured small group health insurance products, including dental, may qualify for the Small Employer Credit if all other requirements are met. Assurant Health Small Group Self Funded, Short Term Disability and Life products do not qualify. 17. Where can an employer get more information on the Small Employer Credit? An employer can get more information on the Small Employer Credit at from its own tax professional and at gov. The Internal Revenue Service has issued Notice , Notice , as well as posted IRS Form 8941 and its instructions, frequently asked questions, examples, announcements and other useful information on its website. Disclaimer: This information is provided for informational purposes. It is not and should not be viewed as tax, accounting or legal advice. Specific questions about the tax, accounting or legal issues relating to the Small Employer Health Insurance Credit should be discussed with your qualified tax and legal professional. IRS Circular 230 Notice: To ensure compliance with requirements imposed by IRS and other taxing authorities, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purposes of (i) avoiding penalties that may be imposed on any taxpayer, (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein and (iii) you should seek advice based on your particular circumstances from an independent advisor.

8 Assurant Health 501 W. Michigan St. Milwaukee, WI About Assurant Health Assurant Health has been in business since 1892 and is the brand name for products underwritten and issued by Time Insurance Company, John Alden Life Insurance Company and Union Security Insurance Company. Together, these three underwriting companies provide health insurance coverage to people nationwide. Each underwriting company is financially responsible for its own insurance products. Primary products include individual medical, small group, short-term and student health insurance products, as well as non-insurance products and consumer-choice products such as Health Savings Accounts and Health Reimbursement Arrangements. Assurant Health is headquartered in Milwaukee, Wisconsin, with operations offices in Minnesota, Idaho and Florida, as well as sales offices across the country. The Assurant Health Web site is Assurant is a premier provider of specialized insurance products and related services in North America and select worldwide markets. The four key businesses -- Assurant Solutions, Assurant Specialty Property, Assurant Health, and Assurant Employee Benefits -- partner with clients who are leaders in their industries and build leadership positions in a number of specialty insurance market segments in the U.S. and select worldwide markets. The Assurant business units provide debt protection administration; credit-related insurance; warranties and service contracts; pre-funded funeral insurance; creditor-placed homeowners insurance; manufactured housing homeowners insurance; individual health and small employer group health insurance; group dental insurance; group disabilityinsurance; and group life insurance. Assurant, a Fortune 500 company and a member of the S&P 500, is traded on the New York Stock Exchange under the symbol AIZ. Assurant has approximately $27 billion in assets and $8 billion in annual revenue. Assurant has approximately 14,500 employees worldwide and is headquartered in New York s financial district. Assurant Health is the brand name for products underwritten and issued by Time Insurance Company, John Alden Life Insurance Company and Union Security Insurance Company. Form (Rev. 2/2011) This Guide and the documents included in this Guide are the sole and exclusive property of Union Security Insurance Company; Julie Welch; Meara Welch Browne, P.C.; and Wealth Builders Press, LLC. Any unauthorized use, reproduction, or distribution of these copyrighted materials is strictly prohibited without the express, written consent of each of the four listed owners.