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Health care reform is now law and everyone will be affected by it's provisions. The Patient Protection and Affordable Care Act overhauls the health care environment in the U. S. The goal of the reform is to provide a minimum level of coverage for eligible individuals. Almost everyone will be required to have health insurance. Lower income individuals will receive tax credits to help pay for coverage. Those choosing not to carry coverage will pay penalties.
The Act places new responsibilities on employers that will change the nature of employer provided health care. Employers will be required to offer qualifying coverage or pay additional taxes. There is an exception for smaller businesses.
The Act's provisions go into effect in phases over time and will be in place completely by 2018. Business owners, especially, need to understand the impact that the Act may have on their bottom line. What can we expect for 2011?
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| John Paul Jones House |
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The Small Employer Health Insurance Tax Credit will give the "small employer" (25 full-time employees or less with average annual wages of less than $50,000 per employee) a credit of up to 35% of the employer's contribution towards employee' coverage. Employers with less than 10 employees and average wages of less than $25,000 will get the full credit. The credit is phased out as the number of employees and wages increase. In addition to the credit, small businesses may be able to pool together, to spread coverage which should result in lower costs.
Larger employers (50 full-time employees or more) will be subject to tax penalties for not offering affordable, essential coverage to employees. Employers that offer coverage to their employees will be required to provide "Free Choice Vouchers" to employees who meet income level guidelines. The employee can then use the voucher amount to purchase their own coverage elsewhere.
Some additional provisions:
- Employers will have to disclose the health insurance benefit amount on the employees' W-2, even though it won't be considered taxable.
- Most employers providing essential coverage will have to file information with the IRS. The filings will provide identity, months covered and amounts paid by each employee. In addition, information will have to be filed with the Department of Health and Human Services.
- The Act provides a reinsurance program for retirees aged 55 or older who are not eligible for Medicare.
- The Act imposes restrictions on FSA, MSA, and HSAs. Only prescribed medications will be eligible for these plans. The penalty for non-medical withdrawals increases to 20%.
- High income individuals will be subject to higher Medicare taxes, in the form of a .9% tax on income above certain levels. In addition, there will be a surtax on investment income, called the "unearned income Medicare contribution".
- The 7.5% floor for deductible medical expenses will increase to 10% for those under 65.
Health care reform will have an impact on businesses. To what extent depends on a number of factors, including its' size, current health care coverage and the makeup of the employees, to name just a few. Having a better understanding of the changes imposed by the Act will help in planning your future health care coverage needs.
Excerpts taken from What Health Care Reform Means For Your Business by NPI.
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Beginning in 2011, most small businesses will be required to pay their payroll taxes and other payments by EFT (Electronic Funds Transfer).
The U.S. Department of the Treasury has announced that businesses currently permitted to use paper Federal Tax Deposit (FTD) coupons will have to make those deposits electronically beginning in 2011 with few exceptions. The major exception to the above rule will be for businesses with $2,500 or less in quarterly tax liabilities that pay their tax liability when they file their return. Some small businesses could continue paying the "old fashion" way, however the Treasury states that banks will soon be in control of the process and that they could halt the paper filing or start charging fees for the service. Paper filing is on the way out, so be sure to get your account set up ahead of time.
Currently, nearly 98% of all business tax dollars are paid electronically through the Treasury’s free Electronic Federal Tax Payment System (EFTPS). IRS research has shown that businesses using EFTPS are 31 times less likely to make an error.
The new initiative is one of several in the Treasury’s plan to go green, a move that is expected to save more than $400 million and 12 million pounds of paper in the first five years alone.
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