Nicole Simpson, CPA Partner Regier Carr & Monroe, LLP (520) 624-8229 nsimpson@rcmllp.com Jay Heydt and Chris Gordon Crest Insurance (520) 784-7655 jheydt@crestins.com
2010 Small Employer Health Insurance Credit 2012 Additional W-2 Reporting 2013 Additional Medicare Tax.9% on earned income 3.8% on unearned income 2014 Insurance Requirements Requirements of a small employer Requirements of a large employer The Exchanges: What Do They Mean to You.
2010-2013: Eligible Small Employers that purchase health insurance for their employees. 2014-2015: Eligible Small Employers that purchase health insurance for their employees through the insurance exchange.
Eligible employer: 25 or fewer full-time equivalent employees (FTE) Average annual wages of $50,000 or less per FTE. Pays at least 50% of the health insurance premium costs. The credit is up to 35% of the eligible employer paid health insurance premiums in 2010-2013. (50% for tax years beginning after 2013)
Beginning in 2012, large employers must report the aggregate cost of health insurance made available through a group plan. Aggregate cost: Portion paid by employer and portion paid by employee Amount paid for any person covered under the plan (spouse, dependents) The cost is reported in box 12, using code DD Penalty for not complying is up to $100 per W-2.
Beginning in 2013, individuals must pay an additional.9% Medicare tax on wages in excess of $200,000 single ($250,000 married filing jointly and $125,000 married filing seperate). Employer: The employer must begin withholding the additional.9% in the pay period the wages exceed the $200,000. $1 - $200,000 = 1.45% $201,000 unlimited = $2.35% Employee: The employee is responsible for paying additional.9% if not withheld by employer or if self-employed.
Under-withheld Wages.9% withheld Husband $200,000 $0 Wife $175,000 $0 Total Earned Income $375,000 Married Filing Jointly Threshold $250,000 Excess of Threshold $125,000 = $1,125 Over-withheld Wages.9% withheld Husband $0 $0 Wife $245,000 $45,000 = $405 Total Earned Income $245,000 Married Filing Jointly Threshold $250,000 Excess of Threshold $0
Self-Employed Individuals are also subject to the.9% additional medicare tax. Income from self-employment is added to Form W- 2 wages in calculating amounts over thresholds. Losses from self-employment do NOT reduce W-2 wages in calculating amounts over thresholds. If multiple W-2s and multiple sources of selfemployment income, then all W-2s are netted together and all self-employment is netted together.
Income From Self-Employment Wages.9% withheld Husband W-2 $200,000 $0 Wife Schedule C $175,000 $0 Total Earned Income $375,000 Married Filing Jointly Threshold $250,000 Excess of Threshold $125,000 = $1,125 Losses From Self-Employment Wages.9% withheld Husband W-2 $300,000 $100,000 = $900 Wife Schedule C $(75,000) Total Earned Income $300,000 Married Filing Jointly Threshold $250,000 Excess of Threshold $50,000 = $450
Beginning in 2013, 3.8% Medicare tax is imposed to all or a portion of net investment income. The tax is imposed when Adjusted Gross Income is over $200,000 single, $250,000 married filing jointly ($125,000 married filing separate) This tax applies to individuals as well as trusts and estates.
Individuals with income over the thresholds must pay 3.8 % Medicare tax on the LESSER: Net investment income Modified Adjusted Gross Income (MAGI) over the threshold. Trusts must pay the tax on the lesser of undistributed net investment income or excess of AGI over the highest tax bracket begins ($11,650 in 2012).
MAGI $400,000 $260,000 Net Investment Income $50,000 $50,000 MAGI $400,000 $260,000 Married Filing Jointly Threshold $250,000 $250,000 Excess of Threshold $150,000 $10,000 Lesser of Excess of Threshold OR Net Investment Income $50,000 $10,000
Net Investment Income: Net Income from: interest, dividends, royalties and rents passive activity Net Gain from the disposition of nonbusiness property or property held in passive activity Any income, gain or loss attributable to the investment of working capital. Does NOT include tax-exempt bond interest, distributions from retirement plans, veterans benefits
Medicare Tax Wages (H&W) $270,000 $20,000 x.9% = 180 Capital Gain $100,000 MAGI $370,000 Married filing jointly threshold $250,000 Excess over threshold $120,000 Lesser of Excess of Threshold OR Net Investment Income $100,000 $100,000 x 3.8% =$3,800 Total Additional tax paid $3,980
Agenda Components of Reform to Consider Requirements of a small employer Requirements of a large employer The Exchanges What do they mean? Do we Pay or Play?
Changes Already in Effect Rate Review (2010) Grandfathering (2009) Small business Tax Credits (2010) Patient Bill of Rights (2010) Network access PCP Choice Independent appeals process No pre-ex for kids <19 Coverage for dependents up to age 26 100% coverage for wellness/prevention No Rescissions No Annual and lifetime limits Medical Loss Ratios MLR (2010) Defines maximum insurance company profits 15% Large groups 20% small groups Requires refunds to groups is profit is too high
Pre-Existing Condition Insurance Plan National high risk pool (PCIP) Established by HHS Started July 2010. Ends 2014. $5B set aside https://www.pcip.gov/
2013 We re Already Here Health FSA Accounts Contribution Limits Plan Amendments Increases in Medicare Payroll Taxes Increases in Medicare Contribution Tax Mandatory Form W-2 Reporting (100+ ee s) Health Care Exchange Notices
Coming Soon to a Policy Near You Guaranteed Issue -Insurers must issue a policy to any applicant, regardless of health condition. No pre-existing condition limitations. Community Rating Everyone is charged essentially the same amount for insurance. Variations for geography, smoking and age (3:1), was 7:1.
The Individual Mandate All individuals must have coverage. If not through work or the government, then through the Individual market. The Individual s Penalty For not having minimum essential coverage Not more than the price of the lowest coverage option Some exceptions
Dangerous Equation
Bad News for Insurance Rates Bracing for rate double digits increase in 2014. (20%-60%) What s gives? It s the policymakers. It s ObamaCare Premium hikes are a consequence of policies. Premiums will rise because, in the end, everything has a price. Prohibition of traditional underwriting is a major and costly provision. Washington can try to force health plans to price insurance below cost, but then health plans will lose money and move out of markets. To keep the insurers whole, and accommodate the new rules, the cost of insurance must go higher. That re-pricing is what s coming this fall.
Preparing for 2014 Is your plan Grandfathered? Are you Compliant with the law? How many FT employees do you have? Are you a large or small employer? Exchanges Lots still unknown Decision Time Do we Pay or Play?
Grandfathered Health Plans Not required to comply with various components of Health Care Reform: Non-discrimination Clinical Trials (self funded plans) Preventative health services Choice of Primary Care Physician Dependent Coverage (until 2014)
Discrimination Are your benefits currently: Different by class of employee? Management Carve Out Have different contributions by class? Management Vs. Others Different waiting periods by class? Management Vs. Others If your answer is YES to any of these then you will not be compliant with the law in 2014
What is a FT Employee? Minimum of 30 hours per week = Full Time Employee Or 130 hours per month Full Time Equivalent Employee (FTE) Total PT hours worked per month / 120 = # of FTE Seasonal: - A worker who performs labor or services on a seasonal basis, as defined by the Secretary of Labor and retail workers employed exclusively during holiday seasons.
How Many FT Employees do I have? Minimum of 30 hours per week = Full Time Employee Or 130 hours per month Full Time Equivalent Employee (FTE) Total PT hours worked per month / 120 = # of FTE Calculating FTE - Example You employ 35 regular FT employees & 30 PT employees In total PT employees work 2,400 hours in a month 2,400 / 120 = 20 FTE s 35 FT employees + 20 FTE employees = 55 Total FTEs Under PPACA If you have 50+ FTEs you seen as a large employer
PPACA & the Small Employer Mandate does Not Apply to Employers with < 50 FTEs Plans must have: $2,000 Max Deductible $6,500 Maximum Out of Pocket Details still emerging No waiting period in excess of 90 days Qualified Health Plan HIPAA bona fide wellness program Will be able to purchase group plans through the exchange
A Large Employer = 50+ FTEs Shared Responsibility Penalty (Penalty for not offering health coverage) If an employer fails to provide its full-time equivalent employees (and their dependents) the opportunity to enroll in minimum essential coverage, Employer penalty is $2,000 annually for each full-time equivalent employee in the workforce (in excess of 30). Waiver for penalty for the first 30 FTEs Ex. 300 FTEs then penalty for 270 FTEs ($540k) Ex. - 100 FTEs then penalty for 70 FTEs ($140k) Ex. 60 FTEs then penalty for 30 FTEs ($60k) This penalty is non-deductible. Penalty does not offset the cost of employee coverage.
Large Employer Unaffordable Coverage Penalty Assuming an employer offers minimal essential coverage to all FTE employees and dependents When One or more full-time employees enrolls for coverage in an exchange and qualifies for a premium tax credit or cost-sharing reduction because: Employee s share exceeds 9.5% of W2 income Then Employer Penalty = $3,000 per employee receiving tax credit at the exchange
Calculating Safe Harbor Limits Employee Only Rate $325.00 Employer Contribution Hourly Wage 80% 70% 60% 50% $7.65 6.54% 9.80% 13.07% 16.34% $8.15 6.13% 9.20% 12.27% 15.34% $8.65 5.78% 8.67% 11.56% 14.45% $9.15 5.46% 8.20% 10.93% 13.66% $9.65 5.18% 7.77% 10.36% 12.95% $10.15 4.93% 7.39% 9.85% 12.32% $10.65 4.69% 7.04% 9.39% 11.74% $11.15 4.48% 6.73% 8.97% 11.21% $11.65 4.29% 6.44% 8.58% 10.73% $12.15 4.12% 6.17% 8.23% 10.29% $12.65 3.95% 5.93% 7.91% 9.88% $13.15 3.80% 5.70% 7.60% 9.51% $13.65 3.66% 5.49% 7.33% 9.16% $14.15 3.53% 5.30% 7.07% 8.83%
Employee Only Rate $455.00 2014 Safe Harbor Limits ** Represents 40% increase in 2014 Employer Contribution Hourly Wage 80% 70% 60% 50% $7.65 9.15% 13.73% 18.30% 22.88% $8.15 8.59% 12.88% 17.18% 21.47% $8.65 8.09% 12.14% 16.18% 20.23% $9.15 7.65% 11.48% 15.30% 19.13% $9.65 7.25% 10.88% 14.51% 18.13% $10.15 6.90% 10.34% 13.79% 17.24% $10.65 6.57% 9.86% 13.15% 16.43% $11.15 6.28% 9.42% 12.56% 15.70% $11.65 6.01% 9.01% 12.02% 15.02% $12.15 5.76% 8.64% 11.52% 14.40% $12.65 5.53% 8.30% 11.07% 13.83% $13.15 5.32% 7.98% 10.65% 13.31% $13.65 5.13% 7.69% 10.26% 12.82% $14.15 4.95% 7.42% 9.89% 12.37% $14.65 4.78% 7.17% 9.56% 11.95% $15.15 4.62% 6.93% 9.24% 11.55% $15.65 4.47% 6.71% 8.95% 11.18% $16.15 4.33% 6.50% 8.67% 10.84% $16.65 4.20% 6.31% 8.41% 10.51% $17.15 4.08% 6.12% 8.16% 10.20% $17.65 3.97% 5.95% 7.93% 9.92% $18.15 3.86% 5.79% 7.71% 9.64%
When Penalties Don t Apply Employee is in their waiting period (less than 90 days) Variable Hour employee in their measurement period or has worked less than 30 hours per week on average.
The Exchanges The only place that tax credits and cost-sharing subsidies will be available. Tax credits to 400% of Federal Poverty Level (FPL) Subsidies to 250% of FPL Tax Credits from 250% to 400% of FPL Medicaid does not entitle an individual to a subsidy or tax credit
2014 Exchange Subsidies 2012 Federal Poverty Levels: Single Person $11,170 Family of 4 $ 23,050
2014 Decisions Decisions Pay or Play? How will this change your business? We can help to answer some big questions for you 1.Is my plan as it is today in compliance? 2.What is the real net cost of my plan today? 3.What will it cost me if I cancel my plan and send my employees to the exchanges? 4.What penalties am I subject to based on my plan today? 5.How much will it cost me to make the changes necessary to get into compliance?
Chris Gordon & Jay Heydt (520) 881-5760 office cgordon@crestins.com jheydt@crestins.com Locally Owned and Operated Since 1975 (Mueller Insurance) Employee Benefits Property & Liability Insurance Individual Medical/Life/Disability Bonds Aviation Home and Auto