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PPACA - What You Need To Know
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PPACA - What You Need To Know



Please note: Seasonal employees ARE counted in the calculation for FTEs for the month that they work. However, if they work less than 120 days and cause the 50 FT threshold to be breached, then the ...

Please note: Seasonal employees ARE counted in the calculation for FTEs for the month that they work. However, if they work less than 120 days and cause the 50 FT threshold to be breached, then the employer is not considered a large employer.



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  • Also in 2016: threshold for itemized medical deductions increases from 7.5% to 10% for seniors

PPACA - What You Need To Know Presentation Transcript

  • 1. Patient Protection and Affordable Care Act:What You Need To Know Travis A. Sinquefield, MBA February 13, 2013
  • 2. OVERVIEWo Timeline of Key Eventso Employer Mandateo W-2 Reportingo Other Items of Note
  • 3. TIMELINE OF KEY EVENTS2013• Health flexible spending account limit of $2,500.• Restricted annual limit on essential benefits at $2 million.• Exchange notices to all employees due in Fall 2013 – exchanges set to open for purchase October 1• Elimination of Medicare Part D subsidy tax advantage (any Medicare subsidies received must be reported as taxable income)• 0.9 percent increase in Medicare tax for employees earning at least $200,000 for individuals ($250k for joint filers), which affects withholding and W-2 forms – employees only!• Medicare expense deduction increase to 10% threshold of AGI for those under 65 (increase in 2016 for those 65+)
  • 4. TIMELINE OF KEY EVENTS2013 (continued)• Medicare tax on unearned income of 3.8% (MAGI of $200k for individuals, $250k for joint filers)• Lower HSA deductions for high deductible health plans • $3250/$6450 maximum annual contribution deduction • $1250/$2500 minimum • Max out of pocket (deductibles and copays) of $6250/$12,500
  • 5. TIMELINE OF KEY EVENTS2014• Individual mandate• Health insurance premium tax credit (refundable)• Exchange coverage• Employer “pay-or-play” mandate• Waiting periods limited to 90 days• No annual dollar limit on essential health benefits• Cost-sharing limits of $6,250 for individual coverage/$12,500 for in- network family coverage (to be adjusted for 2014 based on inflation).
  • 6. TIMELINE OF KEY EVENTS2014 (continued)• Deductible limit of $2,000 for individual coverage/$4,000 for family coverage.• Section 6055 IRS reporting for plans that provide minimum essential coverage (IRS Notice 2012-32)• Section 6056 IRS reporting for large employers (at least 50 full- time employees), presumably to verify individual mandate and pay-or-play information. (IRS Notice 2012-33)• Small business tax credits if under 25 employees and average annual wages of less than $50k of up to 50% of employer’s non- elective contribution towards health care premium; employer must pay at least 50% of employee’s premium; less than 10 EEs and $25k average can receive full credit (2013 – must purchase through exchange in 2014 & 2015 to receive credit)
  • 7. EMPLOYER MANDATEWho is subject to the new employer mandate rules?“Large Employers” - Employers with 50 or more full-time equivalents(FTEs)• Definition of full-time employee: reasonably expected to work 30 or more hours per week or 130 hours per month• Part-time employees are included in the FTE calculation by taking aggregate hours for the month and dividing by 120• Total full-time employees plus full-time equivalents must be over 50• Seasonal employees are not included (<120 days/year)• 30 or less Full-Time employees: exempt from fines• You only have to cover full-time (30+ hrs/wk) employees – not part-time or season employees
  • 8. EMPLOYER MANDATEIRS Notice from January 2, 2013:• Proposed Rule: 95% standard – won’t face penalties if coverage offered to at least 95% of eligible employees• Large employer calculation done on a monthly basis • Keep any fractions for the monthly calculation• Look back periods: • Previous calendar year (12 months) • A 6 month consecutive period that occurred during 2013 (transition relief period)• Take an average of the FTE calculation for your look back period • Fractions are dropped from the annual average • Example: 49.9 FTEs is 49 – not a large employer• Monthly hours include vacation time, sick time, etc.
  • 9. EMPLOYER MANDATESafe Harbor Provisions (IRS Notice 2012-58)• Through 12/31/14, employers can utilize a Safe Harbor provision as outlined in IRS notice 2012-58• Utilizes a measurement period followed by a stability period• If an employee is deemed to be full-time (worked 30+ hours per week) during the measurement period, they are considered full- time for the stability period regardless of hours worked during the stability period • Standard measurement period of 3-12 months that is used for all on-going employees • Stability period of at least 6 months but not less than the standard measurement period • Optional administrative period no longer than 90 days • Same method used for new hires, will have a different measurement period based on start date • Calculated on an on-going basis as needed
  • 10. EMPLOYER MANDATEEven if you offer insurance, you may still be subject to a penalty!So, how do I avoid paying a penalty?• Offer minimum essential coverage • Must be affordable – Employees required contribution to plan is less than 9.5% of W-2 wages (safe harbor through 2014) for employee portion only • Must offer minimum value – Plan has actuarial value of greater than 60% - i.e. plan must cover at least 60% of health care costs• If you offer insurance but yet fail to meet the standards for minimum essential coverage, you will pay the penalty
  • 11. EMPLOYER MANDATEMore from the IRS Notice on 1/2/13:Affordability safe harbor provisions:• W-2 Wage Safe Harbor • For 2014 affordability, use W-2 wages for 2014 issued in 2015 • Annual basis, by employee• Rate-of-pay Safe Harbor • Based on hourly or monthly wages • Contribution is affordable if under 9.5% of computed monthly wages• Federal Poverty-Line Safe Harbor • Considered affordable is employee’s cost for self-coverage only does not exceed 9.5% of the federal poverty line for single individual
  • 12. EMPLOYER MANDATE PENALTIESWhat are the possible penalties?• Do not offer insurance and one or more full-time employees received federal subsidy and gets insurance on exchange: $2,000 per FT employee less the first 30 FT employees• Offer insurance and one or more FT employees receives subsidies and insurance from exchange because your plan fails to provide minimum essential coverage, pay either $3,000 per subsidized employee OR $2,000 per full-time employee (minus first 30 FT), whichever is less• Penalties are paid on a monthly basis• IRS Rule Proposal on 1/2/13: penalties only apply if fail to offer affordable coverage to 95% of eligible full-time employees
  • 13. EMPLOYER MANDATE PENALTIESWhat are the possible penalties? (cont.)• Who is eligible for credits: • Full-time employees with household income below 400% of federal poverty level (currently $88,200) for family of four • Eligible for health plan but plan does not meet affordability standards – 9.5% of household income (not W-2 wages) • Eligible for health plan but plan does not provide minimum value• Employers will need to weight the costs and benefits of possibly dropping insurance coverage • Penalties are not deductible, but insurance premiums are • Effect on recruiting and employer brand, along with employee morale
  • 15. EMPLOYER MANDATE PENALTIESEmployee Category How Category is used to Subject to penalty if determine “Large “Large Employer” and Employer” employee receives creditFull-Time Counted as one Yes employee, based on 30 hour work weekPart-Time Prorated (total PT hours No worked per month divided by 120)Seasonal Not counted if working Yes, for month in which less than 120 days per a seasonal worker is full- year timeTemp Agency Yes, for the temp agency Yes, for the temp agency
  • 16. EMPLOYER MANDATE PENALTIESCan employer purchase coverage through exchange? Possibly…• Depends on number of FTEs and state statutory guidelines• Per the law: • Have average of greater than 1 employee • No more than 100 employees during any business during previous year • Employee at least one employee at beginning of plan year• Before 1/1/2016, states may lower requirement to 50 employees
  • 17. W-2 REPORTINGWho has to report the cost of insurance on their W-2?• Employers with 250 or more employees must report cost of the insurance benefits on W-2’s issued for 2012• Based on individual employer, not controlled group• IRS Notice 2012-9 provides guidance and a handy chart for determining reporting• Must report “aggregate reportable cost” it provided • Total cost of all applicable insurance coverage, includes both employee and employer portion of cost• Do not have to issue a W-2 for the sole purpose of reporting insurance cost (i.e. to a retiree)
  • 18. OTHER ITEMS OF NOTESummary of Benefits and Coverage• Issued to all participants of the health insurance plan• Is issued by the insurance company and uses a standard template provided by the government• Self insured plans must create with the help of the TPA• Is in addition to the SPD and must be issued by all plans, even if exempt from ERISA• Also provided at other times (initial enrollment, etc.)• Not required for stand-alone benefits (vision, dental, etc.)• Must be linguistically and culturally appropriate• $1,000 fine per individual who didn’t receive properly for non- complianceNon-discrimination Testing• Non-grandfathered insured plans must undergo discrimination testing; details TBD per the IRS
  • 19. OTHER ITEMS OF NOTEAutomatic Enrollment• Employers with 200 or more employees must automatically enroll their employees in the plan; employees can opt-out• Originally scheduled for 2014 but is now delayedCadillac Plans• Effective in 2018• 40% excise tax charged to the plan sponsor• Excise tax is based on difference between the actual plan value and the plan limits below, and is per participant in the plan• Based on aggregate annual value amounts • Individual coverage: $10,200 • Family: $27,500• Based on total cost of benefits• Ex: If plan value is $1,000 over the individual limit, pay $400 per participant in excise tax
  • 20. OTHER ITEMS OF NOTESIMPLE Cafeteria Plans• Available to small employers – average 100 or less employees• Meet certain eligibility requirements for employees • 1000 hours service and 1 year of service • 21 years of age • Not covered under CBA• Contribution Requirements • Non-elective contribution: uniform amount of salary not less than 2% • Matching contribution: equals or exceeds lesser of – 6% of employees compensation for plan year – Twice the employee’s salary reduction contribution • Must choose between the two • Has to be a true employer contribution • Has to be uniform for all employees
  • 21. QUESTIONS For more information visit: http://www.hscompanies.com/PPACA