1 / 79

Affordable Care Act Chapter 5 pp. 123-174

Understand the Affordable Care Act's Employer Mandate, ALE status determination, and Aggregated ALE Groups. Learn how businesses are categorized and rules for attributing ownership. Update your knowledge now!

thomasbdavis
Download Presentation

Affordable Care Act Chapter 5 pp. 123-174

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Affordable Care ActChapter 5 pp. 123-174 2016 National Income Tax Workbook™

  2. p. 123Affordable Care Act (ACA) • Summary of Employer Mandate • Small Employer Responsibilities • Summary of Individual Mandate • PTC Calculation for Year of Marriage • Individual Exchange – Special Enrollment • ACA – Return Preparer Best Practices • New Guidance

  3. p. 124Summary of Employer Mandate • Applicable large employers, ALEs, (≥ 50 FTEs in prior year) must either • Offer minimum essential coverage (MEC) that is affordable & of minimum value or • Face potential of employer shared responsibility payment (ESRP)

  4. p. 124Summary of Employer Mandate • ESRP - If a full-time employee (EE) received a premium tax credit (PTC) and • No offer of MEC to at least 95% of full-time + dependents Or • Offered coverage was not affordable, did not provide MV, or the employer did not offer coverage to the full-time EE(s) getting PTC

  5. p. 124Summary of Employer Mandate • ACA market reforms • Prescribes benefits to be in coverage • Restricts limits on benefits • An employer of any size offering coverage must meet market reforms • If not, potential excise tax § 4980D

  6. p. 125Determination of ALE Status • Average monthly # of FTEs ≥ 50 FTEs? • Total of full-time and full-time equivalents in preceding year divided by 12 months • Must count all employees working in U.S • Exclude veterans with VA health or TRICARE • Exclude those working under vow of poverty • Determined annually

  7. p. 125Determination of ALE Status • Seasonal workers included in ALE count • If determined to be ALE, average ≥ 50 for ≤ 120 days, and excess over 50 due to seasonal workers, not an ALE • EE/independent contractor decisions critical • Audit activity increasing – could result in ALE status and potential ESRP

  8. pp. 125-126Aggregated ALE Groups • Single employer if 2 or more businesses • Have common owner or • Related under • § 414(b): controlled group of corps • § 414(c): T or Bs under common control • § 414(m): affiliated service groups • § 414(o): as further prescribed in regs.

  9. p. 126Aggregated ALE Groups Parent-Subsidiary Group • Parent owns ≥ 80% of another • Corps: Voting power or value of stock • Trust, estate: Actuarial interest • PS: Profits or capital interest • Can be tiers of entities • Can be various types of entities in group

  10. p. 126Aggregated ALE Groups Parent-Subsidiary Group • Example 5.1 • Clay, Inc. owns: • 100% of Dade, Inc. • 80% of Evans, Inc. • 70% of Franklin, Inc. • Clay, Dade and Evans = one employer • Franklin not part of the parent-sub. group

  11. p. 126Aggregated ALE Groups Parent-Subsidiary Group • Example 5.2 • Grand Company owns 100% Hand, Inc. • Hand owns: 90% of Jenkins, Inc 80% of Kent Corp. • Jenkins owns 95% of Madison, Inc. • Grand, Hand, Jenkins, Kent & Madison = 1 ER • If total ≥ 50 FTEs, each one is an ALE

  12. pp. 126-127Aggregated ALE Groups Brother-Sister Group if: • 5 or fewer persons (individuals, estates, trusts) own directly or indirectly ≥ 80% (controlling) in each organization AND • Common ownership of same persons in each entity totaled exceeds 50% (effective control) • Look to % of voting or value of stock (corp), actuarial interest (trust), profits or capital int. (PS)

  13. p. 127Aggregated ALE Groups Brother-Sister Group • Example 5.3 Figure 5.1 • 4 unrelated shareholders own 80% and 90% • Common ownership not > 50% • Example 5.4 Figure 5.2 • 8 unrelated shareholders • 5 or fewer own > 50% total common ownership but < 80% in ownership of each entity

  14. p. 128Aggregated ALE Groups Brother-Sister Group • Example 5.5 • Ex. 5.4 Owners but Victoria, Winona, Hope & Lesley own 20%, others own 20% remainder • 5 or fewer own 80% and common > 50% • Athens and Orleans = one employer • If FTEs combined ≥ 50, both are ALEs

  15. p. 128Aggregated ALE Groups Combined Group • 3 or more organizations if • Each is a member of either a parent-subsidiary or brother-sister group • At least one organization is the common parent and also a member of a brother-sister group

  16. p. 128Aggregated ALE Groups Example 5.6 Combined Group • Milligan is parent of Milligan/Pike parent/sub group & is part of brother-sister group w/Norwich • Milligan, Norwich, Pike = one employer • If total FTEs ≥ 50, each entity is an ALE

  17. pp. 128-129Aggregated ALE Groups Attribution Rules • Treating one as owning an interest in a business that is not owned directly • Referred to as “indirect” ownership • Family or business relationships • Figure 5.3 (p. 129)

  18. p. 128Aggregated ALE Groups • Example 5.7 Spousal Attribution • Bart and Shannon – husband & wife • Bart: 100% of medical practice • Shannon: 50% of medical practice w/Joe • Bart fails exception: manages her practice • Shannon meets exception for Bart’s practice • Bart owns a PS 50/50 with Joe • PS and Shannon’s practice = one employer

  19. p. 129Aggregated ALE Groups • Example 5.8 Parent-Child Attribution • Dana mother to 25-year-old Clare • Dana owns 75% XYZ Corp • Clare owns 25% of XYZ corp • Clare’s share attributed to Dana • If Dana operated a business thru a single-member LLC, XYZ Corp & LLC = 1 employer

  20. pp. 129-130Aggregated ALE Groups • Example 5.9 Entity Attribution • Attribution: Lake owned - Jay 35%, Kendall 15% • If Jay also owned 50% of Lake, Lake and any other business Jay owned ≥ 80% = 1 employer

  21. p. 130Aggregated ALE Groups • Affiliated Service Group = Service org. (FSO) & one or more of the following: • A org: Any service org. that is SH/PN in FSO & • Regularly performs services for FSO or • Is regularly associated with FSO in performing services for third persons • B org: Other org. if significant % of business is employee-type services for FSO or A org & ≥10% owned by highly compensated of FSO/A

  22. p. 130Aggregated ALE Groups • Affiliated Service Group • Organization: Corporation, partnership, other organization • Service: Health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting insurance

  23. p. 130Aggregated ALE Groups • Example 5.10 • Allen Able, doctor, Allen Able PC (PC) • PC is partner in Baker Surgical Group (Baker) • PC regularly associated w/Baker in performing services for third parties • Baker = FSO, PC = A org. • Baker and PC → affiliated service group • Baker and PC = one employer, combine FTEs

  24. p. 130Aggregated ALE Groups • Example 5.11 • EFG PS, law partnership • EFG of Capital City, PC is PN in EFG PS • Paralegal & admin services for EFG PS • EEs work only for the PC • EFG PS is FSO, EFG PC is A org. • EFG PS & EFG PC = affiliated service group • PS & PC = one employer, combine FTEs

  25. pp. 130-131Requirement to Offer Coverage 2016: ALE must offer coverage • To ≥ 95% full-time employee (+ dependents) • Spouse, stepchild, foster child not dependents • ER contribution to dep. cost not required • That provides minimum value • 60% (bronze) + inpatient hosp./physician serv. • That is affordable: Self-only cost ≤ % of HHI • 2016: 9.66% (2015: 9.56%, 2017: 9.69%)

  26. p. 131Requirement to Offer Coverage • ER affordability safe-harbors: apply % to • Form W-2 wages • Employee’s rate of pay • Federal poverty line • Safe-harbor shown on line 16, F1095-C • Safe harbors usable only if • MV provided in self-only coverage • Provides FTs/dependents enrollment chance

  27. pp. 131-1322015 Transition Rules Apply to plan-years beg’g in 2015 • 50-99 FTE relief in ALE determination • Offer to 70% (rather than 95%) • Dependent offer not always required • §4980(a) ESRP with reduction of 80 (30) • January start date relief • Option to use only 6 mos of 2014 FTE data

  28. pp. 132-133Assessing the ESRP • Figure 5.5 – ESRP summary • ESRP not included on any tax return • ER will get certification of EEs rec’g PTC • ER contacted re: potential penalty & given chance to respond • Contact after due dates of 1040 & 1095-C • If ESRP applies, notice & payment demand with payment instructions

  29. pp. 131, 133Market Reforms Coverage offered by employers of anysize must meet market reforms or the employer is potentially subject to the § 4980D excise tax • List p. 131 and p. 133 • Group health plans: Insured or self-insured plans • N/A gov’t plans or plan for < 2 current employees • Relief for some small employer insured plans • No guidance yet on nondiscrimination rules

  30. pp. 134-135Employer Payment Plans (EPP) ER reimbursemt of EE premiums for individual ins. • Notice 2013-54: Does not meet market reforms • Reimb. PN premiums = plan not meet’g reforms • Notice 2015-17: • Small ER relief to 6/30/15 for EPP • 2% S corp SH relief until further guidance • N/A to PN reimbursement plans **Note: H.R. 5447 – small business HRA relief

  31. p. 135Excise Tax - § 4980D • $100/day per employee per failure – Form 8928 • Minimums and caps based on facts • IRS can waive all/part: Reasonable cause (not willful neglect) & penalty excessive as to failure • No tax if no one knew, or exercising reasonable diligence would have known of failure • No tax if reasonable cause & failure fixed w/in 30 days of knowing

  32. p. 136Small Employer Responsibilities Small = Employer with < 50 FTEs in prior yr • ACA reporting requirements • Offers self-insured coverage → Form 1095-B • Providing coverage • Ensure market reforms are met • Small Bus. Health Options Program - SHOP • Available in some states up to 100 EEs

  33. pp. 136-137Small Employer Responsibilities • SHOP • Offer single plan or choice of plans to EEs • Can be health, dental, alone or both • Must offer to all full-time EEs • Usually 70% participation needed to start plan outside the enrollment period (11/15-12/15) • Have office or worksite in state of SHOP used • Separate EIN = separate business

  34. p. 137Small Employer Responsibilities • Small Business Health Care Tax Credit • Employers with • < 25 employees, • Coverage through SHOP, • Average annual wages < $52,000 (indexed) & • Contribute uniform ≥ 50% EE’s self-only • Credit up to 50% of ER’s cost – Form 8941 • Can only claim for two consecutive years

  35. pp. 137-138Self-Employed Taxpayers & ACA • Same rules/restrictions as other employers • Must meet individual mandate for family • If no EEs, can secure thru Marketplace – PTC • If spouse ER offers affordable w/MV: No PTC • If has EEs, can secure thru SHOP if at least one EE (not family) enrolls in SHOP plan • Not eligible for FSA or HRA for EEs • Unless spouse bona fide EE (& not co-owner)

  36. pp. 138-141Summary of Individual Mandate • All US individuals, regardless of age, • Must have minimum essential coverage, • Qualify for a coverage exemption, or • Make an individual shared responsibility payment (ISRP) • MEC list – p. 138 • Exemptions – Fig. 5.6 - show on Form 8965 • Information returns showing MEC – Fig. 5.7

  37. p. 140Summary of Individual Mandate Individual Shared Responsibility Payment • 2016: Greater of: • Flat dollar amount $695/adult, $347.50/child per-month (max $2,085) or • 2.5% of household income in excess of the tax return filing threshold • ISRP capped at national average bronze premium: $223/person/month (max $1,115/mo.)

  38. p. 141Summary of Individual Mandate Individual Shared Responsibility Payment • Computation worksheet in Form 8965 instructions (not filed with return) • Report ISRP on line 61, 38, or 11 of return • IRS cannot take enforcement action on ISRP • Can collect by refund offset or request for payment

  39. p. 141Summary of Individual Mandate Premium Tax Credit (PTC) • Assistance based on income and family size on insurance purchased thru Marketplace • Choose PTC amount to receive in advance • Reconcile or claim PTC on Form 8962 • Cap on repayment if income < 400% of FPL • No APTC if prior year reconciliation not made • Pub 974 – Premium Tax Credit (PTC)

  40. p. 142PTC Calculation Year of Marriage Alternative method available if: • Each spouse unmarried on January 1 • Were married as of December 31 • File a joint return • Member of tax family enrolled in QHP before first full month of marriage • APTC was paid for member of in tax family • Excess APTC on W/S 3 or HHI ≥ 401% FPL

  41. p. 142PTC Calculation Year of Marriage Alternative PTC Method: • To reduce payback of APTC received prior to marriage • NOT to determine PTC if no APTC received during the year • Couples most likely to benefit: • Married late in the year • Different incomes & lower one had the APTC

  42. pp. 142-143PTC Calculation Year of Marriage • Complete Part I, Form 8962 • If line 5 ≥ 401%, taxpayers eligible • If line 5 ≤ 400%, to W/S 3 in Form 8962 Inst. • Combines all #’s from Forms 1095-A • If total APTC > PTC, taxpayers eligible • Any shared-policy allocations are made before applying the alternative method • Determine alternative family size for each

  43. p. 143PTC Calculation Year of Marriage • Up to 8 possible steps in calculation • Which steps are completed depends on who enrolled any member of the household • Steps direct TP to complete Worksheets • Must determine alternative family size for taxpayer and spouse • Cannot duplicate members • If dependent of both, either may include

  44. pp. 143-144PTC Calculation Year of Marriage • W/S I: Taxpayer’s alternative monthly contribution using ½ of household income • W/S II: Taxpayer’s alternative monthly credit amounts for premarriage months using W/S I • W/S III: Spouse’s alternative monthly contribution using ½ of household income • W/S IV: Spouse’s alternative monthly credit amounts for premarriage months using W/S III

  45. p. 144PTC Calculation Year of Marriage • W/S V: Totals alternative credit amounts from W/S II and W/S IV and total credit amounts in the regular calculation on month-by-month basis (premarriage months) If total alternative credit amounts > total regular credit amounts, alternative calculation is beneficial (continue to steps 6-8)

  46. p. 144PTC Calculation Year of Marriage • Complete Part V, Form 8962, lines 35 and 36 • Complete Form 8962 lines 12-23 using a combination of alternative and regular amounts • (a) & (b): totals of 1095-A amounts • (c): W/S for pre-marriage, 8b for other mos. • (d): (b) minus (c) • (e): W/S V amts. for pre-marriage, smaller (a) or (d) for other months • Complete lines 24-29 as appropriate

  47. pp. 145-149PTC Calculation Year of Marriage Example 5.12 • Paulette and Quentin married July 18, 2015 • Paulette: QHP 1/1-7/31, F1095-A, Fig. 5.8 • Quentin (+2): QHP 1/1-7/31, F1095-A, Fig. 5.9 • Paulette/Quentin (+2 kids) 8/1-12/31, Fig. 5.10 • Household income: $75,000

  48. p. 149-150PTC Calculation Year of Marriage • Eligible for alternative method? • Completed lines 1-8, Form 8962 - Fig. 5.11 • Answered Table 4 questions - Fig. 5.12 • Line 5 Form 8962 < 401 - W/S 3 - Fig. 5.13 • Excess APTC → Eligible for method • Alternative family size? • Paulette: One • Quentin: Three

  49. p. 151-152PTC Calculation Year of Marriage • W/S I – Paulette Figure 5.14 • Same calculation as lines 1-8 Form 8962 • Monthly contribution: $299 • W/S II – Paulette Figure 5.15 • Pre-marriage months only • Calculation of alternative PTC: $134/month • W/S III – Quentin Figure 5.16 $182/month • W/S IV – Quentin Figure 5.17 $651/month

  50. p. 153-154PTC Calculation Year of Marriage • W/S 5 – January thru July • A: Total of Alternative PTC from W/S II & IV • B: Total of regular PTC from Worksheet 3 (100% of HHI and family of 4) • Alternative credit total > regular credit total → method beneficial • Complete Part V, Form 8962 – Figure 5.19

More Related