e3 Compliance Navigator™ Logine3 Financial News Archive For March / April 2010
IRS Releases Information on Small Business Health Care Tax Credit
Apr 14, 2010
Certain small businesses and tax-exempt organizations that provide health insurance coverage to their employees may qualify for a special tax credit, according to the Internal Revenue Service. Included in the recently enacted health care reform legislation, the Patient Protection and Affordable Care Act, is a tax credit designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. The following are eligibility rules and the amount of credit as explained by the IRS.
Eligibility Rules
• Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
• Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
• Average annual wage. A qualifying employer must pay average annual wages below $50,000.
• Both taxable (for profit) and tax-exempt firms qualify.
Amount of Credit
• Maximum Amount. The credit is worth up to 35 percent of a small business' premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
• Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.
Three Simple Steps for Employers to Qualify
If you are a small employer (business or tax-exempt) that provides health insurance coverage to your employees, determine if you may qualify for the Small Business Health Care Tax Credit by following the three simple steps featured here.
For more information about the credit, please see different tax credit scenarios and answers to frequently asked questions. Or, please visit the IRS site here.
Health Care Reform Passes!
Mar 22, 2010
As you may already know, the U.S. House of Representatives passed new health care legislation last night. As such, Congress is preparing to send the package to President Obama for signature.
The bill touches upon nearly every component of Health Care financing and delivery in the United States. The major components of the bill will be phased in over time (2010, 2011, 2013 and 2014), subject to the writing of regulations. Over the next several weeks, we will send you additional reporting that will outline the impact, timelines and key elements of the new legislation.
Some of the brief highlights are:
- Market Reforms: The plan introduces a number of market reforms, some of which will take place within 6 months of the enactment of the bill. Some of these reforms include the removal of Pre-Existing conditions, allowing dependent children to stay on the plan until age 26, disbanding “rescission” practices, and the introduction of guarantee issue coverage.
- Exchange Portals: Creation of State-based insurance exchanges for small employers and individuals by 2014. These exchanges would consist of multiple insurance companies offering a wide range of plans. A small employer is defined as 100 or fewer employees, but states may reduce that number down to 50 employees.
- Employer Mandate: Employers do not have to offer coverage, but employers of 50 or more must provide a baseline of “essential” coverage, or pay a fine of $2,000 per uncovered employee (first 30 uncovered employees are exempt).
- Individual Mandate: Beginning 2014, all American citizens and legal residents must purchase qualified health insurance. The bill exempts those below Federal tax thresholds, and applies a penalty to those who do not purchase the coverage.
- Automatic Enrollment: Employers of 200 or more are required to automatically enroll all new employees into employer-sponsored plans. Employees are able to waive if they have another source of coverage.
- FSA limitations: FSA contributions to be limited to $2,500, starting in 2013, and over-the-counter drugs would be considered ineligible expenses at that time.
- MultiState Plans: Allows for creation of interstate and national plans. Creates multistate plans to be offered via state exchanges, provided by private insurers and administered by the Federal Office of Personnel Management.
- Financing: The financing of the increased benefits will come from several sources. Increased Medicare taxes, Employer fines for not covering employees, and new Insurance and Pharmaceutical industry taxes are among the primary funding vehicles.
- Medicare: The bill closes the “donut hole” in Medicare Part D (prescription drugs), by providing a $250 rebate to those who hit the Rx deductible. It reduces payments to Medicare Advantage by freezing the benchmark payment in 2011, and reducing those payments going forward. Proposed “savings” is $200 billion.
- Medicaid: The bill expands coverage under Medicaid for people up to 144% of the Federal Poverty level in 2014.
Please look for additional information from e3 Financial, as we will have specific Compliance Alerts and Webinars on this topic in the near future. In the meantime, if you have any questions, do not hesitate to call.
COBRA Subsidy Extended
Mar 05, 2010
President Obama has signed legislation that extends the deadline for terminated employees to qualify for the COBRA premium subsidy. Under the law, as amended, workers now terminated between September 1, 2008, and March 31, 2010 may be eligible for a 65% subsidy of their COBRA premiums for up to 15 months.
The legislation also redefines a qualifying event to include the involuntary termination of employment on or after March 2, 2010, of any qualified beneficiary who did not make (or who made and discontinued) an election of coverage on the basis of a reduction of hours of employment.
For more information on this temporary extension, individuals are encouraged to call the Employee Benefits Security Administration toll-free at 1-866-444-3272. To view the legislation, H.R. 4691, please click here.
