Nicole Simpson, CPA
Partner
Regier Carr & Monroe, LLP
(520) 624-8229
nsimpson@rcmllp.com
Jay Heydt and Chris Gordon
Crest Insurance
(520) 784-7655
jheydt@crestins.com

2010
• Small Employer Health Insurance Credit

2012
• Additional W-2 Reporting

2013
•
Additional Medicare Tax
 .9% on earned income
 3.8% on unearned income

2014
•
Insurance Requirements
 Requirements of a small employer
 Requirements of a large employer
 The Exchanges: What Do They Mean to You.
 2010-2013: Eligible
Small Employers that
purchase health insurance for their
employees.
 2014-2015: Eligible
Small Employers that
purchase health insurance for their
employees through the insurance
exchange.
 Eligible
employer:
• 25 or fewer full-time equivalent employees (FTE)
• Average annual wages of $50,000 or less per FTE.
• Pays at least 50% of the health insurance premium
costs.
 The
credit is up to 35% of the eligible
employer paid health insurance premiums
in 2010-2013. (50% for tax years beginning
after 2013)


Beginning in 2012, large employers must report
the aggregate cost of health insurance made
available through a group plan.
Aggregate cost:
• Portion paid by employer and portion paid by employee
• Amount paid for any person covered under the plan
(spouse, dependents)

The cost is reported in box 12, using code DD

Penalty for not complying is up to $100 per W-2.


Beginning in 2013, individuals must pay an
additional .9% Medicare tax on wages in excess of
$200,000 single ($250,000 married filing jointly
and $125,000 married filing seperate).
Employer: The employer must begin withholding
the additional .9% in the pay period the wages
exceed the $200,000.
• $1 - $200,000 = 1.45%
• $201,000 – unlimited = $2.35%

Employee: The employee is responsible for paying
additional .9% if not withheld by employer or if
self-employed.
Under-withheld
Wages
.9% withheld
Husband
$200,000
$0
Wife
$175,000
$0
Total Earned Income
$375,000
Married Filing Jointly Threshold
$250,000
Excess of Threshold
$125,000 = $1,125
Over-withheld
Wages
.9% withheld
Husband
$0
$0
Wife
$245,000
$45,000 = $405
Total Earned Income
$245,000
Married Filing Jointly Threshold
$250,000
Excess of Threshold
$0

Self-Employed Individuals are also subject to the
.9% additional medicare tax.

Income from self-employment is added to Form W2 wages in calculating amounts over thresholds.

Losses from self-employment do NOT reduce W-2
wages in calculating amounts over thresholds.

If multiple W-2s and multiple sources of selfemployment income, then all W-2s are netted
together and all self-employment is netted
together.
Income From Self-Employment
Wages
.9% withheld
Husband – W-2
$200,000
$0
Wife – Schedule C
$175,000
$0
Total Earned Income
$375,000
Married Filing Jointly Threshold
$250,000
Excess of Threshold
$125,000 = $1,125
Losses From Self-Employment
Wages
Husband – W-2
$300,000
Wife – Schedule C
$(75,000)
Total Earned Income
$300,000
Married Filing Jointly Threshold
$250,000
Excess of Threshold
$50,000 = $450
.9% withheld
$100,000 = $900
 Beginning
in 2013, 3.8% Medicare tax is
imposed to all or a portion of net
investment income.
 The
tax is imposed when Adjusted Gross
Income is over $200,000 single, $250,000
married filing jointly ($125,000 married
filing separate)
 This
tax applies to individuals as well as
trusts and estates.
 Individuals
with income over the
thresholds must pay 3.8 % Medicare tax on
the LESSER:
• Net investment income
• Modified Adjusted Gross Income (MAGI) over
the threshold.
 Trusts
must pay the tax on the lesser of
undistributed net investment income or
excess of AGI over the highest tax bracket
begins ($11,650 in 2012).
MAGI
$400,000
$260,000
Net Investment Income
$50,000
$50,000
MAGI
$400,000
$260,000
Married Filing Jointly Threshold
$250,000
$250,000
Excess of Threshold
$150,000
$10,000
Lesser of Excess of Threshold OR
Net Investment Income
$50,000
$10,000
 Net Investment Income:
• Net Income from:
 interest, dividends, royalties and rents
 passive activity
 Net Gain from the disposition of nonbusiness
property or property held in passive activity
 Any income, gain or loss attributable to the
investment of working capital.
• Does NOT include tax-exempt bond interest,
distributions from retirement plans, veterans’
benefits
Medicare Tax
Wages (H&W)
$270,000
Capital Gain
$100,000
MAGI
$370,000
Married filing jointly threshold
$250,000
Excess over threshold
$120,000
Lesser of Excess of Threshold OR
Net Investment Income
$100,000
Total Additional tax paid
$20,000 x .9% = 180
$100,000 x 3.8%
=$3,800
$3,980
Agenda
•
•
•
•
•
Components of Reform to Consider
Requirements of a small employer
Requirements of a large employer
The Exchanges – What do they mean?
Do we Pay or Play?
Changes Already in Effect
Rate Review (2010)
Grandfathering (2009)
Small business Tax Credits (2010)
“Patient Bill of Rights” (2010)
• Network access – PCP Choice
• Independent appeals process
• No pre-ex for kids <19
• Coverage for dependents up to age 26
• 100% coverage for wellness/prevention
• No Rescissions
• No Annual and lifetime limits
Medical Loss Ratios – MLR (2010)
• Defines “maximum” insurance company profits
• 15% Large groups
• 20% small groups
• Requires refunds to groups is profit is too high
Pre-Existing Condition Insurance Plan
National high risk pool
(PCIP)
Established by HHS
Started July 2010. Ends
2014.
$5B set aside
https://www.pcip.gov/
2013 – We’re Already Here
• Health FSA Accounts
•
•
Contribution Limits
Plan Amendments
• Increases in Medicare Payroll Taxes
• Increases in Medicare Contribution Tax
• Mandatory Form W-2 Reporting (100+ ee’s)
• Health Care Exchange Notices
Coming Soon to a Policy Near You
Guaranteed Issue - Insurers must issue a
policy to any applicant, regardless of health
condition. No pre-existing condition
limitations.
Community Rating – Everyone is charged
essentially the same amount for insurance.
Variations for geography, smoking and age
(3:1), was 7:1.
The Individual Mandate
All individuals must have coverage. If
not through work or the government,
then through the Individual market.
The Individual’s Penalty
• For not having “minimum essential coverage”
• Not more than the price of the lowest coverage option
• Some exceptions
Flat Fee (per person)
• Set at $95 for 2014
• $325 in 2015
• $695 in 2016
• 2017 tied to inflation (CPI)
Percent of Income
• 0.5% for 2014
• 1% in 2015
• 2.5% in 2016
Dangerous Equation
Bad News for Insurance Rates
• Bracing for rate double digits increase in 2014. (20%-60%)
• What’s gives? It’s the policymakers. It’s ObamaCare…
• Premium hikes are a consequence of policies.
• Premiums will rise because, in the end, everything has a price.
• Prohibition of traditional underwriting is a major and costly provision.
• Washington can try to force health plans to price insurance below cost,
but then health plans will lose money and move out of markets.
• To keep the insurers whole, and accommodate the new rules, the cost of
insurance must go higher.
• That re-pricing is what’s coming this fall.
Preparing for 2014
• Is your plan Grandfathered?
• Are you Compliant with the law?
• How many FT employees do you have?
• Are you a large or small employer?
• Exchanges – Lots still unknown
• Decision Time – Do we Pay or Play?
Grandfathered Health Plans
Not required to comply with various
components of Health Care Reform:
•
•
•
•
•
Non-discrimination
Clinical Trials (self funded plans)
Preventative health services
Choice of Primary Care Physician
Dependent Coverage (until 2014)
Discrimination
Are your benefits currently:
• Different by class of employee?
• Management Carve Out
• Have different contributions by class?
• Management Vs. “Others”
• Different waiting periods by class?
• Management Vs. “Others”
If your answer is “YES” to any of these…then you
will not be compliant with the law in 2014
What is a FT Employee?
•
Minimum of 30 hours per week = Full Time Employee
• Or 130 hours per month
•
Full Time Equivalent Employee (FTE)
• Total PT hours worked per month / 120 = # of FTE
•
Seasonal:
- A worker who performs labor or services on a seasonal
basis, as defined by the Secretary of Labor and retail
workers employed exclusively during holiday seasons.
How Many FT Employees do I have?
•
Minimum of 30 hours per week = Full Time Employee
• Or 130 hours per month
•
Full Time Equivalent Employee (FTE)
• Total PT hours worked per month / 120 = # of FTE
Calculating FTE - Example
• You employ 35 regular FT employees & 30 PT employees
• In total…PT employees work 2,400 hours in a month
• 2,400 / 120 = 20 FTE’s
• 35 FT employees + 20 FTE employees = 55 Total FTEs
• Under PPACA
• If you have 50+ FTEs you seen as a large employer
• If you have less than 50 FTEs you are seen as a small employer
PPACA & the Small Employer
• Mandate does Not Apply to Employers with < 50 FTEs
• Plans must have:
• $2,000 Max Deductible
• $6,500 Maximum Out of Pocket
• Details still emerging
• No waiting period in excess of 90 days
• Qualified Health Plan
• HIPAA bona fide wellness program
• Will be able to purchase group plans through the exchange
A Large Employer = 50+ FTEs
Shared Responsibility Penalty
(Penalty for not offering health coverage)
• If an employer fails to provide its full-time equivalent
employees (and their dependents) the opportunity to enroll
in “minimum essential coverage,”
• Employer penalty is $2,000 annually for each full-time
equivalent employee in the workforce (in excess of 30).
• Waiver for penalty for the first 30 FTEs
• Ex. – 300 FTEs then penalty for 270 FTEs ($540k)
• Ex. - 100 FTEs then penalty for 70 FTEs ($140k)
• Ex. – 60 FTEs then penalty for 30 FTEs ($60k)
• This penalty is non-deductible.
• Penalty does not offset the cost of employee coverage.
Large Employer
Unaffordable Coverage Penalty
Assuming an employer offers minimal essential
coverage to all FTE employees and dependents
When…
• One or more full-time employees enrolls for coverage in
an exchange and qualifies for a premium tax credit or
cost-sharing reduction because:
• Employee’s share exceeds 9.5% of W2 income
Then…
• Employer Penalty = $3,000 per employee receiving tax
credit at the exchange
Calculating Safe Harbor Limits
Employee Only Rate $325.00
Hourly Wage
$7.65
$8.15
$8.65
$9.15
$9.65
$10.15
$10.65
$11.15
$11.65
$12.15
$12.65
$13.15
$13.65
$14.15
80%
6.54%
6.13%
5.78%
5.46%
5.18%
4.93%
4.69%
4.48%
4.29%
4.12%
3.95%
3.80%
3.66%
3.53%
Employer Contribution
70%
60%
9.80%
13.07%
9.20%
12.27%
8.67%
11.56%
8.20%
10.93%
7.77%
10.36%
7.39%
9.85%
7.04%
9.39%
6.73%
8.97%
6.44%
8.58%
6.17%
8.23%
5.93%
7.91%
5.70%
7.60%
5.49%
7.33%
5.30%
7.07%
50%
16.34%
15.34%
14.45%
13.66%
12.95%
12.32%
11.74%
11.21%
10.73%
10.29%
9.88%
9.51%
9.16%
8.83%
2014 Safe Harbor Limits
Employee Only Rate $455.00
Hourly Wage
$7.65
$8.15
$8.65
$9.15
$9.65
$10.15
$10.65
$11.15
$11.65
$12.15
$12.65
$13.15
$13.65
$14.15
$14.65
$15.15
$15.65
$16.15
$16.65
$17.15
$17.65
$18.15
80%
9.15%
8.59%
8.09%
7.65%
7.25%
6.90%
6.57%
6.28%
6.01%
5.76%
5.53%
5.32%
5.13%
4.95%
4.78%
4.62%
4.47%
4.33%
4.20%
4.08%
3.97%
3.86%
** Represents 40% increase in 2014
Employer Contribution
70%
60%
13.73%
18.30%
12.88%
17.18%
12.14%
16.18%
11.48%
15.30%
10.88%
14.51%
10.34%
13.79%
9.86%
13.15%
9.42%
12.56%
9.01%
12.02%
8.64%
11.52%
8.30%
11.07%
7.98%
10.65%
7.69%
10.26%
7.42%
9.89%
7.17%
9.56%
6.93%
9.24%
6.71%
8.95%
6.50%
8.67%
6.31%
8.41%
6.12%
8.16%
5.95%
7.93%
5.79%
7.71%
50%
22.88%
21.47%
20.23%
19.13%
18.13%
17.24%
16.43%
15.70%
15.02%
14.40%
13.83%
13.31%
12.82%
12.37%
11.95%
11.55%
11.18%
10.84%
10.51%
10.20%
9.92%
9.64%
When Penalties Don’t Apply
• Employee is in their waiting period
(less than 90 days)
• Variable Hour employee in their
measurement period or has
worked less than 30 hours per
week on average.
The Exchanges
The only place that tax credits and
cost-sharing subsidies will be available.
•
Tax credits to 400% of Federal Poverty Level (FPL)
•
Subsidies to 250% of FPL
•
Tax Credits from 250% to 400% of FPL
•
Medicaid does not entitle an individual to a subsidy or tax
credit
2014 – Exchange Subsidies
2012 Federal Poverty Levels:
• Single Person $11,170
• Family of 4 $ 23,050
2014…Decisions…Decisions
Pay or Play?
How will this change your business?
We can help to answer some big questions for you…
1. Is my plan as it is today in compliance?
2. What is the real net cost of my plan today?
3. What will it cost me if I cancel my plan and send my
employees to the exchanges?
4. What penalties am I subject to based on my plan today?
5. How much will it cost me to make the changes necessary
to get into compliance?
Chris Gordon & Jay Heydt
(520) 881-5760 office
cgordon@crestins.com
jheydt@crestins.com
Locally Owned and Operated
Since 1975 (Mueller Insurance)
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