2. March 2010, Congress passed the Patient
Protection and Affordable Care Act and the
Health Care and Education Reconciliation Act
of 2010
Estimated cost - $940 billion over 10 years
Expand coverage to 32 million Americans
3. Changes for Business
◦ Summary of benefits
◦ W-2 reporting
◦ FSA limits
◦ Medical Loss Ratio rebate
◦ Minimum Essential Coverage
Tax Impacts to Individuals
◦ Increased Medicare Taxes
◦ Surtax on Unearned Income
◦ Medical Expense Deduction
◦ Health Insurance Requirement
◦ Premium Assistance Credit
4.
5. ◦ Uniform summary of benefits and coverage
explanations in plain language
◦ Must be provided at plan renewal on or after
9/23/12
◦ Revised summary of changes must be given 60 days
prior to effective date
◦ Penalty of up to $1,000 per failure to provide
6. Cost of employer sponsored coverage must
be reported on employee’s W-2 beginning
with the 2012 tax year.
Employer’s issuing less than 250 W-2’s exempt until
2013
Reporting is for information purposes only
Do not have to provide for individuals who would not
otherwise get a W-2 (retiree, Cobra)
Penalty for failure to comply (up to $250,000 per year)
7. Effective 1/1/2013 max election for
employee is $2,500
◦ No previous federal mandated limit
Plan documents must be amended by
12/31/2014
8. Insurers required to spend so much of
premiums on claims-excess refunded to
employer
Employer must distribute rebates to
participants in some way…
Distribute to enrollees/improve benefits/reduce future
employee contributions
Allocation amongst participants must be fair and
reasonable
Must be used within 3 months of receiving
9. In 2014-Employers with 50 or more
employees who DO NOT offer health
coverage…
Must offer insurance to full-time employees or pay a
penalty
Fine is $2,000 per employee, but first 30 employees
are not counted….so with 65 employees penalty is only
paid on 35 of them
10. Employer with 50 or more employees who
DOES offer health coverage…but has at least
one Full time employee receiving a tax credit
in the exchange will pay the lesser of…
$3,000 for each employee receiving a credit or $2,000
for each full time employee
An individual with family income up to 400% of federal
poverty level is eligible for credit if:
The value of employer coverage is less than minimum
standard (does not cover 60% of costs) or...
The employer requires employee to contribute more than
9.5% of employee’s family income toward coverage
11.
12. Current Social Security Taxes:
◦ 6.2% (4.2% in 2012) to a maximum $110,100 for
OASDI (old age survivor disability insurance)
and
◦ 1.45% on all wages for Medicare (HI)
Withheld from wages; employer matches
Self-employed pay both shares; receive
deduction for ½ of tax on 1040
13. 2013—Medicare increases 0.9% for employee
only on wages over - $200,000
For joint returns additional tax on joint
earned income in excess of $250,000.
Self-Employment Tax increases to same
amount
No increase in Self-Employment deduction
May have to remit additional Medicare on
1040
14. Also effective in 2013
New 3.8% Surtax on investment income
Calculated on the lesser of:
1. Net investment income OR the
2. Excess of taxpayers’ modified AGI over $200,000
($250,000 for MFJ)
15. Interest
Dividends
Annuities
Royalties
Rent
Capital Gains
Passive income from business (limited
participation)
16. Active business income
Qualified retirement plan and IRA
distributions
Self-employment income
Tax-exempt interest
Sale of principal residence
17. Barack & Michelle, MFJ
Salaries $280,000 + net interest income
$20,000 = AGI $300,000
Taxed on lesser of:
1. Net investment =$20,000 OR
2. Excess of AGI over $250,000 =$50,000
Result
$760= 3.8% surtax on $20,000
18. Currently, medical expenses allowable if
GREATER than 7.5% of AGI
2013, threshold increases to 10% of AGI
Exception-Taxpayer or Spouse is or turns 65
during 2013-2016, 10% threshold is not
effective until 2017
19. Taxpayer AGI of $100,000 receives no
deduction of unreimbursed medical costs
until those expenses exceed $7,500 for
2011-2012
2013- medical expenses > $10,000 to be
deductible
20. 2014 & 2015 phase in period—penalty on
individuals who fail to maintain “minimum
essential coverage”
Penalty: 2014 = greater of 1% of household
income OR $95 per uninsured
2015 = greater of 2% of household
income OR $325 per uninsured
21. In 2016, penalty is greater of:
2.5% of taxpayer’s household income
(In excess of filing threshold)
OR
$695 per uninsured adult plus half the amount per
child under 18.
Penalty has a cap of $2,085 per household
22. Individual must maintain minimum essential
health care coverage under:
Medicare, Medicaid, TRICARE, veteran’s care
or other governmental programs
Employer sponsored group plan
Grandfathered health plan
Any coverage recognized by Department of
Health & Human Services
23. Health insurance premium exceeds 8% of
household income
Income below 1040 filing threshold
24. Penalty included on 1040
IRS may not impose interest on late payment
Not subject to criminal prosecution or
assessment
IRS may not file a lien or levy property
◦ May reduce refund owed to taxpayer
Penalty criticized as unconstitutional
◦ Supreme Court has ruled it is a tax and
constitutional
Voluntary?????????????
25. 2014 - Refundable credit to cover cost of
premiums for health insurance purchased
through a state health exchange
Credit based on income
Individual pays plan difference of premium
and credit (credit goes directly to exchange)
Low income individuals
26. There are a lot of changes coming to the tax
system as a result of healthcare legislation
Clarifications are coming almost continually
Keep in contact with your professionals
(insurance agent, attorney, CPA)
Good luck!!!