Health Care Reform Update. Michelle VanDellen, CPA Tax Senior Manager

Transcription

1 Health Care Reform Update Michelle VanDellen, CPA Tax Senior Manager 1

2 The material appearing in this presentation is for informational purposes only and is not legal or accounting advice. Communication of this information is not intended to create, and receipt does not constitute, a legal relationship, including, but not limited to, an accountant-client relationship. Although these materials may have been prepared by professionals, they should not be used as a substitute for professional services. If legal, accounting, or other professional advice is required, the services of a professional should be sought. 2

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4 AGENDA The Health Insurance Marketplace The Individual Mandate A Few Essentials Pay or Play Health Care Coverage decision Q & A 4

5 HEALTH CARE EXCHANGES The Marketplaces 5

6 WHAT IS THE STATUS OF THE EXCHANGES? 6

7 EXCHANGE (MARKETPLACE) Family of 4 $94,200 Subsidies/Credits (penalty trigger) 400% of FPL Expanded Medicaid Traditional Medicaid 100% of FPL 138% of FPL 100% of FPL $32,500 $23,550 $0 7

8 EXCHANGE PREMIUM EXAMPLE Unsubsidized premium $ 10,152 Silver plan for 40-year old non-smoking parents with 2 children $60,000 sole earner in Wenatchee Less tax credit/subsidy Net premium paid ($ 5,239) $ 4,913 8

9 EXCHANGE SUBSIDIES Household of 4 making $60,000 would pay maximum of $4,913 for premiums (subsidy of $5,239) Based on second lowest silver plan 9

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11 THE INDIVIDUAL MANDATE 11

12 INDIVIDUAL MANDATE EXCISE TAX ON UNINSURED PERSONS Thereafter Greater of*: Flat Amount** $95 $325 $695 $695 % of Household Income Applies to U.S. citizens and non-citizens lawfully present. *Capped at the national avg of the annual cost of a bronze level health plan per family size offered through the State Exchange ** Halved for dependents under age 18. Maximum of 300% per family. Indexed for inflation after

13 MORE ON THE INDIVIDUAL MANDATE Any person who is able to purchase insurance for < 8% of income Insurance plans will send documentation to beneficiaries and IRS Documentation must be attached to IRS Form 1040 Can only be without insurance for three months per year After 2016, the penalty is capped at cost of cheapest bronze plan Tax liens, wage garnishment, and incarceration will not be allowable enforcement mechanisms Withholding refunds is only viable enforcement Certain religious ministries, Native Americans, undocumented immigrants, incarcerated people, and those with financial hardships may be exempt 13

14 A FEW ESSENTIALS 14

15 THE QUICK LIST Small business tax credits are available now < 25 FTE; < 50k avg wages; 50% premium credit 2013 Medicare payroll tax increase 0.9% increase in employee portion of FICA tax (> $250k) 2013 Medicare tax on unearned income 3.8% on net investment income (>$250k) 15

16 EMPLOYER NOTICE OF INSURANCE EXCHANGES Initial notice to be provided to employees by October 1, 2013 After , notice must be provided to new employees within 14 days of hire Applies to all employers regardless of size Must be provided in writing in a manner calculated to be understood by the average employee. Templates are available (COBRA version) 16

17 EMPLOYER NOTICE OF INSURANCE EXCHANGES Notices must advise employees of the following: The employees right to purchase insurance coverage through an Exchange, the services provided by the Exchange, and contact information for the Exchange If the employee may be eligible for a premium tax credit or subsidy on insurance purchased through the Exchange The tax implications if the employee chooses to purchase insurance through the Exchange rather than enroll in an employer-sponsored plan. 17

18 EMPLOYER REPORTING Required for those with at least 50 FTE Extended until 2015 Filed with the IRS Proposed regulations issued 9/5 Various information submitted: Whether you offer coverage Employer name, date, EIN Certification that you offered MEC Number of FT employees per month Name, address, and ID of each FT employee Months that coverage was available Monthly premium for the lowest cost option Employer share of total allowed costs of benefits Length of waiting period Plan option for which you pay the largest portion of the cost and the portion of the cost you paid 18

19 DISCRIMINATORY PLANS ACA disallowed discriminatory plans after September 23, 2010 Unless grandfathered But without an alternative feds forced to temporarily suspend this rule Critical Point! If you have a discriminatory plan regardless of grandfathered status, consult legal counsel experienced with health care reform! 19

20 COMMUNICATION BETWEEN EMPLOYER, EMPLOYEE, EXCHANGE, AND IRS Employer provides Employer Notice of Insurance Exchange to Employee Employee contacts Exchange and provides family and income information Exchange verifies information and determines amount of premium tax credit (if any) Exchange notifies Employer if Employee is eligible for premium tax credit* Employer has right to appeal within 90 days Employer files information with IRS* Assessment of Employer Penalties* *Delayed to

21 MODIFIED USE IT OR LOSE IT RULE FOR HEALTH FSAS Allows up to $500 of a participant s health FSA to be carried over into the next year. Does not affect the $2,500 salary reduction limit applicable to each plan year. An employer can amend its Sec. 125 cafeteria plan to include this carryover, but the plan cannot also provide a grace period. 21

22 PAY OR PLAY Employers Shared Responsibility Fee AKA Pay or Play Penalty 22

23 CONTROLLED OR AFFILIATED SERVICE GROUPS For purposes of determining whether an employer is a large employer, with 50 or more FTE, and for purposes of determination and assessment of the penalty described above, ACA requires employers to count employees on a controlled group or an affiliated service group basis. In general, this means that employees of businesses with common owners (or, in some cases, which perform services for each other) will need to be aggregated combined for purposes of counting. Warning this is an extremely complex area and you should consult with legal and/or financial advisors 23

24 CONTROLLED GROUPS Do 5 or fewer persons own* at least 80% of each Company (or one entity owns 80% of another)? No No aggregation required Attribution Rules Parents and non-adult children are treated as one If parent owns greater than 50% of the corporation owned by an adult child, they are treated as one *Measured by greater of voting power or value of ownership No Yes Is ownership more than 50% considering only the smallest common ownership for each individual? Yes Aggregation required 24

25 AFFILIATED SERVICE GROUPS Org A Org B Is a significant portion of the business of Org B to provide services to or on behalf of Org A? No aggregation required No No Yes Is 10% or more of Org B held or controlled by a highly compensated employee of Org A? Yes Aggregation required 25

26 ARE YOU AN A.L.E.? (APPLICABLE LARGE EMPLOYER) 50 or more full-time equivalent employees? No Yes No Penalties Possible Penalties No requirement to offer an insurance plan If plan is offered, non-discrimination rules apply No requirement to offer an insurance plan If plan is offered, non-discrimination rules apply 26

27 A.L.E. PENALTIES? (EFFECTIVE JANUARY 1, 2015) Does the employer OFFER a health plan to at least 95% of FT employees and dependents? No Yes Unavailable penalty $2,000* If ONE FT employee goes to exchange and receives a subsidy, penalty triggered for ALL FT employees (less the first 30) *Non-deductible and measured and assessed monthly (1/12 th ) Unaffordable penalty $3,000* Plan must meet minimum value requirements If ONE FT employee opts out of plan and goes to exchange and receives a subsidy, penalty triggered for that employee only IF: Employee share of premium for employee only coverage exceeds 9.5% of employee s W-2 wages 27

28 TYPES OF WORKERS Full Time (30 or more hours of service per week or 130 hours per month) Part Time (less than 30 hours of service per week) Variable Hour (unable to determine at hire date) Seasonal Temporary (Someone else s common law employee) 28

29 SEASONAL WORKERS For purposes of the definition of an applicable large employer, section 4980H(c)(2)(B)(ii) defines a seasonal worker as a worker who performs labor or services on a seasonal basis, as defined by the Secretary of Labor, including (but not limited to) workers covered by 29 CFR (s)(1) and retail workers employed exclusively during holiday seasons. Labor is performed on a seasonal basis where, ordinarily, the employment pertains to or is of the kind exclusively performed at certain seasons or periods of the year and which, from its nature, may not be continuous or carried on throughout the year. A worker who moves from one seasonal activity to another, while employed in agriculture or performing agricultural labor, is employed on a seasonal basis even though he may continue to be employed during a major portion of the year. 29

30 LARGE EMPLOYER CALCULATION Prior calendar year is look-back period (2014) Determined monthly; then totaled and averaged annually MAY JUN JUL AUG SEP OCT Full-time employees (30 or > hours per week avg): Part-time employees (10 employees aggregating 600 hours per month/120): Total =

31 SEASONAL CALCULATION Prior calendar year is look-back period (2014) Determined monthly; then totaled and averaged annually MAY JUN JUL AUG SEP OCT Full-time equivalent employees: Seasonal employees (30 or > hours per week avg): Total = Months > 49 employees: >

32 NOW FORGET ALL ABOUT A.L.E.S You are either providing a health plan Or you are not If you are providing a health plan You will need to figure out who qualifies for coverage and when Waiting period no longer than 90 days All FT employees (30 hours per week or more) Measurement and stability periods More detailed rules on seasonal workers 32

33 COVERAGE DECISION The Who and the When 33

34 MORE ON SEASONAL WORKERS The IRS has indicated that any interpretation of the term seasonal probably would not be reasonable if it included a working period of more than six months If an employee terminates and returns, the break in service (BIS) must be at least 6 months to qualify as a new employee (unless Rule of Parity applies BIS > 4 weeks and as long as employed period) 34

35 IF EMPLOYER SPONSORS A HEALTH PLAN The WHO and the WHEN of offered coverage Month-to-month determination Or other options: Current Employees Standard Measurement Period (SMP) More than 3 months but less than 12 Admin Period 90 days or less Stability Period More than 6 months but at least SMP Did employee avg > 30 hours/week? If yes.. coverage offered here And must continue thru SP.Regardless of hours worked If no.. no coverage necessary through stability period 35

36 IF EMPLOYER SPONSORS A HEALTH PLAN The WHO and the WHEN of offered coverage Month-to-month determination Or other options New Employees Initial Measurement Period (IMP) Stability Period 90 days or less More than 3 months but less than 12 Do you expect employee to avg > 30 hours/week? If yes.. coverage offered here More than 6 months but at least IMP And must continue thru SP.Regardless of hours worked If no.. then no coverage through stability period If maybe. then variable hour employee 36

37 IF EMPLOYER SPONSORS A HEALTH PLAN The WHO and the WHEN of offered coverage Month-to-month determination Or other options Variable and Seasonal IMP + AP can be no longer than 13 months Initial Measurement Period (IMP) More than 3 months but less than 12 Admin Period 90 days or less Stability Period More than 6 months but at least IMP Did employee avg > 30 hours/week? If yes.. coverage offered here And must continue thru SP.Regardless of hours worked If no.. no coverage necessary through stability period 37

38 WHAT IS YOUR EMPLOYEE DEMOGRAPHIC? Susan 45 years old Spouse Two kids $60,000 per year 38

39 SUSAN 45 YRS OLD; $60,000 ANNUAL INCOME Current w/o Dependents No Plan w/ Dependents Total Premium $ 5,000 **$ 4,913 Employer [80%] 4,000 *3,077 Employee [20%] 1,000 4,913 Employer Savings (Cost) 923 Employee Savings (Cost) Dependents Cost 8,000 (3,913) 0 Total Savings $4,097 * $2,000 penalty after adjusting for non-deductibility at 35% corporate rate **Kaiser Family Foundation (kff.org) Subsidy Calculator 39

40 SUSAN 45 YRS OLD; $60,000 ANNUAL INCOME Current w/ Dependents No Plan w/ Dependents Total Premium Employer Employee **$ 14,245 [60%] 8,547 [40%] 5,698 **$ 4,913 *3,077 4,913 Employer Savings (Cost) Employee Savings (Cost) 5, Dependents Cost included included 40

41 WHAT ARE YOUR OPTIONS? Offer full coverage to employees and take risk on # of employees that will opt-in to coverage Offer minimal coverage and take risk on # of employees that will go to Exchange (MV test or 9.5% test) Decline to provide coverage and send employees to the State Marketplace or other and pay penalties Self-insured plans Defined contribution plans 41

42 DEFINED CONTRIBUTION OPTIONS 42

43 EMPLOYER REIMBURSEMENTS Question: I have an employee who is going to purchase their health insurance on our State s Marketplace. Can I reimburse him/her for some or all of the premium cost to purchase the coverage? Is the reimbursement subject to income and/or FICA/Medicare tax? Answer: An employer can reimburse the employee for premiums paid to purchase insurance on the State Marketplace. However, the reimbursement will be subject to income and FICA/Medicare tax. 43

44 THE PRIVATE EXCHANGE OPTION Online marketplace through which employees can evaluate and purchase health insurance. Single-carrier exchanges run by insurers. Best for employers who want input in choosing the insurance carrier and plan design. Multi-carrier exchanges run by third parties, generally brokers or benefits consultants. Provide a broad range of insurance carrier and design options. 44

45 PRIVATE EXCHANGES (CONT.) Generally Defined Contributions Fully-insured (although can be self-insured) Offer different health plans with a full-range of cost-sharing options Offer a menu of supplemental insurance products, such as dental and life insurance Provide decision support and customer service No Subsidies! 45

46 PRIVATE EXCHANGES (CONT.) Insurance companies want to maintain a vibrant group-based insurance business as an alternative to the State Marketplace. Benefits consultants want to stay relevant and creating multi-carrier exchanges is a new opportunity. Employers are looking to shift from a definedbenefit model to a defined-contribution model to control costs. Employees want more healthcare choices. 46

47 QUESTIONS? Michelle VanDellen, CPA, Tax Senior Manager 47