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Tag: Internal Revenue Service

An Internal Revenue Service Health Care Fine That’s 12 Times Bigger than the Employer Mandate Penalty

As if it wasn’t tough enough to run a business, beginning this month, the Internal Revenue Service can levy fines amounting to $100 per worker per day or $36,500 per worker per year, with a maximum of $500,000 per firm.

This Internal Revenue Service penalty is not written into the Obamacare law. The amount is over 12 times the statutory amount in the Affordable Care Act of $3,000 per worker per year. That is what an employer is charged when one of its employees gets subsidized care on one of the health-care exchanges. It’s 18 times the $2,000 penalty for not offering adequate health insurance.

The $100 fine is applicable not only to large firms, but also those with fewer than 50 workers that are exempt from the $2,000 and $3,000 employer penalties. Firms with one worker are exempt. The penalty for S-corporations will take effect on Jan. 1, 2016. The new rule is broad, sweeping and overly punitive.

Prior to the IRS’ pronouncement, many businesses who didn’t offer health insurance provided tax-free dollars to help their employees pay for individual health policies or other medical costs. Now, they

Prior to the IRS’ pronouncement, many businesses who didn’t offer health insurance provided tax-free dollars to help their employees pay for individual health policies or other medical costs. Now, they will be penalized for aiding their workers.

Read the full report here.

Contact Steven G. Cosby, MHSA, Group Health Insurance Broker and Agent with Cosby Insurance Group, with questions or to request more information and to schedule a healthcare plan evaluation, savings analysis or group plan solution for your company.

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Implementing Health Reform: The Supreme Court Upholds Tax Credits In The Federal Exchange

The Supreme Court has spoken, and the Affordable Care Act (ACA) has survived yet another near-death experience. In a decisive opinion, written for six of the Court’s nine justices, Chief Justice Roberts upheld the Internal Revenue Service (IRS) rule that allows low-and moderate-income Americans access to tax credits, regardless of whether they live in states where the federal or state government operates the marketplace.

The Background

King v. Burwell is one of four cases that have been brought by ACA opponents asking the courts to invalidate an Internal Revenue Service rule that allows federally facilitated exchanges (FFEs, also called federally facilitated marketplaces) to make available advance premium tax credits to help Americans purchase health insurance.

The Affordable Care Act reformed health insurance underwriting to prohibit insurers from considering preexisting conditions in deciding whether to cover individuals and determining how much enrollees are charged in premiums. It also required individuals who could afford coverage to get coverage or pay a penalty. To ensure that insurance was affordable, the ACA offered premium tax credits to low- and moderate-income people.

These tax credits were offered through entities that were called “exchanges” in the legislation, and are now called marketplaces. The exchanges were intended to increase competition among insurers and augment the choices available to enrollees, but also to provide an access point through which tax credits could be made available to help pay premiums as they became due on a monthly basis.

The Senate version of the ACA — which was eventually adopted by both houses with modifications that could be made through the Health Care and Education Reconciliation Act — located the exchanges in the states. It provided, however, that if a state chose not to establish its own exchange, the Department of Health and Human Services would provide “such exchange” for the states.

Dozens of provisions in the ACA indicate that the federally facilitated exchanges were supposed to function just like the state-operated exchanges. One provision of the law, however, which added section 36B to the IRS code to provide for the tax credits, twice refers to enrollment through an “Exchange established by the State” as a seeming condition of eligibility for tax credits.

Read the full report here.

Contact Steven G. Cosby, MHSA, Group Health Insurance Broker and Agent with Cosby Insurance Group, with questions or to request more information and to schedule a healthcare plan evaluation, savings analysis or group plan solution for your company.

Cosby Insurance Group Warrenton Health Insurance Broker and Agent

Treasury/IRS Take First Step In Implementing 40% High Cost “Cadillac” Excise Tax with Notice 2015-16

Treasury and the Internal Revenue Service have issued initial guidance on one of the least popular provisions of the Affordable Care Act–the excise tax on high cost employer sponsored health coverage (commonly referred to as the “Cadillac Excise Tax” (“40% Excise Tax” or “Tax”).

Although attempts on Capitol Hill to repeal or delay the 40% Excise Tax are likely to continue, whether any of these efforts succeed remains to be seen. Meanwhile, in Notice 2015-16 (“Notice”), Treasury and the IRS offer the first glimpse of the complex requirements that employers, insurers and third party plan administrators will face if the 40% Excise Tax goes into effect in 2018, as called for by the statute.

The Notice does not offer guidance on which taxpayers may rely, but it does offer insight into how Treasury/IRS are thinking about the 40% Excise Tax and represents a not-to-be-missed opportunity for stakeholders to provide comments that could help shape the final rules. This is especially true with respect to the definition of coverage to which the 40% Excise Tax applies and the determination of costs for purposes of calculating potential 40% Excise Tax liability.

For example, it appears that Treasury/IRS are willing to exempt certain on-site medical clinics that provide de minimis care and both insured and self-funded vision and dental plans and employee assistance programs that meet the excepted benefit requirements.

However, it also appears that employer contributions to health savings accounts, including pre-tax cafeteria plan contributions made by employees, will count toward the calculation, as well as contributions to health reimbursement arrangements and the cost of executive physical programs. The Notice also illustrates that several fundamental concepts relating to premium calculations under the COBRA continuation of coverage rules, upon which the calculation of the 40% Excise Tax is based, need to be resolved.

What Actions You Should Take

Treasury/IRS specifically invite comments on all of the issues addressed in the Notice and any other issues arising under the 40% Excise Tax, which must be submitted no later than May 15, 2015. Now is the time for insurers, employers, and plan sponsors and administrators to share their comments, concerns, and insights with Treasury/IRS in order to maximize the chance that final rules fully take their comments into consideration.

It appears that Treasury/IRS are using the same approach to rule making with respect to the 40% Excise Tax that they used with the employer shared responsibility provision.

First, Treasury/IRS have indicated that several notices will be issued. The first notice, which is the subject of this alert, solicits comments on the types of coverage that should be subject to the 40% Excise Tax and how to determine the cost of coverage and apply the statutory dollar limits when calculating the Tax.

A planned second notice will include procedural issues related to the calculation and assessment of the Tax. After considering comments on both notices, Treasury/IRS will publish proposed regulations with a formal notice and comment period.

Finally, after considering the comments on the proposed regulations, Treasury/IRS will publish final regulations, presumably in advance of the effective date of taxable years beginning on or after December 31, 2017.

On the positive side, the projected schedule means that taxpayers will have several opportunities to weigh in on the rules that will eventually apply to the 40% Excise Tax. But a protracted timeline also may mean that Treasury/IRS believe they will need to develop complex rules for implementation and administration of the Tax.

This could mean that by the time final rules are published, employers, insurers, plan administrators and others impacted by the Tax may have very little time in which to implement necessary administrative processes to meet reporting obligations and little ability to plan for the economic impact of the Tax on their businesses.

Affected parties may want to begin planning now based on the notice, since it gives the first clear indication of the views of Treasury/IRS on a number of significant issues.

Read the full article here.

Contact Steven G. Cosby, MHSA with questions or to request more information and to schedule a healthcare plan evaluation, savings analysis or group plan solution for your company.

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Employee or Contractor? Health Care Law Raises Stakes

If you work for a living, do you know who your boss is? And if you run a business, do you know who’s on your payroll?

These are simple questions. But you may not have the same answers as the Internal Revenue Service.

The IRS is emphasizing the distinction between employees and self-employed independent contractors this year, tax specialists warn. That makes it important for workers and critical for businesses that use their services to make sure to get the classification right. If you flub the answers, it could be costly.

In a sense, this is a semantic exercise: If someone is doing a certain kind of work for a specific amount of pay, the label you put on it might not seem to matter much. But which is which and who is who helps determine the obligations that each party in the relationship has to the other and to the I.R.S.

Contractors, being self-employed, are responsible for paying Social Security and Medicare taxes, and they are entitled to certain tax deductions for business expenses. If you’re an employee, though, you pay only half of these payroll taxes. Employers must cover the other half and now, if they’re big enough, health insurance under the Affordable Care Act.

Read the full report here.

Contact Steven G. Cosby, MHSA with questions or to request more information and to schedule a healthcare plan evaluation, savings analysis or group plan solution for your company.

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IRS Announces 2015 Dollar Limits on Compensation and Benefits

Revised as of October 31, 2014

The Internal Revenue Service announced cost-of-living adjustments affecting the dollar limitations that will apply in 2015 for employee benefit plans. There are modest increases in many (but not all) of these limits.

The key limits will apply for 2015, as well as the limits that continue to be in place for the remainder of 2014. Please contact Steven Cosby if you have any questions about how these limits will apply to your benefit plans.

Read the full update here.

Contact Steven G. Cosby, MHSA with questions or to request more information and to schedule a healthcare plan evaluation, savings analysis or group plan solution for your company.

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