The IRS has warned of costly consequences to an employer that doesn’t establish a health insurance plan for its employees, but reimburses them for premiums they pay for health insurance. It’s an attractive option on the surface – avoiding establishing a costly group health plan while providing your employees the means to buy their own insurance. But it has hit a major snag.
According to the IRS, these arrangements are considered to be group health plans subject to the market reforms of the Affordable Care Act. These reforms include the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing. Simply giving your employees the money to buy their own individual policies doesn’t mean you’ve cleared this hurdle.
Consequently, such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee. That money adds up quickly. The best thing to do is to reach out to a well qualified insurance professional to determine what, if any, coverage you are required to provide and whether what you’re currently doing will meet those obligations.
About the author
Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.
His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.
He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.
Late last week, the Obama Administration announced that it will delay until 2015 the penalty imposed on employers for not providing “minimum essential health care coverage” to its employees as part of the Affordable Care Act. The penalty would have applied to employers with 50 or more full time equivalent employees starting in 2014.
Based on the press release by the Treasury Department, the agency in charge of imposing the penalty, as well as writing the regulations explaining how to comply with the law, there has been significant push-back from the business community about the penalty. The main concerns raised are the lack of clear guidance from the Treasury department on a penalty that was to go into effect in five short months, as well as the complexity of reporting proposed by the department and the burden that reporting would impose on employers.
The “individual mandate” requiring individuals to have health insurance or be assessed a penalty, is still set to go into effect at the beginning of 2014. The requirement for employers with more than 250 employees to report the value of employer-provided health insurance on the employee’s W2 is also still scheduled to go into effect in 2014.
Based on the implementation of the Affordable Care Act to date, it would not be surprising to see more delays announced on other parts of the law in the future. The best advice when working with this law is to determine how it will affect your business and work to comply with the law as it stands at the end of the year. This also happens to be the advice of the Treasure Department as well.
We’re here to help, as we have been for more than 30 years.
This time of year we start talking to our clients about tax planning, but this year things are taking a somewhat different twist. With the November elections still to be determined, and additional parts of the Affordable Care Act going into effect in 2013, below are a couple of new things we’re thinking about this planning season.
Are you considering selling stocks, bonds, or investment real estate at a considerable gain? If so, you may want to consider doing it at the end of 2012, because in 2013, you may find yourself paying an additional 3.8% tax on those gains.
If you own a business, are you considering a bonus for yourself? If so, doing that in 2012 may save you from paying an additional .09% in Medicare tax which goes into effect for certain taxpayers in 2013.
If you’re under age 65, it may pay to push as many deductible medical expenses into 2012 as possible, as less of them will be deductible in 2012.
These are just a few of the items in the wind for the end of this year. If you’re a client of ours, expect to see a tax planning letter with even more ideas in the coming weeks.
The ruling by the Supreme Court issued a couple weeks back had even news organizations confused – reporting it was struck down at first, then changing the story to the act being upheld, which was the correct reading. So what does this mean for all of you?
There are some still holding out hope for the Republican charge to repeal the act entirely, especially with the November elections coming. Assuming they are unable to do so, here are some of the key parts of the act that will go into effect starting in 2013.
The amount employees can set aside in Flexible Spending Accounts (FSA’s) will be limited to $2,500 per year
The amount of Medicare tax withheld from paychecks will increase from 1.45% to 2.35% for single taxpayers earning more than $200,000 in wages, and for couples earning $250,000 or more in combined wages.
Medical expenses will be deductible to the extent the exceed 10% of AGI, rather than 7.5% currently.
We’ll keep our eyes open to see if the repeal effort gains traction, and keep you updated with all the latest developments.
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