Monday, November 22, 2010
Wednesday, November 10, 2010
- Penalties on Unqualified Distributions from HSA's. The Penalty will be increase from 10% to 20% starting in 2011 and should raise an estimated $1.4 Billion
- Fees on Pharmaceutical Manufacturers and Importers-This takes effect in 2011 and should raise an approximate $27 Billion.
- Comparative Effectiveness Fee-This is a fee that is going to levied on every member in a health plan ($1 the first year then $2 per year after). Comparative Effectiveness is where a Non-Governmental Third Party gathers and disseminates health care findings to decision makers. This goes into effect in 2012 and should raise an estimated $2.6 Billion.
- Increase the itemize tax deduction for medical expenses from 7.5% to 10% of Adjusted Gross Income, starts in 2013 and should raise an approximate $15 Billion.
- 2.3% excise tax on medical device manufacturers and importers. This goes into effect in 2013 and should raise an estimated $20 Billion.
- Limit Flexible Spending Account (FSA) deferral contributions to $2500 per year. This will be indexed for inflation, will go into effect in 2013 and will raise an estimated $13 Billion.
- Health Insurance Companies will be required to pay a fee in 2014 towards the cost of the reform and should raise an estimated $60 Billion.
If we total all these fees, taxes and penalties we come to approximately $149 Billion Dollars!
In addition, the Bush Tax Cuts are set to expire January 1, 2011 and this also would create a huge funding source. However, it remains to be seen if President Obama is going to extend those tax cuts. Because, if he does, in a sense he is de-funding his own Health Reform Law.
Friday, November 5, 2010
Small Business Health Care Tax Credits (Retroactive effective
January 1, 2010)
Eligible employers may be offered a credit of up to 35% of what they paid towards the cost of employee’s health care!
Who is Eligible ?
Employers with less that 25 Full Time Equivalent (
FTE) employees and average wages below $50,000 and contribute at least 50% toward the cost of the employees individual plan.
Highest credits give to employers with 10 or less
FTE employees and average wages below $25,000.
As the number of employees exceed 10 and the wages exceed $25,000, the credit decreases until at 25 employees and $50,000 average wages, the credit is $0
How do I calculate my number of
Divide the total number of hours worked by all employees (excluding owners and seasonal employees) by 2080 and round to the next lowest whole number. If employees worked more than 2080 hours then use 2080.
Seasonal employees are not counted in the
FTE calculation if they worked less than 120 days in the tax year. However, premiums paid on their behalf may be counted towards the credit.
Sole Proprietors, Partners in a partnership, shareholders owning more that 2% in a S Corporation and any owner of more than 5% of other business…… and all family members are not considered employees for purposes of the tax credit. Therefore, premiums paid on their behalf are also not counted towards the credit as well.
For Example, Jones Company has 5 full-time employees and 3 part-time employees. The part-time employees work 20 hours each per week. Therefore:
(5 X 2080 = 10,400)
(3 X 1040 = 3,012)
13,412 divided by 2080 =6.45 or 6 (Rounded to the next lowest whole number)
How do I determine average annual wages?
You will divide the total wages paid for
FTE employees……not including those already listed as ineligible) by the total number of FTE.
$200,000 (total wages) / 10 (
FTE Employees) = $20,000 (Average Annual Wage)
How do I calculate my credit?
If you have 10 or less
FTE employees and an average annual wage under $25,000 then you are eligible for a 35% credit on what you have paid towards your employees coverage.
What happens if I have 10 or more
FTE’s and/or the average annual wage is over $25,000?
This is where it gets a bit tricky………………
For every employee over 10, the credit is reduced by 1/15th and 1/25th for every thousand dollars over $25,000.
ABC Company had 12
FTE Employees and an Average Wage of $30,000. The employer paid $28,800 ($200 X 12 Employees X 12 months).
Therefore the calculation looks something like this:
Calculate what the credit would have been without reductions…
(35% X $28,800) = $10,080
Then calculate the reduction of credit for number of employees over 10…..
($10,080 X 2/15) = $1,344 (Reduction of credit)
Then calculate the reduction of credit for each thousand dollars over the $25,000 threshold….
($10,080 X 5/25) = $2,016 (Reduction of Credit)
The credit then looks something like this:
$10,080 (Total Possible Credit) minus $1,344 (Reduction for number of employees over 10) minus $2,016 (Reduction for $5,000 over $25,000 threshold) = $6,720 Tax Credit
So how do you claim the tax credit?
Tax exempt organizations are eligible for a maximum 25% tax credit (as opposed to 35% for all others) and the credit is a refundable credit. In addition the tax credit may not exceed the total amount of income and medicare tax that the employer is required to withhold from employees wages and the employer share of medicare tax on employees wages for the year.
Amounts paid by the employer for dental and vision plans are also eligible but must meet these same requirements separately.
Most companies (except non-profits) must claim the credit as an offset of income tax liability. Therefore, in order to claim the credit, the company must make a profit. In other words, if the company is operating at a loss for the year, they are not allowed to take the credit. Doesn't this seem a bit backwards since the companies who would need this credit the most, aren't going to qualify?
Wednesday, November 3, 2010
I know that many on the right and some turn-coats on the left have vowed to repeal the health care reform (PPACA) signed into law on March 23, 2010. I honestly have no idea how that would happen. Not that it couldn't, I just don't know enough about the politics to be sure. However, what I do know is that the Republican House has already set a course through amendments and bills to "chip away" at the current law. Some of these bills include:
- No less than 9 representative have bills to repeal the Patient Protection and Affordable Care Act.
- H.R. 4904-Prohibits the use of funds for implementation or enforcement of any federal mandate to purchase health insurance. (Poe, R-TX)
- H.R. 4985-Medicare Decision Accountability Act of 2010 (Roe, R-TN)-This bill repeals legislation to set-up a Independent Advisory Board that was enacted in the PPACA and gives bureaucratic control to determine what benefits are covered and how much physicians are to be paid. The IPAB sole intention will be to determine whether Medicare is spending more than budgeted and offer "fixes" to cut-back on that spending.
- H.R. 4995-End the Mandate Act of 2010 (Paul, R-TX)-Repeals the sections of PPACA that force all Americans to purchase federally-approved health insurance plans.
- H.R. 5054-Prevent IRS Overreach Act of 2010 (Forbes, R-VA)-Prohibits the IRS from hiring, transferring or appointing individuals for positions used to enforce provisions of health care reform.
- H.R. 5126-Helping Save Americans' Health Care Choices Act of 2010 (Fleming, R-VA)-repeals provisions of the PPACA including the additional taxes on Health Savings Accounts (HSA) and the prohibitions on tax-free reimbursements for over-the-counter medications as well as remove the cap on Flexible Spending Accounts (FSA's).
- H.R. 5141-Helping Small Business Paperwork Mandate Elimination Act (Lungren, R-CA)-Repeals the tax reporting mandate included in the PPACA thats requires all business to file 1099's for all transactions in goods and services over $600 a year.
- H.R. 5444-To Amend the PPACA to permit a State to elect NOT to establish and American Health Benefit Exchange (Paul, R-TX)-This bill places individuals back in control of health care by replacing PPACA with reforms designed to restore a free market health care system.
Monday, November 1, 2010
Individuals must have health coverage effective
January 1, 2014 either through employer coverage, government, private or the exchange. If individuals elect to purchase coverage through their State run Exchanges (place where we will purchase coverage) they will be able to choose from several options: The plans will range from minimum plan or Bronze Plan to the Silver plan, Gold and Platinum Plans. In addition for those under 30 years old, you will be able to purchase a catastrophic plan which is kindly named the "young and invincible" plan. This plan makes absolutely no sense. Since all health coverage offered through the exchange will be community rated, you want the younger and healthiers on plan and paying into the system to help off-set the older and/or unhealthiers.
Many States are arguing the constitutionality of the Individual Mandate
This is how the cost of the plans will break-down for people earning at or below 400% of the Federal Poverty Level (FPL)
Individuals earning up to 133% of
Federal Poverty Level (around $14,000/Year) will be eligible for free coverage under expanded version of Medicaid. Individuals earning 133%-400% of Federal Poverty Level will receive a subsidy based on a sliding scale up to 400%. 400% of FPL for an individual is $44,000 per year and a family of four is $88,000 per year. Nobody will pay more than 9.5% of their annual household income on health coverage if they fall at or below 400% of the FPL.
So What if You Say Forget It, No Coverage for Me........?
Fines for not having coverage
In 2014 you will pay a fine of $95 per year or 1% of income whichever is greater and by 2017 amount goes to $695 or 2.5% of income to a maximum of 3X the individual penalty.
Non-payers will receive a notice from the
IRS. If they don’t pay, the IRS will take it from their tax refund in the future. If they continue to not pay the fine, they will not be subject to any criminal prosecution or penalties. The secretary cannot file a notice of lien or file a levy on any property……..In other words, no teeth to this penalty.