Affordable Care Act: Have You Kept Up with the 2014/2015 Provisions?

by

I’ll be the first to admit it; nope, not much. So, like most of my professional brethren, here I am in the last two months of 2014 educating myself about the 2014/15 enactments. And, let’s face it, since there is no new tax bill yet, why not focus on the Affordable Care Act (“ACA”) until our dysfunctional Congress can determine if they can agree on anything.

As I began reading the colossal number of papers and publications associated with ACA, I quickly realized I needed to maximize my efforts. ‘Knowing’ ACA in its entirety is akin to ‘knowing’ a rather large tax act. So, I limited my efforts to the provisions affecting my client base to properly advise them. While I have a few clients over the 25-employee limit or 50-employee limit (depending on what provision we’re talking about), most of my clients are smaller businesses falling beneath the ‘large’ employer definition. As a result, I focused on the provisions referencing businesses with less than 50 employees.

Employers

Notice. Probably the first thing employers should know is their obligation to furnish all current employees with a written notice of their health coverage options. An employer should also inform any new hires of these same options within 14 days of employment. This includes employees who do not have or are not eligible for employer-based coverage.

The notice must include information regarding:

  • the Health Insurance Marketplace, also referred to as the “Exchanges;” how to get assistance with information on the Exchanges, and the services provided;
  • the potential loss of employer health coverage if an employee elects coverage under an Exchange-based plan; and
  • premium assistance may be available if eligible.

 This notice was due October 1, 2013; yes, 2013. This is not a typo. If you’ve already done it, congrats. If not, get it done ASAP. FYI, there is no penalty or fine for non-compliance.

Other Provisions.  Other employer-related provisions to consider are:

  • If you are self-employed or a 2% shareholder of an S corporation, you can deduct all health insurance premiums paid for you and your family, including adult ‘kids’ who were under the age of 27 at the end of the tax year;  
  • If you have 25 or fewer employees making a collective average of less than $50,000, you may be eligible to claim a credit subject to certain provisions (see IRS Form 8941 and instructions); and
  • While it is probably coming in future years, if you filed less than 250 Forms W-2 in 2013, you are NOT required to report the costs of employer-provided health insurance coverage on your employees’ 2014 Forms W-2 (and for those who love the urban legend that if your W-2 reports the cost of your health insurance, it is included in your income, sorry, it just ain’t so).

Individuals

Requirement to Obtain Insurance.  Short of a deferral in an upcoming tax bill, 2015 holds certain edicts for all individuals. The vanguard of these edicts is that all individuals must obtain health insurance coverage (considered the “minimum essential coverage”) for themselves and their dependents or face ACA penalties. See “Penalties” below.

Minimum Essential Coverage.  What is minimum essential coverage (“MEC”)? OK, you asked. Any of the following plans will be considered to meet MEC requirements for 2015:

  • Any Marketplace plan, or any individual insurance plan you already have;
  • Any employer plan (including COBRA);
  • Retiree health plans;
  • Medicare;
  • Medicaid;
  • The Children’s Health Insurance Program (CHIP);
  • TRICARE (current service members and military retirees, their families, and survivors);
  • Veterans health care programs;
  • Peace Corps Volunteer plans; and
  • Self-funded health coverage offered to students by universities for plan or policy years that begin on or before Dec. 31, 2014.

Bottom line…most plans will meet the MEC requirements.

Other Provisions. Other individual provisions of note are:

  • If you have an employer-sponsored health plan that covers dependents, you can cover your adult ‘kids’ until age 26. 
  • Withdrawals from MSAs or HSAs that are not considered qualified medical expenses are includible in income and subject to an additional tax unless an exception applies. The additional tax could be from 10% to 20% depending on the type of plan.
  • Similar to last year, any potential deduction for unreimbursed medical expenses is limited to that amount in excess of 10% of adjusted gross income (still 7.5% if you are 65 or older; and
  • Pre-tax contributions to your FSA is capped at $2,550 for 2015.

Penalties

While there are myriad penalties associated with ACA, for purposes of this article, we’ll simply cover the penalties associated with those failing to obtain coverage. So, if an individual doesn’t obtain coverage in 2015, the penalty is the higher of:

  • 2% of your yearly household income. Don’t freak out just yet. The “yearly household income” definition for purposes of calculating this penalty is the amount “above the tax filing threshold,” which is roughly $10K; OR
  • $325 per person. The maximum penalty per family is $975.

I’ve only covered what I consider to be the most important health-related provisions to employers and individuals in this article. As most of you are aware, ACA introduced us to the 3.8% Net Investment Income Tax, the 0.9% Additional Medicare Tax, and a boatload of other provisions. I’m not covering those, but you can check it out for yourself.  The best ACA-related websites I’ve seen at this point are: Healthcare.gov and IRS.gov.