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The Affordable Care Act “What’s in it for my small business?”

The Affordable Care Act “What’s in it for my small business?”. TAX CONSIDERATIONS January 21, 2014. INDIVIDUAL MANDATE 1/1/2014 – Small Employer Health Coverage. Individual advance tax credits available Income requirements (100% to 400% of Fed. Poverty Level)

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The Affordable Care Act “What’s in it for my small business?”

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  1. The Affordable Care Act “What’s in it for my small business?” TAX CONSIDERATIONS January 21, 2014

  2. INDIVIDUAL MANDATE 1/1/2014 – Small Employer Health Coverage Individual advance tax credits available Income requirements (100% to 400% of Fed. Poverty Level) 2013 Single @ 400% = $44,680 2013 Family of 4 @ 400% = $94,200 Coverage requirements May not be eligible for Medicaid or Medicare or private coverage May not be eligible for Employer coverage (Affordable & Minimum Value)

  3. INDIVIDUAL MANDATE 1/1/2014 – Small Employer Health Coverage Pre-tax nature of employer coverage Employer premiums are fully deductible / payroll tax free Employee portion is income & payroll tax free (if paid through a Sec. 125 plan) Employers can provide pre-tax HRAs, Health FSAs and HSAs After-tax nature of Exchange coverage Employee cost, after subsidy (if any), is after-tax Any Employer ‘bonus’ will be subject to income & payroll taxes HSAs available IF Exchange policy is a HDHP

  4. INDIVIDUAL MANDATE 1/1/2014 – Small Employer Health Coverage Will an offer of Employer health coverage void Employee’s ability to qualify for an Exchange credit? Yes – if coverage is Affordable & provides Minimum Value But – Employer need not offer coverage to Spouse A way to leave Spouse credit eligible But – Household Income may make spouse ineligible!

  5. INDIVIDUAL MANDATE 1/1/2014 – Small Employer Health Coverage May an Employer use an HSA and/or an HRA to help make a health plan Affordable? HSA – NO. May not use an HSA to pay premiums. HRA – Yes, if integrated and $ only available for premiums. May an Employer use an HSA and/or an HRA to help make a health plan meet Minimum Value? HSA – Yes. HRA – Yes, if integrated and $ only available for cost-sharing.

  6. INDIVIDUAL MANDATE 1/1/2014 – Small Employer Health Coverage Employer pre-tax payment for individual health insurance premiums – prior to 1/1/2014 One way for small Employers to provide ‘custom’ employee health coverage Direct Employer premium payment or reimbursement Use of HRAs possible Avoided income taxes and payroll taxes Non-discrimination rules have been non-existent

  7. INDIVIDUAL MANDATE 1/1/2014 – Small Employer Health Coverage IRS Notice 2013-54 – Effective 1/1/2014 HRA, Employer Payment Plan, Section 125 Health FSA These are group health plans subject to the ACA. Standing alone, they fail ACA requirements (e.g., prohibition on annual dollar limits & first $ preventative care) They may be integrated with an ACA compliant group health plan Integration with an individual policy is not allowed REVIEW ALL SUCH PLANS IF STILL EXISTENT

  8. INDIVIDUAL MANDATE 1/1/2014 – Small Employer Health Coverage IRS Notice 2013-54 – Effective 1/1/2014 Exceptions One-participant plans (sole-proprietors w/o employees) Standalone retiree-only plans Certain Health FSAs if carefully designed (excepted benefits) Use of HSA with individual HDHP Employer contributions must be comparable HSA $ can not be used to pay premiums (by law)

  9. Small Business HealthCare Tax Credit IRC §45R - Maximum credit equals 35% of employer health insurance Premium cost (increases to 50% for 2014-2016) 25 or fewer FTE’s to qualify for any credit Aggregation rules apply Average annual wages less than $50,000, and Employer pays 50% or more of insurance premiums Must use SHOP starting in 2014

  10. Small Business HealthCare Tax Credit DETERMINATION OF NUMBER OF FTEs Divide total annual hours/2,080 = number of FTEs EE hours in excess of 2,080 do not count Excluded employees Owners & their family members Seasonal Workers (< 120 days/year)

  11. Small Business HealthCare Tax Credit DETERMINATION OF AVERAGE ANNUAL WAGES Divide total wages by # of FTEs = Average annual wages All wages paid to qualifying employees are included – even for hours in excess of 2,080. But – exclude wages paid to: Owners & their family members Seasonal Workers (< 120 days/year) The relevant period is the Employer’s taxable year.

  12. Small Business HealthCare Tax Credit Maximum credit equals 35% of employer health insurance Premium cost (50% for 2014-2016) 10 or fewer FTEs to qualify for maximum credit $25,000 or less average wages to qualify for maximum Credit phase out between 10-25 FTE’s Average wages 25K-50K

  13. INTERESTED IN MORE? Contact Roger Prince, a Senior Manager in BerryDunn’s Employee Benefit Consulting Group, to learn more. rprince@berrydunn.comPhone 207.541.2314Websiteberrydunn.comBlogberrydunn.com/firmfooting

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