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Health Care Reform Update October 12, 2010 - IRS Releases Draft W-2 Form for 2011; Announces Relief for Employers
Starting in tax year 2011, the Affordable Care Act requires employers to report the value of the health insurance coverage they provide employees on each employee's annual Form W-2. However, to provide employers the time they need to make changes to their payroll systems or procedures in preparation for compliance with this requirement, the IRS will defer the reporting requirement for 2011, making that reporting by employers optional in 2011.
The revised Form W-2 for 2011 is now available in draft for viewing. The draft form includes the codes that employers may use to report the cost of coverage under an employer-sponsored group health plan.
Read the full IRS Press Release.
Health Care Reform Update July 1, 2010 - HHS Secretary Sebelius Announces New Pre-Existing Condition Insurance Plan
Affordable Care Act Program to Provide Temporary Coverage for Americans Without Insurance Due to Pre-Existing ConditionsNow Through 2014 When the New Insurance Exchanges Are Established.
The U.S. Department of Health and Human Services (HHS) announced today the establishment of a new Pre-existing Condition Insurance Plan (PCIP) that will offer coverage to uninsured Americans who have been unable to obtain health coverage because of a pre-existing health condition.
The Pre-Existing Condition Insurance Plan, which will be administered either by a state or by the Department of Health and Human Services, will provide a new health coverage option for Americans who have been uninsured for at least six months, have been unable to get health coverage because of a health condition, and are a U.S. citizen or are residing in the United States legally.
Read the full HHS Press Release.
Health Care Reform Update June 15, 2010 - New Regulation on “Grandfathered” Health Plans under the Affordable Care Act
The U.S. Departments of Health and Human Services, Labor and Treasury issued a new regulation that makes good on President Obama’s promise that Americans who like their health plan can keep it.
The new regulation protects the ability of individuals and businesses to keep their current plan while providing important consumer protections that give Americans – rather than insurance companies – control over their own health care. The new regulation also provides stability and flexibility to insurers and businesses that offer health insurance coverage as the nation transitions to a more competitive marketplace in 2014 when businesses and consumers will have more affordable choices through exchanges.
Read the full HHS Press Release.
Read the Fact Sheet: Keeping the Health Plan You Have: The Affordable Care Act and “Grandfathered” Health Plans
Health Care Reform Update April 14, 2010 - A Timeline of Anticipated Changes
In addition to making several significant changes to the Patient Protection and Affordable Care Act (PPACA), President Obama signed the Health Care and Education Reconciliation Act of 2010 into law on March 30, 2010.
The Health Care Reform Timeline shows a breakdown of how and when the Health Care Reform law will be implemented over the next 8 years. It reflects the health reform bill with reconciliation amendments passed by the House and the Senate. Please click on the timeline for details.
On March 23, 2010 President Barack Obama signed the healthcare reform bill.
As the healthcare reform bill is being finalized, MMC will keep a keen eye on the situation and strive to offer you the latest and most current information.
At this time, the bill is with the Senate for clearance and finalization, whereby an identical bill must be approved by both chambers.
The information below depicts an outline of the bill in its current form, though amendments and changes are expected before the process concludes. Amidst the ongoing changes surrounding the bill, please be reminded that MMC intends to continue offering quality healthcare plans to all of our clients as we have done for more than 26 years.
Our team of impartial experts will continue to stay informed of the ongoing developments and provide you with the latest updates concerning this topic as they unfold.
Please see the following tips from Whitehouse website for additional information.
"I own a small business."
"I have insurance through my work."
"I do not have insurance."
"I buy my own insurance."
"I have Medicare."
The Benefit to Small Business - Tax Credit for Business Owners
Many small businesses stand to benefit from health care reform. One clear benefit of health care reform to business owners is the credit offered to companies of fewer than 25 FTEs (Full-time Equivalent Employees).*
* Please reference the information and examples below for more details.
| | Small Business Health Care Tax Credit |
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| Intro |
The new law, the Patient Protection and Affordable Care Act, was passed by Congress and was signed by President Obama on March 23, 2010. The new health reform law gives a tax credit to certain small employers that provide health care coverage to their employees, effective with tax years beginning in 2010. |
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Goal
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The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have.
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| Eligible Employers |
- Fewer than 25 full-time equivalent employees (FTEs)*
- Average annual wages* must be less than $50,000 per FTE
- Contribute at least 50% of each employee's premium
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Maximum Credit Percentage
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The maximum credit percentage
of the employer's premium expenses |
Tax Year |
| 2010 - 2013 |
2014 |
| Eligible Employers |
35% |
50% |
| Eligible Tax-Exempt Employers |
25% |
35% |
The maximum credit goes to smaller employers — those with 10 or fewer FTEs — paying annual average wages of $25,000 or less. To learn more about how to calculate tax credits, please download " Health Care Tax Credit Details".
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Notes
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* FTEs and Average Annual Wages
- The number of an employer’s FTEs is determined by dividing (1) the total hours for which the employer pays wages to employees during the year (but not more than 2,080 hours for any employee) by (2) 2,080. The number is rounded to next lowest whole number.
- The amount of average annual wages is determined by first dividing (1) the total wages paid by the employer to employees during the employer’s tax year by (2) the number of the employer’s FTEs for the year. The result is then rounded down to the nearest $1,000 (if not otherwise a multiple of $1,000). Wages means wages as defined for FICA purposes (without regard to the wage base limitation).
- To determine if your small business or tax exempt organization qualifies for the Small Business Health Care Tax Credit, please follow the IRS three simple steps fact sheet.
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Examples of the Health Care Reform Tax Credit
To learn more about how to calculate tax credits, please download "Health Care Tax Credit Details".
| Example 1 | Company A with 10 Employees |
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2010 Tax Credit
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$24,500
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• Employees: 10
• Wages: $250,000 total, or
$25,000 per worker
• Employee Health Care Costs:
$70,000
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Calculate 2010 Tax Credit
Step 1: An eligible employer's maximum credit percentage is 35%.
-> $70,000 * 35% = $24,500
Step 2: Employees number does not exceed 10 so there is no credit reduction.
Step 3: Avg. annual wages does not exceed $25k so there is no credit reduction.
Step 4: Total credit reduction = $0
Step 5: $24,500 - $0 = $24,500
2010 Tax Credit: $24,500 (35% credit)
2014 Tax Credit: $35,000 (50% credit)
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| Example 2 | Company B with 12 Employees |
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2010 Tax Credit
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$22,400
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• Employees: 12
• Wages: $360,000 total, or
$30,000 per worker
• Employee Health Care Costs:
$96,000
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Calculate 2010 Tax Credit
Step 1: An eligible employer's maximum credit percentage is 35%.
-> $96,000 * 35% = $33,600
Step 2: Credit reduction for FTEs in excess of 10
-> $33,600 * (2/15) = $4,480
Step 3: Credit reduction for average annual wages in excess of $25,000
-> $33,600 * ($5,000/$25,000) = $6,720
Step 4: Total credit reduction = $4,480 + $6,720 = $11,200
Step 5: $33,600 - $11,200 = $22,400
2010 Tax Credit: $22,400 (35% credit)
2014 Tax Credit: $36,800 (50% credit)
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Calculate your tax credit Now!! (Source: Center for American Progress)
* This calculator is applied to small business employers, but not tax-exempt employers.
Please see the Tax-Exempt Employer example below.
| Example 3 | Non-Profit Company C (Tax-Exempt Employer) with 9 EEs |
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2010 Tax Credit
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$18,000
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• Employees: 9
• Wages: $198,000 total, or
$22,000 per worker
• Employee Health Care Costs:
$72,000
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Calculate 2010 Tax Credit
Step 1: An eligible tax-exempt employer's maximum credit percentage is 25%.
-> $72,000 * 25% = $18,000
Step 2: Employees number does not exceed 10 so there is no credit reduction.
Step 3: Avg. annual wages does not exceed $25k so there is no credit reduction.
Step 4: Total credit reduction = $0
Step 5: $18,000 - $0 = $18,000
2010 Tax Credit: $18,000 (25% credit)
2014 Tax Credit: $25,200 (35% credit)
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For any additional questions, please feel free to contact us. MMC will continue to stay on top of new developments and keep you informed.
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