Learn about how your SEC registered company can address key aspects of the Affordable Care Act and about upcoming deadlines for 2014 and beyond - Peterson Sullivan - Seattle CPA Firm.

1. MAY 2013
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Health care coverage doesn’t have to be taxing
The Patient Protection and Affordable Care Act of 2010 contains some potentially costly
tax provisions affecting businesses. The most significant may be the shared responsibility
provision, also known as “play or pay.”
It becomes effective January 1, 2014, but
other notable tax-related provisions of
the health care act are already in effect.
Potential penalties
The health care act doesn’t require any
employers to provide health insurance to
their employees. But starting in 2014,
employers with 50 or more full-time-
equivalent employees that choose not to
provide coverage — or that provide
coverage that is “unaffordable” or
doesn’t provide “minimum value” —
must pay a penalty if even just one
employee receives a premium tax credit
for purchasing coverage through an
insurance exchange. (The credit is
available to employees who meet certain
income requirements and don’t have
access to a minimum value of affordable
employer-provided coverage).
The “no coverage” penalty is $2,000 per
full-time employee (defined as one who
is employed on average at least 30 or
more hours per week), excluding the first
30 employees. So if a company has 1,000
full-time employees, the penalty is $1.94
million ($2,000 × 970).
The penalty that applies if coverage fails
to meet affordability or minimum value
requirements is the lesser of $2,000 per
full-time employee or $3,000 for each
employee who receives a premium
credit. Under the act, coverage is
considered affordable if the employee’s
share of the premium for single coverage
doesn’t exceed 9.5% of his or her
household income. Minimum value
means the plan covers at least 60% of
the total allowed benefit costs.
Earlier this year, the IRS issued proposed
regulations that provide further guidance
as well as some safe harbors for avoiding
penalties.
Assessing the impact
If you offer health care coverage to your
full-time employees and plan to continue
offering the same coverage, you need to
assess whether it’s affordable and
provides minimum value as defined by
the health care act. You might be able to
avoid penalties without making any
changes to your coverage.
If, however, you don’t provide coverage
or your coverage won’t meet the
affordability and minimum value require-
ments, you’ll need to weigh the costs of
adding or improving coverage against
the cost of the penalties. Keep in mind
that coverage costs are deductible, while
penalties aren’t.
It may be possible to reduce penalties by

2. 2 PUBLIC COMPANY INSIGHTS | MAY 2013
Proposed “play or pay”
regulations
The IRS’s proposed “play or pay”
regulations, released earlier this year,
provide guidance regarding shared
responsibility provisions under the
Patient Protection and Affordable Care
Act of 2010. Among other things, the
proposed regulations help employers:
• Identify full-time employees and
dependents,
• Calculate and pay penalties on a
monthly basis, and
• Determine affordability and
minimum value.
They also create certain safe harbors
under which an employer is deemed to
offer minimum essential coverage.
Employers may rely on the proposed
regulations until final ones are issued.
shifting work from full-time employees to
part-time employees or independent
contractors. But you also need to
consider other factors, such as the
impact on productivity and service
quality as well as on employee morale.
In addition, the IRS is on the alert for
workers who’ are improperly classified as
independent contractors rather than
employees. It may impose back taxes,
interest and penalties if it determines
you’ve misclassified workers.
Other tax provisions
The act has made several other tax law
changes affecting businesses that go into
effect starting with the 2013 tax year. Two
notable changes are:
1. A $2,500 employee contribution limit
for health Flexible Spending
Accounts offereed in cafeteria plans,
and
2. Reduced deductions for retiree
prescription drug subsidies.
Also, the act imposes an annual fee on
certain manufacturers of branded
presciption drugs and a 2.3% excise tax
on the sale of certain medical devices.
Planning for 2014
The health care act’s tax-related provi-
sions are complex and potentially costly
for employers. So it’s important to
carefully assess your company’s situation
and take steps to minimize exposure.