MACETax Implications of the

Patient Protection and Affordable Care Act May 21, 2015

Presented by: Scott Crane

850 Cassatt Road, Suite 310 Berwyn, PA 19312 610.251.0670www.tycorbenefit.com

The information contained in this presentation is intended to make employer aware of their upcoming responsibilities and provide Tycor® clients and business associates with guidance on the new health reform law. This summary does not constitute legal advice.

The Patient Protection and Affordable Care Act Declared a tax by the Supreme Court of the United States.

What Does that Mean to You?This presentation is good for 1 tax credit!

Supreme Court DecisionJune 28, 2012

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Tax Implications of thePatient Protection and Affordable Care Act

Tax Topics Covered

Reinsurance Tax

PCORi Tax

Play or Pay Taxes (IRS Section 6055 and 6056)

W-2 Reporting

Employer Payment Plans

Cadillac Tax

Small Employer Tax Credit

Health Insurance Subsidy Paybacks

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Reinsurance Taxes Employers – All Size Groups

The reinsurance program is designed to help stabilize premiums in the individual health insurance market.

In 2015, Group Fully-Insured and Self-Insured Plans are required to pay a fee of $3.67 PMPM or $44 annually per covered family member.

The Reinsurance Tax is already built into most fully-insured plan premiums.

Employers with self-insured plans must file and pay.

HHS requires an annual fee collection with plans reporting enrollment counts by November 15 to HHS.

HHS would then issue a payment request to the plan no later than December 15.

Plans will have 30 days from the date of the notice to submit payment.

Integrated HRA’s Could Be Exempt.

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PCORi Tax Employers – All Size Groups

The Patient-Centered Outcomes Research Trust Fund fee is a tax on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans that helps to fund the Patient-Centered Outcomes Research Institute (PCORI).

The tax applies to Fully-Insured and Self-insured plans.

The adjusted dollar amount for plan years beginning November 1, 2013 through October 1, 2014 is $2.08 (up $0.08).

To Be Filed no later than 7/31 each year.

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PCORi Tax Employers – All Size Groups

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Plan PCOR Fee Requirement

Health Flexible Spending Arrangement (FSA)

No, as long as FSA is HIPAA compliant

Health Savings Account (HSA) No. The HDHP is covered the medical benefit

Health Reimbursement Arrangement (HRA) – Stand Alone

Yes

Health Reimbursement Arrangement (HRA) – Integrated

Yes. When integrated with a self-insured plan of the same sponsor, PCOR fee is based on a combined life count. When integrated with an insured plan, PCOR fee is determined separately as if it was a stand-alone HRA.

COBRA coverage Yes

Dependent Care Account (DCA) No

Commuter Benefit Account (CBA) No

* Refer to Health Reform: Research Fee Adjusted Published September 24, 2014 available electronically

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Fully-Insured Employers

The Health Insurance Carrier is required to file Form 1095-B with the IRS and to taxpayers about individuals (this means employee and covered dependents) who are covered by minimum essential coverage (any health insurance coverage recognized by HHS) and therefore are not liable for the individual shared responsibility penalty.

Most carriers have already implemented programs to collect Tax ID numbers of all members for the reporting required in Section 6055.

Self-Insured Employers (Section 6056)

Employers (including government employers) subject to the employer shared responsibility provisions sponsoring self-insured group health plans will report this 6055 information about the coverage in Part III of Form 1095-C (under 6056 regulations).

6055 Reporting Individual Mandate

Plans Beginning On or After January 1, 2015 – Reported in 2016Applies to All Employers Regardless of Size

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6055 Reporting 1094-B (Carrier Transmittal)

The carrier will use the 1094-B as a “Cover Letter” when they submit all the copies of the employee’s 1095-B to the IRS. This could include all members covered by the carrier.

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6055 Reporting 1095-B (Prepared by Carrier; sent to Each Employee and IRS)

Employees that show they had qualified

coverage in any given month do not have to pay the individual mandate penalty for that month.

All covered dependents must be listed.

Employer Mandate Tax Penalties

Employers with 50 or More Employees

If an employer DOES NOT PROVIDE its full-time employees (and their children dependents) the opportunity to enroll in “minimum essential coverage” plan, then the Employer Excise Tax Penalty = $2,000 for each of its full-time employees

If the employee only share of premium exceeds 9.5% of household income, then the Employer Penalty = $3,000 for each of employee in this situation.

These Excise Tax Penalties are NOT Tax Deductible.

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Tax Penalties Postponed to 2015

Remember

6056 Reporting Employer Mandate

Plans Beginning On or After January 1, 2015 – Reported in 2016Applies to All Employers Regardless of Size

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1. a.k.a. Minimum Essential Coverage Reporting

2. Applies to Plans Beginning On or After January 1, 2015

3. Employers with 50 or more full-time employees (including full-time equivalent employees) use Forms 1094-C and 1095-C to report the information required under section 6056 about offers of health coverage and enrollment in health coverage for their employees.

4. Employers that offer employer-sponsored self-insured coverage also use Form 1095-C to report information to the IRS and to taxpayers about individuals who are covered by minimum essential coverage under the employer plan and therefore are not liable for the individual penalty.

5. The employer is required to file Forms 1094-C and 1095-C with the IRS and to furnish a copy of Form 1095-C to the employee.

6. The return and transmittal form must be filed with the IRS on or before February 28 (March 31 if filed electronically) of the year following the calendar year of coverage.

Employer Name, Address, Tax Identification Number

Certification as to whether the employer offers its full-time employees (and dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan

The length any waiting period

Show that Health Insurance was available by employee by month

Monthly premiums for the lowest-cost option by employee

The employer plan’s share of covered health care expenses

The number of fulltime employees

Each full time employee name, address, and tax identification number

The employer will have to provide information about the plan for which the employer pays the largest portion of the costs (and the amount for each enrollment category- Single, Employee/Children, Employee/Spouse, Family)

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6056 ReportingInformation Needed

1094-C and 1095-C

Notice

This report will become more

complex in 2016 when employers with

51-100 employees will have individualized

pricing based on age and tobacco usage

like the 2-50 employee groups have now.

Each dependent could have a different

premium

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6056 Reporting1094-C IRS Employer Summary Information

(Page 1 of 3)

ALEA ApplicableL LargeE Employer

51 or more full-time equivalent

employees

If line 21 is checked Yes, you

must complete page 3

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Reports which months the employer offered

health insurance that met minimum essential

coverage.

Note the requirement to report by month.

6056 Reporting1094-C IRS Employer Summary Information

(Page 2 of 3)

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This section is only used if the employer is part of an Aggregated ALE Group. See Line 21

An Aggregated ALE Group refers to a group of ALE members that treated as a single employer under section 414(b), 414(c), 414(m), or 414(o).

6056 Reporting1094-C IRS Employer Summary Information

(Page 3 of 3)

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6056 Reporting1095-C (Proof of Coverage Sent to Employee and IRS)

Note the requirement to report by month.

If the employer is self-insured, they must include all covered

dependents.

Over age 21 dependents need proof of coverage

for their tax filing.

Value of Life InsuranceEmployees that are provided more than $50,000 of group life insurance by the employer are required to pay tax on an equivalent age-rated premium as determined by the federal government. Owners (except for C-corporations) must pay a tax on the full value of the insurance.

Employer Contributions to Health Savings AccountsWhen an employer makes any contribution to an employee Health Savings Account (HSA), the employer must report that amount on the employees W-2 in Box 12 Code W.

Value of Health InsuranceEmployers that issued 250 or More W-2’s are responsible to report the value of health insurance on W-2’s for the 2014 tax year, which would be issued in 2015.

The IRS regulations (Notice 2012-9) still exempts employers with fewer than 250 W-2’s to file that report . HHS/DOL/IRS announced that they will give smaller employers a 6-month notice before they will need to comply.

W-2 Reporting

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Does your company (combine all common ownership companies) generate 50 or more W-2’s?

NO - Under 50 EmployeesYES – 50 or More Employees

Do You Have a Self-Insured Medical Plan?

NO YES

The employer has no Responsibility for:1. W-2 Reporting*2.6055 Reporting3.6056 Reporting

Did You Distribute 250 or More W-2’s for 2014?

The employer has no Responsibility for:1. W-2 Reporting*2.6056 Reporting

The employer is Responsible for:1.6055 Reporting

NOYES

Do You Have a Self-Insured Medical Plan?

The employer has no Responsibility for:1. W-2 Reporting*

The employer is Responsible for:1. W-2 Reporting*

NOYES

The employer has no Responsibility for:1.6055 Reporting

The employer must 1.Calculate FTE to determine if they have 50 or more Full Time Equivalent Employees.

The employer is Responsibility for:1.6055 Reporting2.6056 Reporting

NO

YES

The employer has no Responsibility for:1.6056 Reporting

The employer is Responsible for:1.6056 Reporting 18

2015 Compliance RemindersW-2 (Health Insurance Value), 6055 (Individual Mandate), and 6056 (Employer Mandate) Reporting

* Referring to the value of Health Insurance to be reported on W-2’s

Employer Payment PlansNot Allowed

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Employer payment plans include arrangements that reimburse some or all of an employee’s individual health insurance premiums on a tax-free basis (including an HRA reimbursement or a direct payment by the employer to an insurance company).

Under PPACA an employer payment plan is considered a group health plan subject to the market reforms. These arrangements cannot be integrated with individual policies to satisfy PPACA requirements.

Employers offering such a program may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee).

An employer payment plan generally does not include an arrangement under which an employee may have an after-tax amount applied toward health coverage or may take that amount in cash compensation.

The now-famous former outside adviser on ObamaCare, Jonathan Gruber of MIT, spoke about the Cadillac tax before an audience at the Pioneer Institute in 2011.

He said:"It turns out politically, it's really hard to get rid of. And the only way we could get rid of it was:Mislabeling it, Call it a tax on insurance plans rather than a tax on people, We all know it's a tax on people who hold those insurance plans."It was "clever" exploitation of Americans'  "lack of economic understanding."

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Cadillac Tax Scheduled for 2018

Single Premium may not exceed $10,200

Family (H/W – P/C – F) Premium may not exceed $27,500

40% Tax on Excess Premium Tax is not deductible

Currently no adjustment for: Geographic Location Age State Mandates Federal Cost Shifts and Taxes built into Premium Rates

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Cadillac Tax Scheduled for 2018

Small Employer Tax CreditEmployers with 25 or Fewer Employees

Since2010

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Employee health insurance expenses of small employers provides a sliding scale tax credit to small employers with fewer than 25 employees and average annual wages of less than $50,000 that purchase health insurance for their employees.

To be eligible for a tax credit, the employer must contribute at least 50% of the total premium cost or 50% of a benchmark premium. 70% of Businesses with fewer than 25 employees may qualify.

The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000.

Employers must enroll their employees through the SHOP Exchange which is virtually non-existent in most states.

Health Insurance SubsidiesDid Your Client Receive An Illegal Subsidy?

Must Pay Back on 2014 Tax Return

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1. Did your Client purchase Health Insurance for themselves from the Exchange?

2. Did your client receive a full or partial subsidy for the cost of that insurance?

3. Did your client work for an employer that offered health insurance?

4. Was the employee share of the premium less than 9.5% of the household adjusted gross income?

If the answer is yes to all four questions: Your client was not entitled to a subsidy. They will be required to pay back any subsidies received on their 2014 tax return!

Compliance ReminderHealth Plan Identifier

All Health Plans Must Enumerate

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The Health Plan Identifier (HPID) is a standard, unique health plan identifier required by the Health Insurance Portability & Accountability Act of 1996 (HIPAA).  

The HPID was originally intended for self-insured plans. Under PPACA, all health plans must create an HPID by November 5, 2015. Carriers will enumerate fully-insured plans. Employers will enumerate self-insured plans.

Enumeration is the process of getting an HPID.  

In order to enumerate (obtain an HPID), a health plan should:

1. Create an account in the CMS Enterprise Portal to obtain a user ID and password.

2. Select the link to register in the Health Insurance Oversight System (HIOS).

3. After registering in HIOS, select the link for the Health Plan and Other Entity Enumeration System (HPOES), and follow the prompts. 

850 Cassatt Road, Suite 310 Berwyn, PA 19312 610.251.0670

www.tycorbenefit.com

For More Information

Tycor Benefit Administrators, Inc.®

Scott Crane610.251.0670

scrane@tycorbenefit.com

The information contained in this presentation is intended to make employer aware of their upcoming responsibilities and provide Tycor® clients and business associates with guidance on the new health reform law. This summary does not constitute legal advice.