Affordable Care Act Planning for CPAs

Transcription

1 Affordable Care Act Planning for CPAs Ben Conley Seyfarth Shaw LLP Seyfarth Shaw refers to Seyfarth Shaw LLP (an Illinois limited liability partnership) Seyfarth Shaw LLP. All rights reserved.

2 Overview Background ACA & Taxes Taxes on Employers (and Tax Credits for Employers) Taxes on Individuals (and Tax Credits for Individuals) Taxes on Group Health Plans

3 Current Health Care Landscape Employer-provided coverage Individual Policy Medicare Medicaid TRICARE Population = 311 Million Uninsured 50 million people 16% of population Seyfarth Shaw LLP

4 Overview of 2014 Health Care System Exchanges Medicaid Expansion Individual Mandate Guaranteed Issue/ Community Rating Employer Mandate Seyfarth Shaw LLP

5 Projected Health Care Landscape Employer-provided coverage Individual Policy Medicare Medicaid TRICARE Population = 311 Million Uninsured 18 million people 5% of population Seyfarth Shaw LLP

6 Taxes on Employers (and Tax Credits for Employers)

7 Background: What Employers are Subject to Employer Shared Responsibility Requirements? Threshold for Large Employer = 50 Full-time Equivalent Employees in prior year* Full-time employees = 30 hours per week, on average #FULL-TIME EMPLOYEES Aggregate # hrs worked/ mth/part-time ee up to 120 Divided by 120 #Full-time equivalent employees Special rules for seasonal employees 7

8 Background: What Employers are Subject to Employer Shared Responsibility Requirements? Transition Relief: What is a large employer? For 2015 only, large employer means 100 or more full-time equivalent employees How do I determine large employer status? For 2015 only, employers can look back to any six consecutive months in determining whether they are considered large employers. Permanent Relief No penalty for first three months of the year after qualifying as a large employer. 8

9 Background: What Employers are Subject to Employer Shared Responsibility Requirements? Related entities must be considered together, as one employer Related generally means: Parent-subsidiary - 80% owned up and down chain Brother-sister companies - 80% owned by same 5 or fewer people Creating new companies in same controlled group will not allow you to get below 50 employee threshold 9

10 Background: What is the Employer Shared Responsibility Penalty? Employer is subject to big penalty if: Employer fails to offer minimum essential coverage AND At least one employee receives a tax credit or subsidy through an exchange Big Penalty = $2,000 x # of Full-time Employees Subtract first 80 full-time employees when calculating the penalty for the 2015 plan year Subtract first 30 full-time employees when calculating the penalty for plan years on or after 2016 The penalty is assessed based on the number of full-time employees, not the number of full-time equivalents.

11 Background: What is the Employer Shared Responsibility Penalty? Effective date: January 1, 2015 for employers with 100 or more employees must cover only 70% of the workforce in 2015 increases to 95% in 2016 Note: Penalty still applies for the 30% (5% starting in 2016). But the applicable penalty is the small penalty (discussed below)

12 Background: What is the Employer Shared Responsibility Penalty? Employer offers health insurance coverage, but not affordable coverage that provides minimum value Affordable Cost of coverage no more than 9.5% of household income Minimum value Covers at least 60% of actuarial value of health costs Note: No coverage to an employee (where part of the 5% leeway (30% for 2015)) would equate to coverage not offering minimum value Any employee receives a tax credit or subsidy through a state-based exchange 12

13 Background: What is the Employer Shared Responsibility Penalty? PENALTY $2,000 x (Total No. of Full-Time Employees 80*) THE LESSER OF: $3,000 x No. of Full-Time Employees who receive a tax credit or subsidy and purchase coverage through an Exchange 13

14 Background: What is the Employer Shared Responsibility Penalty? Affordable Employee-only premium cost (regardless of what coverage employee elects) May use: W-2 wages Rate of Pay (hourly rate for each hourly employee multiplied by 130 hours per month) New guidance: can use if rate of pay reduces mid-year Federal Poverty Line New guidance: can use rates published six months before start of plan year Safe harbor selected may vary based on certain employee groups. 14

15 Background: What is the Employer Shared Responsibility Penalty? Minimum Value Calculated in one of three ways HHS Calculator Safe Harbor Checklist Actuarial Certification Three design-based safe harbors proposed to determine MV% For plans that coverage all benefits in calculator MV varies based on deductible, cost-sharing, OOP and HSA contributions 15

16 Employer Tax Reporting Information will be used to determine: whether the employees obtained health coverage generally (which would satisfy their obligation under the individual mandate) whether the employees obtained health coverage through their employer (which would satisfy the employer s obligation under the employer mandate) Reporting optional for 2014 Reporting required for 2015 year due in early 2016

17 Employer Tax Reporting Minimum Essential Health Coverage Report (6055) Who must file? Employers with self-insured plan even if small employer Insurers Multiemployer plans What s on the Minimum Essential Health Coverage Report (6055)? Name/address/EIN of plan sponsor Name/address/SSN of covered employee and other covered individuals Months each individual covered by plan

18 Employer Tax Reporting Employer Shared Responsibility Report (6056) Who must file? Large employers subject to employer mandate What s on the Employer Shared Responsibility Report (6056) Name/address/EIN/contact information for employer Number of full-time employees for each month during year Name/address/SSN of covered employee and # of months covered

19 Employer Tax Reporting What s on the Employer Shared Responsibility Report (6056) (cont d)? Certification as to whether offered full-time employees (and dependents) minimum essential coverage Employee s share of self-only coverage for lowest cost option

20 Employer Tax Reporting Forms available at:

21 Small Employer Tax Credit Small employer health care tax credit For 2013, 35% of employer contribution (25% for taxexempt orgs) if: Employer has less than 25 FTE s Average annual wages of employees less than $50,000 per FTE Employer covers at least 50% of premium on uniform basis Small employer health care tax credit Full credit: 10 employees and average wages of $25,000 or less then phases out. Starting in 2014: Credit is 50% of employer contributions Credit only available for coverage offered through small business marketplace (SHOP)

22 Small Employer Tax Credit

23 Taxes on Individual (and Tax Credits for Individuals)

24 Marketplace Tax Credits Each state will have one or two exchanges: Individual Exchange + Small Business Health Operations Program Exchange (SHOP Exchange) OR Combined exchange for individuals and small businesses All individuals can purchase coverage through the exchange, regardless of: Income level Employment status

25 Marketplace Tax Credits Tax credits are available to help pay for premiums for individuals between 100% and 400% of the Federal poverty level Note, in states where Medicaid is expanded, those below 133% will typically go there. Credits paid directly to qualified health plan.

26 Marketplace Tax Credits Credits available on a sliding scale, linked to silver level plan Income Level Premium (as % of Income) 100%-133% 2% 133%-150% 3%-4% 150%-200% 4%-6.3% 200%-250% 6.3%-8.05% 250%-300% 8.05%-9.5%% 300%-400% 9.5%

27 Marketplace Cost-Sharing Subsidies Cost-sharing subsidies are available to help pay out-of-pocket expenses (e.g., copays, coinsurance, deductibles) for individuals between 100% and 250% of the Federal Income Level Actuarial Value 100%-150% 94% 150%-200% 87% 200%-250% 73%

28 Marketplace Tax Credits Household Size 2014 Federal Poverty Guidelines 100% 133% 150% 200% 250% 300% 400% 1 $11,670 $15,521 $17,505 $23,340 $29,175 $35,010 $46, ,730 20,921 23,595 31,460 39,325 47,190 62, ,790 26,321 29,685 39,580 49,475 59,370 79, ,850 31,721 35,775 47,700 59,625 71,550 95, ,910 37,120 41,865 55,820 69,775 83, , ,970 42,520 47,955 63,940 79,925 95, ,880

29 Individual Mandate Must obtain minimum essential coverage to avoid a penalty Penalty is greater of flat dollar amount or percentage of household income (1/2 for minors) Taxpayer responsible for obtaining coverage for spouse and/or dependents

30 Individual Mandate Flat Dollar Amount 2014 $95 1% 2015 $325 2% 2016 $ % 2017 and later Indexed to inflation Percentage of Household Income

31 Medicare Tax on High-Earners Effective 1/1/13, current Medicare (HI) tax of 1.45% on all wages increases to: 0.9% additional HI tax for wages over $250,000 (joint); $200,000 (single) Effective 1/1/13, 3.8% additional tax on unearned income (dividends, interest, annuities, royalties, rents and capital gains) over $250,000 (joint); $200,000 (single) Plan Sponsor Considerations Employers must withhold on the additional HI tax for wages over $200,000 BUT, additional withholding applies only to employee portion of HI tax, not employer portion

32 Taxes on Group Health Plans 32

33 PCOR v. TRP How much is the fee? When does the fee apply? Who must Pay the Fee? What type of plans are exempt? PCOR Fee $1 per covered life in first year $2 per covered life in subsequent years TRP Fee $63 per covered life in first year Slightly less in subsequent years Insured plans: Insurer Self-funded Plans: Plan sponsor Insured plans: Insurer Self-funded plans: Thirdparty administrator Excepted benefits Everything but major medical

34 Cadillac Tax Cadillac Tax Excise Tax on High-Cost Health Plans Threshold: Individual Coverage - $10,200 Family Coverage - $27,500 Thresholds indexed to inflation and adjusted for high-risk or elderly employee populations Calculating the tax 40% X amounts of coverage in excess of threshold Applies to the aggregate value of coverage (i.e., fullyloaded) Tax assessed against provider of coverage

35 Cadillac Tax

36 Cadillac Tax

37 Ben Conley (312)