THE AFFORDABLE CARE ACT
“WHAT’S IN IT FOR MY SMALL
BUSINESS?”
TAX CONSIDERATIONS
December 10, 2013
berrydunn.com | GAIN CONTROL
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)
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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 incur income & payroll taxes
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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 and/or Dependents
– A way to leave Spouse and Dependents credit eligible
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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.
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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
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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)
• They may be integrated with an ACA compliant group health
plan
• Integration with an individual policy is not allowed
REVIEW ALL SUCH PLANS BEFORE 1/1/2014
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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
• ACA market reforms do not apply to such plans
• Certain Health FSAs if carefully designed (excepted benefits)
• Employer makes other group health coverage available
• Employer contributions to FSA must be <$500 or no more than 100% of
Employee deferrals (i.e., $/$ match)
• Possible Exception: Use of a premium only plan (POP) for pre-tax
individual insurance premiums
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INTERESTED IN MORE?
Contact Roger Prince, a Senior
Manager in BerryDunn’s Employee
Benefit Consulting Group, to learn
more.
rprince@berrydunn.com
Phone
207.541.2314
Website berrydunn.com
Blog
berrydunn.com/firmfooting
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