Creating Low-Code Loan Applications using the Trisotech Mortgage Feature Set
Health Care Reform Seminar
1. Health Care Reform Seminar
Andy
Impastato
Addie
Prewi>
William
Po>er
BancorpSouth
Insurance
Taylor
Porter
Postlethwaite
&
Services/Wright
&
Percy
Associate,
Tax
and
Ne>erville,
APAC
Vice
President,
Health
Care
Senior
Tax
Director
Client
Compliance
Prac:ce
Team
3. Disclaimer
This publication is provided for educational and informational purposes only
and does not contain legal advice. You should not act on any information
provided without consulting legal counsel. To comply with U.S. Treasury
Regulations, we also inform you that, unless expressly stated otherwise, any
tax advice contained in this communication is not intended to be used and
cannot be used by any taxpayer to avoid penalties under the Internal
Revenue Code.
Proprietary and Confidential. Not for Distribution
01
4. Agenda
• Small Employer Provisions • Employer Mandate
o Grandfathered Plans o Large Employer Status
o Carve Out Plans o Full-Time Employee Status
o Exchange Notice o Minimum Essential Coverage
o Essential Health Benefits o Affordability
o Minimum Value
o “Pay or Play” Penalties
o Tax Credit
02
6. Grandfathered (GF) Plans
• Impermissible changes
o Elimination of benefits
o Any increase in percentage cost-sharing
o Increase in fixed-amount cost-sharing
§ 15% above medical inflation is allowed
o Decrease in employer contribution
§ Five percentage points
o Certain changes to annual limits
• Disclosure requirements
• Recordkeeping requirements
02
7. Carve Out Plans
• Nondiscrimination in favor of highly compensated individuals
(HCI)
o Applies to all self-insured plans
o Applies only to non-GF fully insured plans
§ Delayed effective date*
o Definition of HCI
o Eligibility test
o Benefits test
o Penalties for noncompliance
• Other laws
03
8. Exchange Notice
• Applies to employers subject to the FLSA
• Delayed effective date
o Originally effective for March 1, 2013
• Content requirements
o Existence, services and contact information of Exchange
o Eligibility of premium tax credit or cost-sharing reduction
o Consequences of dropping employer coverage
• Model Notice?
04
9. Essential Health Benefits
• Applies to non-GF, small group plans
• Effective for plan years beginning in 2014
• Requirements
o Provide essential health benefits
o Limit cost-sharing
o Provide either bronze, silver, gold or platinum coverage (or
catastrophic plan for individuals)
05
10. Essential Health Benefits
• Essential health benefits
o Categories
§ Ambulatory patient services
§ Emergency services
§ Hospitalization
§ Maternity and newborn care
§ Mental health and substance abuse
§ Prescription drugs
§ Rehabilitative and habilitative services and devices
§ Laboratory services
§ Preventive and wellness services
§ Pediatric services (includes oral and vision care)
06
11. Essential Health Benefits
• Cost-sharing limits
o Out-of pocket limits
§ Estimated to be $6,250 / $12,500
§ Includes deductibles, co-payments and coinsurance
• Deductible limits
§ Will be $2,000 / $4,000
§ May be increased by maximum reimbursement available to participant
under FSA
07
12. Essential Health Benefits
• Coverage (metallic) levels
o Levels based on actuarial values
o Standard data
o Actuarial value calculator tool
• Benchmark plan
o Designated by individual States
o Based on largest products sold in State or by HHS in the
absence of State action
08
14. Employer Pay or Pay Mandate
• Big Penalty
o “Large” employers (50 FTEs) that fail to “offer” “minimum essential
coverage” to “substantially all” of its “full-time employee” (those
working 30 hours per week) and their dependents will be subject to a
$2,000 per employee penalty if any full-time employee goes to an
Exchange and qualifies for a subsidy. Penalty is calculated based on the
total number of full-time employees (minus 30).
02
15. Employer Pay or Pay Mandate
• “Large Employer” Status
o Average of 50 or more full-time employees on business days
o Look at preceding calendar year (transition relief)
o Full-time” defined as 30 or more hours of service per week
o Part-time employees represent FTEs (total hours/120)
o Aggregation rules (controlled group) apply
o Special rule for new employers
o Seasonal employee exception
03
16. Employer Pay or Pay Mandate
• “Offer” of Coverage
o Employee must have an effective opportunity to accept coverage at
least once during the plan year
o Electronic offer permissible
o Facts and circumstances
o No “offer” for a month unless coverage available for every day of month
04
17. Employer Pay or Pay Mandate
• Minimum Essential Coverage
o Not defined in Proposed Rule
o Employer-sponsored GHP plan offered on the small or large group
market
o Where is going to land between major medical and excepted benefits?
o Big open issue
05
18. Employer Pay or Pay Mandate
• “Substantially All”
o An employer will be deemed to have offered covered to substantially
all” full-time employees and their dependents if:
§ Coverage is offered to 95% of full-time employees and their
dependents (or, if greater, 5 employees)
§ Failure to offer to 5% need not be inadvertent (i.e., planning
opportunity)
§ Does not eliminate penalty for 5%
06
19. Employer Pay or Pay Mandate
• “Full-Time Employees”
o Part-time employees are excluded
o Full-time employees only
§ 30 “hours of service” per week
§ 130 “hours of service” per month
§ Hours worked v. “hours of service”
o Common law definition of “employee”
o Full-time status measured monthly on an ongoing basis
o Safe harbors mitigate impact of month-to-month analysis
07
20. Employer Pay or Pay Mandate
• “And Their Dependents”
o The employer is required to offer coverage to dependents
§ Does not include spouse
§ Does include son, daughter, stepson, stepdaughter, adopted child,
child placed for adoption, and foster children up to age 26)
§ Transition relief – dependent coverage not required in 2014 if
employer not currently offering takes steps during 2014 plan year to
offer to dependents
08
21. Employer Pay or Pay Mandate
• No coverage (or coverage but not to substantially all)
o Example:
§ Employer A has 100 full-time employees.
§ Employer A does not offer coverage to any of its employees.
§ Employer A owes $2,000 for each full-time employee minus 30, so
Employer A owes a total penalty of $140,000 (100 – 30 = 70; 70 x
$2,000 = $140,000)
09
22. Employer Pay or Pay Mandate
• Little Penalty
o Large employers that offer coverage will be subject to a $3,000 per
employee penalty if the coverage is either not affordable” (9.5% HI) or
does not meet “minimum value” (fails to cover 60% of total plan costs),
and as a result, any full-time employee qualifies for a subsidy. Penalty is
calculated based on the number of full-time employees who obtain a
subsidy (with a maximum penalty cap).
10
23. Employer Pay or Pay Mandate
• Affordable
o Employee’s premium for single coverage is greater than 9.5% of
employee’s household income
§ W-2 safe harbor
§ Rate of pay safe harbor
§ FPL safe harbor
11
24. Employer Pay or Pay Mandate
• Minimum Value
o Employer pays less than 60% of total allowed costs
o Not a contribution rate
o Tests
§ MC Calculator
§ Safe Harbor Checklists
§ Actuary
12
25. Employer Pay or Pay Mandate
• No affordable” coverage
o Example
§ Employer B offers health coverage and has 100 full-time employees, 20
of whom receive a tax credit and enroll in the Exchange.
§ Employer B owes $3,000 for each employee receiving a tax credit, so it
owes a penalty of $60,000. (20 X $3,000 = $60,000)
§ The penalty is capped at the amount Employer B would have to pay if
it offered no coverage at all.
13
26. Employer Pay or Pay Mandate
• Health Insurance Premium Tax Credit
o Must be lawfully present in the U.S.
o Income between 100% and 400% of the Federal Poverty Level (FPL)
o Cannot be eligible for minimum essential coverage”
§ Medicare, Medicaid, CHIP, certain veteran s coverage and affordable
employer coverage
§ Medicaid eligibility may expand to 133% of FPL depending on State
o Must be through public exchange
o Pending litigation
14
27. Thank You
Andy Impastato
Vice President, Client Compliance
healthcarereform@bxsi.com
Office: (225) 336-3238
29. Am I an Applicable Large Employer?
(generally 50 FTEs for 6 consecutive months)
• Who is an employee?
o Independent Contractors?
o Leased Employees?
• What is full-time?
• How do I calculate the number of full-time equivalent
employees?
• Who is the employer?
o Brother/sister
o Affiliated service groups
Office:
225.381.0281
01
Email:
addie.prewiL@taylorpoter.com
30. Should I Pay or Play?
• Offer minimum essential benefits to substantially all (95%) full-time
employees – no penalties.
• Offer coverage but not to 95% of full time employees or fail affordability and/or
minimum value tests – if at least 1 employee purchases insurance through
exchange and receives a subsidy (400% of FPL) – pay $3000 annually per
subsidized employee.
o Affordable – generally 9.5% of household income
o Minimum value – generally 60% coverage
• Don t offer coverage – pay $2000 per employee over 30 employees.
Office:
225.381.0281
02
Email:
addie.prewiL@taylorpoter.com
31. If I Play, Should I Insure or Self-Insure?
• Insured – more mandates, less flexibility, less risk
• Self-insured – few mandates, more flexibility, more risk
Office:
225.381.0281
03
Email:
addie.prewiL@taylorpoter.com
32. Examples of ACA Requirements Applicable to Self-Insured Plans
• Dependent coverage to age 26
• Coverage of preventative health services without cost-sharing (grandfathered plans
exempt)
• No rescissions of coverage except for fraud or material misrepresentation
• No lifetime limits and, after 2014, no annual limits on essential health benefits
o Lifetime and annual limits on non-essential benefits allowed as otherwise permitted
under the State and Federal Law.
o Note that State-imposed restrictions on self-insured plans would give rise to ERISA
preemption issues.
• Access to pediatric and ob/gyn care
• Due process and appeal rights
Office:
225.381.0281
04
Email:
addie.prewiL@taylorpoter.com
33. Examples of ACA Requirements
Not Applicable to Self-Insured Plans
• Essential Health Benefits requirements (individual and small
markets only)
• Annual limitations on deductibles
• Nondiscrimination in favor of highly compensated employees
Office:
225.381.0281
05
Email:
addie.prewiL@taylorpoter.com
34. Thank you
Addie
Prewi
Attorney, Taylor Porter
Tax Health Care Practice Team
addie.prewitt@taylorporter.com
225.381.0281
35. Definition of Controlled Groups
and Tax and Penalty Provisions
Facing Individuals and Employers
William C. Potter
March
18,
2013
36. Determination of Full-time Employees in a Controlled Group
• Businesses organized in multiple forms may be considered as a single
employer
• Controlled groups can be parent-subsidiary, brother-sister,
combinations or affiliated service groups
01
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
37. Parent - Subsidiary Controlled Group
• Control exists if parent owns 80% of the subsidiary
• Could involve multiple subsidiaries
02
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
38. Brother – Sister Controlled Group
• Where the same five or fewer individuals own 80% of the related
entities, AND
• Effectively control more than 50% (identical ownership)
• Attribution
o Family Members – spouse, children, grandchildren, parents
o Partner to Partner
o Estates and Trusts and Beneficiaries
o Corporations and Shareholders
03
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
39. Example
Percentage of Ownership • The four owners have more
than 80% of A and B, so that
Member A Corp B LLC Effective
requirement is satisfied. But
A 80% 20% 20%
identical ownership is only
B 10% 50% 10% 40% so they fail the 50%
C 5% 15% 5% test. They are two separate
D 5% 15% 5% employees
Total 100% 100% 40%
04
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
40. Affiliated Service Groups
• Subjective determination
• Related entities may or may not have ownership relationships
• Performing services to or on behalf of the other entity, and when capital
is not a material income producing factor
05
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
41. Small Employer Health Insurance Tax Credit
• Allows eligible small employers to claim a 35% credit (25% in the case of tax-exempt employers)
for premiums paid toward health coverage for its employees in tax years beginning 2010
through 2013. These percentages increase to 50% and 35%, respectively, in 2014.
• An eligible small employer is an employer that has no more than 25 full-time employees and the
average annual compensation of these employees is not greater than $50,000.
• The credit is reduced by 6.6667% for each full-time employee in excess of 10 employees and by
4% for each $1,000 that average annual compensation paid to the employee exceeds $25,000.
• After 2013, employer must participate in an insurance exchange to be eligible for credit.
• Must pay at least 50% of premium for all employees and the percentage must be uniform
among all employees
06
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
43. Expansion of Coverage – Individual Mandate
• Individual Mandate
o With limited exceptions, ALL individuals must maintain “minimum essential
coverage” or pay a penalty.
§ Government provided coverage
§ Employer sponsored coverage
§ Exchange coverage.
• Exemption from mandate
o if required contribution to purchase insurance exceeds 8% of household income.
o Religious objection
o American Indians
o Incarcerated Individuals
o Those with incomes below the tax filing threshold
08
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
44. Expansion of Coverage – Individual Mandate
• Penalty amount is the lesser of a flat dollar amount of
percentage of income.
o 2014: $95 or 1% of household income
o 2015: $325 or 2% of household income
o 2016 and later: $695 or 2.5% of household income
09
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
45. Expansion of Coverage – Individual Mandate
• Individual Mandate
o Duty to purchase insurance is mitigated by premium credits and
cost-sharing subsidies available to individuals with income between
100%-400% of federal poverty limit.
o Premium assistance is not available if individual has access to
employer provided coverage UNLESS:
§ Too Skinny: Employer coverage provides less than 60% actuarial
value.
§ Too Expensive: Required contribution under employer plan for
self-only coverage exceeds 9.5% of household income.
10
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
46. Expansion of Coverage – Individual Mandate
Poor Middle Income Upper Income
Federal Assistance
Medicaid Subsidies None
Premiums limits
2% of income 3% to 9.5% No limit
Cost sharing limit
94% 70 – 93% No limit
Eligibility
133% FPL 133 – 400% FPL 400 FPL
Family of 1
14.4 14.4 – 43.3 43.3
Family of 2
19.4 19.4 – 58.3 58.3
Family of 3
24.4 24.4 – 73.2 73.2
Family of 4
23.9 23.9 – 88.2 88.2
Family of 5
34.3 34.3 – 103.2 103.2
11
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
47. Large Employer Penalties
• Effective in 2014 for employers with at least 50 full time employees
• Large employer must offer full time employees (FTE) and their
dependents the opportunity to enroll in minimum essential coverage
under an eligible employer sponsored plan
• FTE must generally not be asked to pay more than 9.5% of their
modified household income for coverage
• Exceptions for new employees
12
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
48. Penalty for Non-Compliance
• Employer not offering coverage
• Employer offering coverage whose employee receives a credit
13
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
49. Employers Not Offering Coverage
• Such employers are subject to a penalty if one or more FTE is certified to
the employer as being covered by an Exchange and received a premium
tax credit
• Penalty for any month is an amount equal to the number of FTE’s in
excess of 30 times 1/12th of $2,000
• Regardless of the number of FTE’s who are enrolled in the Exchange and
received a premium credit
14
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
50. Example
• One FTE of a large employer who does not offer health coverage
enrolled in an exchange
• Suppose the employer has 70 FTE’s
• The monthly penalty would be:
70 – 30 = 40 x ($2,000 / 12) = $6,667
• If the employer offered no coverage all year, the penalty would be:
$6,667 x 12 = $80,004
15
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
51. Note
• Large employer not offering coverage may not be liable for penalties
• If employer has no FTE whose income would qualify him or her for a
subsidy through an Exchange
16
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
52. Employers Offering Coverage
• Some employers who offer health insurance coverage to FTE’s may be
subject to a penalty
• Penalty can apply based on the number of FTE’s who purchase
coverage through an Exchange and receive a credit or cost-
sharing reduction
17
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
53. Penalty Calculation
• For each FTE in the Exchange, the monthly penalty each month is 1/12th
of $3,000 or $250
• If 25 employees are in the Exchange, penalty per month would
be $6,250
• Penalty is limited
• Assume 50 FTE’s. Penalty is:
50 – 30 = 20
20 x 1/12 of $2,000 = $3,333
18
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
54. Expansion of Medicare Taxes (2013)
• Employee portion of Medicare tax increased by 0.9%
• Applies to wages or self-employment income in excess of $200,000 ($250,000
in the case of a joint return, $125,000 in the case of a married taxpayer filing
separately).
• The additional Medicare tax increases the employee portion to 2.35% or a total
Medicare rate of 3.8%.
• Employer has the obligation to withhold the additional tax on wages (without
regard to spouse’s wages) if its employee earns more than $200,000; Employee
is liable to the extent not withheld by employer.
• Self-employed are not allowed a deduction for ½ of the additional 0.9% tax.
19
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
55. Expansion of Medicare Taxes (2013)
• Individuals, estates and trusts required to pay 3.8% tax on net investment
income such as interest, dividends, annuities, royalties, rents, capital
gains and income from passive activities.
• Applies to the income in excess of $250,000 for joint returns, $125,000 for
married filing separate and $200,000 for all others
20
Office:
225-‐922-‐4600
healthcarereform@pncpa.com
56. Thank You
William C. Potter
Senior Tax Director
healthcarereform@pncpa.com
Office: 225-922-4600
57. Health Care Reform Seminar
Andy
Impastato
Addie
Prewi
William
Poer
BancorpSouth
Insurance
Taylor
Porter
Postlethwaite
Services/Wright
Percy
Associate,
Tax
and
Neerville,
APAC
Vice
President,
Health
Care
Senior
Tax
Director
Client
Compliance
Prac:ce
Team
