Understanding Health Care Reform: What Every Realtor Needs to Know

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Understanding Health Care Reform: What Every Realtor Needs to Know

  1. 1. UNDERSTANDING HEALTH CARE REFORM: WHAT EVERY REALTOR NEEDS TO KNOW Michael P. James, JD, MBA, CSSGB Phone: (517) 377-0823 (313) 237-7300 Email: mjames@fraserlawfirm.com www.linkedin.com/in/MichaelJamesLaw © 2014 Fraser Trebilcock Davis & Dunlap, P.C.
  2. 2. Why is Health Care Reform Scaring Employers?        Does health care reform apply to my business? What is it going to cost me? Do I have to provide health insurance to my employees? Are there penalties? Will the changes ever stop? It’s just too confusing… Am I missing something….? Who can I turn to for help?
  3. 3. Be Prepared for Health Care Reform        Are you a large or small employer? Secret cash bonus for small employers. Develop a strategy that works for your business. Make your employees love you. HCR checkup for your business. Develop a compliance program. Unearned and earned income taxes.
  4. 4. The Patient Protection & Affordable Care Act (ACA)    Became law in March 2010. Supreme Court upholds constitutionality of ACA June 2012. ACA creates: Individual Health Insurance Mandate;  Employer Responsibility Requirements; and  Small Business Health Care Affordability Tax Credits. 
  5. 5. ACA Individual Health Insurance Mandate  The individual health insurance mandate requires nearly all Americans to purchase and maintain health insurance.  Qualified coverage evidenced through tax returns.
  6. 6. ACA Individual Health Insurance Mandate  If an individual fails to have minimally essential health coverage, he or she will be required to pay an excise tax. 2014: Penalty is $95 per adult and $47.50 per child (up to $285 for a family) or 1.0% of family income, whichever is greater. 2015: Penalty is $325 per adult and $162.50 per child (up to $975 for a family) or 2.0% of family income, whichever is greater. 2016 and Beyond: Penalty is $695 per adult and $347.50 per child (up to $2,085 for a family) or 2.5% of family income, whichever is greater.
  7. 7. ACA Employer Responsibility Under 50 FTEs    There is no insurance requirement. Employers do not have to offer insurance. However, if health insurance offered, must meet Essential Health Benefits and metals. Over 50 FTEs    Employers must offer insurance. Insurance must cover at least 60% of actuarial value. Must be offered to 95% of full-time employees.
  8. 8. ACA Employer Responsibility Pay or Play: Mandate    1) Applies to employers with 50+ FTEs. 2) Insurance must cover at least 60% of actuarial value. 3) Employer must offer affordable coverage.     Single employee premium contribution not to exceed 9.5% of employee’s household income. 4) Employer will be subject to penalties if any of its full-time employees receives a tax credit on the individual marketplace. 5) Reporting health insurance requirements. 6) Penalties and reporting requirements delayed until 1/1/15.
  9. 9. ACA Employer Responsibility Pay or Play: Penalties - Two Options  Large employer does not provide coverage:   Penalty = $2,000 x (#full-time employees - 30) Large employer offers unaffordable or low value coverage:  Excise Tax = the lesser of:   No coverage penalty; or $3,000 x (full-time employees receiving tax credits.
  10. 10. ACA Employer Responsibility Pay or Play: Example Employer has 220 employees. Employer offers unaffordable health insurance to employees. As a result, 40 full-time employees seek insurance in the individual marketplace and receive a tax credit. What is the penalty? Penalty is the lesser of:  (220 - 30) x $2,000 = $380,000  40 x $3,000 = $120,000  Penalty is $120,000
  11. 11. Are You a Large or Small Employer? How do you Determine Your FTEs?  1) Evaluate employees’ monthly hours for each month:      Number of full-time employees working 130 hours or more in a month + Total part-time hours in a month / 120 2) Add the monthly calculations. 3) Divide total monthly calculations by 12. 4) Round down to the nearest whole number. The FTE is the average of each monthly calculation across the preceding calendar year.
  12. 12. Are You a Large or Small Employer? Example 1 Full-Time Employees: Employer has 45 full-time employees. Employer is a small employer: • Employer has 45 FTEs.
  13. 13. Are You a Large or Small Employer? Example 2 Full-Time and Part-Time Employees: Employer has: Employer is a small employer:  25 full-time employees; and • 25 Full-time employees  10 part-time employees, who • 10 Full-time equivalents each work 120 hours per for part-time employees month. • (1,200 / 120 = 10) • 35 Total FTEs
  14. 14. Are You a Large or Small Employer? Example 3 Full-Time and Part-Time Employees: Employer has: Employer is a large employer:  10 full-time employees; and • 10 Full-time employees  60 part-time employees, who • 50 Full-time equivalents each work 100 hours per for part-time employees month. • (6,000 / 120 = 50) • 60 Total FTEs
  15. 15. Are You a Large or Small Employer? Example 4 Seasonal Employees: The employer has:  25 full-time employees; and  100 seasonal employees.  The seasonal employees are employed for 4 months and work at least 130 hours/month. FTE Calculation: • 25 FTEs for 8 months • 125 FTEs for 4 months • 58 FTEs average across 12 months Employer is a small employer despite having more than 50 FTEs on average. Workforce did not exceed 50 FTEs more than 120 days. Employees working ≤ 120 days do not count.
  16. 16. Are You a Large or Small Employer? Which Employees Count Toward FTEs?       Employees? Seasonal Employees? Independent Contractors? Owner of Business? Family Members of Business Owner? Employees of Other Businesses You Own?
  17. 17. Health Insurance Marketplaces / Exchanges  Health Insurance Marketplaces / Exchanges.      Open enrollment: Plans go into effect: Open enrollment ends: October 2013…… January 2014 March 31, 2014 Michigan has a federally-facilitated health insurance marketplace. Status of HealthCare.gov?
  18. 18. Small Business Health Option Programs Small Business Health Option Programs (SHOP)  Open to all small businesses in 2014.      Must have 50 FTEs or less. In 2014, employer chooses one insurance product for all employees. In 2015, employer picks the metal level, employees choose the insurance product. In 2016, SHOP expands to businesses with up to 100 FTEs. In 2017+, States have option to expand SHOP eligibility to large groups.
  19. 19. Essential Health Benefits Required Coverage 1) 2) 3) 4) 5) Ambulatory Patient Services Emergency Services Hospitalization Maternity and Newborn Care Mental Health & Substance Use Disorder Services; Behavioral Health Treatment 6) Prescription Drugs 7) Rehabilitative and Habilitative Services and Devices 8) Laboratory Services 9) Preventative Wellness Services and Chronic Disease Management 10) Pediatric Services, Including Oral and Vision Care
  20. 20. Health Exchange Metals  ACA uses “Metal Levels” to standardize insurance products offered on exchange to individual and small group markets.  Based on actuarial values.  The percentage of total average costs for covered benefits that a plan will cover. Platinum 88-92% AV Gold 78-82% AV Silver 68-72% AV Bronze 58-62% AV
  21. 21. Secret Cash Bonus for Small Employers Small Business Health Care Tax Credits
  22. 22. Secret Cash Bonus for Small Employers Potential Tax Credits 2010 - 2013 Non-Profit For-Profit Up to 25% of employer contribution to employees’ health insurance premium Up to 35% of employer contribution to employees’ health insurance premium
  23. 23. Secret Cash Bonus for Small Employers Potential Tax Credits 2014 - 2016 Non-Profit For-Profit Up to 35% of employer contribution to employees’ health insurance premium Up to 50% of employer contribution to employees’ health insurance premium
  24. 24. Secret Cash Bonus for Small Employers Requirements
  25. 25. Secret Cash Bonus for Small Employers Requirements Maximum credit available to employers with 10 or fewer FTEs and average annual wages of $25,000 or less.  For each FTE above 10 FTEs, the credit is reduced by 1/15.  For each $1,000 above $25,000 in average wages, the credit is reduced by 1/25.
  26. 26. Secret Cash Bonus for Small Employers Which Employees Count?     Seasonal Workers Leased Employees Owner of Business Family Members of Business Owner
  27. 27. Secret Cash Bonus for Small Employers Which Employees Count? Members of a controlled or an affiliated service group may be treated as a single employer for tax credit purposes.
  28. 28. Secret Cash Bonus for Small Employers Calculating the Number of Employees Calculating FTEs for Tax Credit Purposes - Three Methods: 1) Actual Hours Worked + Paid Leave  Limit of 2,080 hours per employee, per year 2) Days-Worked Equivalency + Paid Leave  8 hours for each day 3) Weeks-Worked Equivalency + Paid Leave  40 hours for each week Add up the total hours of service the employer pays wages to employees and divide by 2,080. Round down.
  29. 29. Secret Cash Bonus for Small Employers Example: Number of Employees In 2013, Employer pays five employees wages for 2,080 hours each, three employees for 1,040 hours each and one employee wages for 2,300 hours. If the employer uses the “Actual Hours Worked Method,” how many FTEs does the employer have? 5 Employees: 10,400 (5 x 2,080) 3 Employees: 3,120 (3 x 1,040) 1 Employee: 2,080 (max 2,080 for each employee) Total Hours: 15,600 Total FTEs: 7.5 (15,600 / 2,080) Employees for Tax Purposes: 7
  30. 30. Secret Cash Bonus for Small Employers Calculating Average Employee Wages 1) Add up the total wages paid by employer during the tax year. 2) Divide total wages by the number of FTEs for the year. 3) Round down the result to the nearest $1,000. Example: In 2013, an employer pays a total of $245,786 in wages and has 10 FTEs. The employer’s average wages are $24,000 ($245,786 / 10 = $24,578.60, rounded down to the nearest $1,000).
  31. 31. Secret Cash Bonus for Small Employers Calculating Employer Contributions 1) Employer must pay at least 50% of coverage. Employer pays at least 50% of the premiums for each employee enrolled in health insurance coverage offered by the employer. Uniformity Requirement:  The employer is not required to pay the same percentage of the premium for each employee.  Required to be at least 50% of the premium for single coverage; does not have to pay 50% of premium for more expensive coverage options.
  32. 32. Secret Cash Bonus for Small Employers Calculating Employer Contributions Uniformity Requirement Example: Employer has 9 employees: Employer pays $4,000 per  6 enrolled in single coverage. employee:  3 enrolled in family coverage. • 50% of the premium for single coverage for each Premium Single: $ 8,000 employee enrolled in Premium Family: $14,000 single or family coverage. • Employer has satisfied uniformity requirement.
  33. 33. Secret Cash Bonus for Small Employers Calculating Employer Contributions 2) Payments must be made under a qualified arrangement. Only premiums paid to a health insurance issuer.  Major medical plan, dental, vision, etc.  Each plan must meet requirements. Payments that do not count:  Portion paid by employees;  Premium payments under a salary reduction arrangement;  Employer contributions to HRAs, FSAs, and HSAs.
  34. 34. Secret Cash Bonus for Small Employers Calculating Employer Contributions 3) Cap on the amount of employer’s premium payments that toward tax credit. Employer’s premium payments may not be more than the average premium for the small group market in the state where the employer offers coverage. 2013 Michigan: Average Premiums for Small Group Markets  Single: $ 5,569  Family: $ 13,256
  35. 35. Secret Cash Bonus for Small Employers Calculating Employer Contributions Cap on Premium Payments Example: # of Employees Type of Coverage Total Premiums MI Avg. Premium Employer Pays 50% 50% of MI Avg. 4 Single $6,000 $5,569 $3,000 $2,785.50 5 Family $14,000 $13,256 $7,000 $6,628 The premium payments for each employee exceed 50% of the average premium for the small group market in Michigan. The value of premiums that can be used to compute the credit is: $44,282 [($2,785.50 x 4) + ($6,828 x 5)].
  36. 36. Secret Cash Bonus for Small Employers Summary 1) 2) 3) 4) 5) Determine the employees who count toward the credit. Calculate the hours of service for these employees. Calculate the number of the employer’s FTEs Calculate the average annual wages paid per FTE. Calculate the relevant employer contributions. Initial Amount of Credit (Contribution x Percentage) - Reduction for FTE in excess of 10 - Reduction for avg. wages in excess of $25,000 Total Small Business Health Care Tax Credit
  37. 37. Secret Cash Bonus for Small Employers How Does the Credit Impact Your Business?      Credit may be able to be used to offset Alternative Minimum Tax liability. The tax credit can be reflected in determining estimated tax payments for the year. The credit affects an employer’s allowable deduction for health insurance premiums; deduction is reduced by amount of credit. Credit does not affect employer’s employment tax payments. Discuss with your tax professional.
  38. 38. What Strategy Works for Your Business? Provide Health Insurance Send Employees to Marketplace
  39. 39. Make Your Employees Love You   Involve employees in decision-making process? Communicate with your employees:   If providing coverage?  Providing coverage despite not being required to do so.  Culture of business; potential advantage over competitors. If not providing coverage?  Cost to business; other forms of assistance.  Be prepared to assist employees with federal exchange.
  40. 40. Make Your Employees Love You Health Insurance Marketplace Notice  An employer is required to provide notice of the availability of the Exchange, informing employees that:      1) the existence of the Marketplace; 2) that employees may be eligible for a subsidy under the Marketplace if the employer’s share of the aggregate cost of benefits is less than 60%; and 3) that if the employee purchases a policy through the Marketplace, he or she will lose the contribution to any health benefits offered by the employer. Notice must be provided to each employee at the time of hiring. For existing employees, the notice must be given no later than October 1, 2013.
  41. 41. Health Care Reform Checkup for Your Business   Is your business compliant with all the current health care regulations? Many regulations went into effect in 2012 and 2013. New regulations for 2014. Have you made the necessary adjustments?
  42. 42. Develop a Compliance Plan
  43. 43. Income Taxes Unearned Income Tax        Effective January 1, 2013 (affects upcoming tax filings). 3.8% Tax Applies to High Income Taxpayers:  Single: AGI > $200k; Married (joint return): AGI > $250k Applies to:  Interest, Dividends, Rents (less expenses) and Capital Gains (less capital losses). Calculation: The Tax Applies to the Lesser of:  The total investment income amount; or  Excess of AIG over $200k or $250k amount. This is not a transfer tax on real estate; never paid at purchase. This is not a tax settlement; not paid when property sold. “Taxable Gain” Exclusion still applies: $250k / $500k.  Existing Primary Residence
  44. 44. Income Taxes Earned Income Tax       Effective January 1, 2013 (affects upcoming tax filings). 0.9% Tax Applies to High Income Taxpayers:  Single: AGI > $200k; Married (joint return): AGI > $250k Applies to:  Wages, Salaries, Net Commissions (expenses of earning commission deducted), or Other Compensation. Not required to pay tax for employees; may have tax withholding responsibilities for high income employees. Earned Income Tax is not deductible for income tax purposes. If you are self employed, you only pay the tax once (there is no employer contribution for the Earned Income Tax).
  45. 45. Michael P. James, JD, MBA, CSSGB Fraser Trebilcock Health Care Reform www.mihealthcarelaws.com Fraser Trebilcock Davis & Dunlap, P.C. One Woodward Avenue, Suite 1550 Detroit, Michigan 48226 www.fraserlawfirm.com Phone: (313) 237-7300 Fax: (313) 961-1651 Phone: (517) 377-0823 (313) 237-7300 Email: mjames@fraserlawfirm.com www.linkedin.com/in/MichaelJamesLaw Fraser Trebilcock Davis & Dunlap, P.C. 124 W. Allegan Street, Suite 1000 Lansing, Michigan 48933 www.fraserlawfirm.com Phone: (517) 482-5800 Fax: (517) 482-0887 © 2014 Fraser Trebilcock Davis & Dunlap, P.C.

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