The document discusses key provisions of the Affordable Care Act. It summarizes that the Act expands health insurance coverage through an individual mandate requiring most people to have minimum essential coverage or pay a penalty. It also requires large employers to offer affordable coverage to full-time employees or pay penalties. Additionally, the Act increases Medicare taxes on high-income individuals.

1. The
Pa'ent
Protec'on
and
Affordable
Care
Act
Bill
Po5er,
Senior
Tax
Director

2. • Businesses organized in multiple forms
may be considered as a single employer
• Controlled groups can be parent-
subsidiary, brother-sister, combinations or
affiliated service groups
Determination of FTE in a Controlled Group

3. • Control exists if parent owns 80% of the
subsidiary
• Could involve multiple subsidiaries
Parent - Subsidiary Controlled Group

4. • Where the same five or fewer individuals
own 80% of the related entities, AND
• Effectively control more than 50%
(identical ownership)
• Attribution
o Family Members – spouse, children, grandchildren,
parents
o Partner to Partner
o Estates and Trusts and Beneficiaries
o Corporations and Shareholders
Brother – Sister Controlled Group

5. Example
Percentage
of
Ownership
Member A
Corp B
LLC Effec've
A 80% 20% 20%
B 10% 50% 10%
C 5% 15% 5%
D 5% 15% 5%
Total 100% 100% 40%
The four owners have more
than 80% of A and B, so that
requirement is satisfied. But
identical ownership is only
40% so they fail the 50%
test. They are two separate
employees

6. • Subjective determination
• Related entities may or may not have
ownership relationships
• Performing services to or on behalf of the
other entity, and when capital is not a
material income producing factor
Affiliated Service Groups

7. Expansion of Coverage – Individual Mandate
• Individual Mandate
o With limited exceptions, ALL individuals must maintain
“minimum essential coverage”or pay a penalty.
§ Government provided coverage
§ Employer sponsored coverage
§ Exchange coverage.
• Exemption from mandate
o if required contribution to purchase insurance exceeds 8% of
household income.
o Religious objection
o American Indians
o Incarcerated Individuals
o Those with incomes below the tax filing threshold

8. Expansion of Coverage – Individual Mandate
• Penalty amount is the lesser of a flat dollar
amount of percentage of income.
o 2014: $95 or 1% of household income
o 2015: $325 or 2% of household income
o 2016 and later: $695 or 2.5% of household income

9. • Effective in 2014 for employers with at least 50 full
time employees
• Large employer must offer full time employees
(FTE) and their dependents the opportunity to
enroll in minimum essential coverage under an
eligible employer sponsored plan
• FTE must generally not be asked to pay more than
9.5% of their modified household income for
coverage
• Exceptions for new employees
Large Employer Penalties

10. • Employer not offering coverage
• Employer offering coverage whose employee
receives a credit
Penalty for Non-Compliance

11. • Such employers are subject to a penalty if one or
more FTE is certified to the employer as being
covered by an Exchange and received a premium
tax credit
• Penalty for any month is an amount equal to the
number of FTE’s in excess of 30 times 1/12th of
$2,000
• Regardless of the number of FTE’s who are
enrolled in the Exchange and received a premium
credit
Employers Not Offering Coverage

12. • Some employers who offer health
insurance coverage to FTE’s may be subject
to a penalty
• Penalty can apply based on the number of
FTE’s who purchase coverage through an
Exchange and receive a credit or cost-
sharing reduction
Employers Offering Coverage

13. Expansion of Medicare Taxes (2013)
• Employee portion of Medicare tax increased by 0.9%
• Applies to wages or self-employment income in excess of
$200,000 ($250,000 in the case of a joint return, $125,000 in
the case of a married taxpayer filing separately).
• The additional Medicare tax increases the employee portion
to 2.35% or a total Medicare rate of 3.8%.
• Employer has the obligation to withhold the additional tax
on wages (without regard to spouse’s wages) if its employee
earns more than $200,000; Employee is liable to the extent
not withheld by employer.
• Self-employed are not allowed a deduction for ½ of the
additional 0.9% tax.

14. Expansion of Medicare Taxes (2013)
• Individuals, estates and trusts required to pay 3.8% tax
on net investment income such as interest, dividends,
annuities, royalties, rents, capital gains and income from
passive activities.
• Applies to the income in excess of $250,000 for joint
returns, $125,000 for married filing separate and
$200,000 for all others

15. Thank You
William C. Potter
Senior Tax Director
healthcarereform@pncpa.com
Office: 225-922-4600