With the Supreme Court upholding the Patient Protection and Affordable Care Act (“PPACA”), employers and individuals need to be prepared to comply with the PPACA. The following summarizes some of the key provisions and effective dates relating to businesses:
- For months beginning after December 31, 2013, large employers may be subject to a “shared responsibility payment” if any full-time employee receives a premium tax credit or cost sharing reduction payment. Generally, a shared responsibility payment will occur where either (i) the employer does not offer to its full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer sponsored plan; or (ii) the employer offers its full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer sponsored plan that either is unaffordable relative to an employee’s household income or does not provide minimum value (that pays at least 60% of benefits). This provision applies to months beginning after December 31, 2013. A large employer is defined as an employer that on average employs fifty or more full-time equivalent employees. A full-time employee is defined as an employee averaging at least thirty hours per week.
- Small employers may qualify for a health insurance tax credit. A small employer is defined as an employer that maintains a qualifying healthcare arrangement and that has fewer than twenty-five full-time equivalent employees for the tax year with average annual wages of its employees for the year of less than $50,000 per full-time employee. For tax years 2010 through 2013, the maximum credit is 35% of health insurance premiums paid by small business employers. The credit is scheduled to increase to 50% after 2013, but will terminate after 2015.
- For tax years beginning after December 31, 2012, the maximum contribution to health flexible spending arrangements is decreased from $5,000 to $2,500.
- Employer sponsored health care coverage that exceeds a threshold amount will be subject to a 40% excise tax starting 2018.
For information concerning the PPACA and its impact on individuals, see a related post titled “Individuals – The Effect of the Patient Protection and Affordable Care Act”.
For any questions concerning the PPACA, contact attorney Mark Samila, a member of the firm’s Tax and Employee Benefits team.
