Affordable Healthcare Act and Your Business

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Affordable Healthcare Act and Your Business

  1. 1. Affordable Healthcare Actand Your BusinessDoug Dreger, RHU, REBC, CBCManager, Employee BenefitsMacLean Agency(609) 683-9300 x 229Steve Sciortino, Jr., CPA, MaccSupervisorLear & Pannepacker, LLP(609) 452-2200
  2. 2. Affordable Care Act
  3. 3. • Legislative Changes
  4. 4. Simple Cafeteria Plans• ACA established simple cafeteria plans– Certain small employers (employing 100or fewer employees) are eligible toestablish a simple cafeteria plan– Simple cafeteria plans deemed to meetapplicable nondiscrimination rules
  5. 5. OTC Medication Reimbursement• Effective January 1, 2011, OTCmedications no longer qualify as medicalexpenses for HRAs and health FSAs• Distributions from HSAs or Archer MSAsfor OTC medications are nonqualifieddistributions– Subject to income tax and penalty tax
  6. 6. Health FSA Contributions• Effective for plan years beginning afterDecember 31, 2012, employee pre-taxsalary contributions are limited to$2,500 per year• Dollar amount indexed for inflation forplan years beginning after 2013.
  7. 7. Health Coverage on Form W-2• Beginning with 2012 forms, employersmust report cost of employer-sponsored health insurance coverageon employee’s Form W-2• Certain small employers exempt from2012 reporting
  8. 8. Medical Expense Deduction• For tax years beginning afterDecember 31, 2012, itemizeddeduction for medical expensesthreshold now 10% of AGI– Threshold in previous years was 7.5%• Taxpayers aged 65 and older will nothave increased threshold until taxyears beginning after December 31,2016
  9. 9. Medicare Tax Expanded• Unearned Income Medicare tax enacted– 3.8% tax on investment income– Married Filing Joint taxpayers with AGI over$250,000 ($200,000 for Single and Head ofHousehold)• Additional Medicare tax on wagesexceeding $250,000 for MFJ ($200,000for Single)– Additional 0.9% tax withheld on wages over$200,000– Self-employed persons subject to 3.8% taxon the same thresholds
  10. 10. Annual Certification of Coverage• After 2013, employers must provideplan information regarding healthinsurance coverage to the IRS andcovered employees
  11. 11. • Small Plan Definition / Credits
  12. 12. Small Employer Health InsuranceTax Credit• Employer must:– Employ 25 full-time employees– Pay average annual wages of less than $50,000per employee– Pay a uniform percentage of health insurancepremiums for enrolled employees• 35% maximum credit (25% for tax-exempt) if:– 10 or fewer full-time employees with averagewages of $25,000 or less– Credit decreases as employees or wagesincrease
  13. 13. Small Employer Health InsuranceTax Credit (continued)• Credit offsets regular income taxes andAMT– Unused portion can be carried back 1 yearor forward 20 years• After 2013, maximum credit increasesto 50% (35% for tax-exempt) ifemployer purchases health insurancethrough small business health optionsprogram (SHOP)
  14. 14. • Large Employer Definition / Penalties
  15. 15. Penalty for Lack of Health Insurance• Employers > 50 FTE subject to penalty if:– Not offering health insurance all full-timeemployees > 30 Hr/Wk(look-back, stability, and seasonal periods)– Insurance is unaffordable (> 9.5% Wages) ordoes not provide certain minimum value– ‘Wages’ net of 401(k) and health premiums• Non-deductible penalty ($250 / Mo) if anyemployee is (allowed) or paid a premiumassistance credit or cost subsidy
  16. 16. • Employee Mandate / Premium Credit
  17. 17. • Number Crunching
  18. 18. Plan Pricing Options
  19. 19. Will staff give up 9.5% of theirwages compared to a $95/yr tax?Hourly Rate 7.25 10 15 20 25Hrly Cost Hrs 30 0.63 0.87 1.30 1.73 2.17Empl Cost $75 $103 $155 $207 $259Hrly Cost Hrs 35 0.73 1.01 1.52 2.02 2.53Empl Cost $87 $121 $181 $242 $303Hrly Cost Hrs 40 0.84 1.15 1.73 2.31 2.89Empl Cost $100 $138 $207 $277 $346EMPLOYEE COSTS Based on $400/Month plan, employee pays 9.5%
  20. 20. Do employer contributions costmore than the “affordability” fine?Hourly Rate 7.25 10 15 20 25Hrly Cost Hrs 30 2.71 2.47 2.03 1.60 1.17Emplr Cost $324 $296 $244 $192 140Hrly Cost Hrs 35 2.94 1.99 1.56 1.13 0.69Emplr Cost $312 $278 $218 $157 96Hrly Cost Hrs 40 2.5 1.63 1.20 0.77 .34Emplr Cost $299 $261 $192 122 53EMPLOYER COSTS based on $400/Month plan, employee pays 9.5%** Notice - everyone at/under $10/Hr costs more than the $250 penalty!
  21. 21. Family coverage & 401(k) couldincrease employer health subsidies …Filing Status: Effective Income “Affordable” MaximumFiling Status: Effective Income “Affordable” Maximum
  22. 22. Affordable Healthcare Actand Your BusinessDoug Dreger, RHU, REBC, CBCManager, Employee BenefitsMacLean Agency(609) 683-9300 x 229Steve Sciortino, Jr., CPA, MaccSupervisorLear & Pannepacker, LLP(609) 452-2200

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