PPACA Tax Overview BenefitMall Reference Guide - (Page 10)

4.7 What income is excluded from the new tax hike? Income not subject to the modified adjusted gross income calculations includes income derived from: tax-exempt municipal bond interest, capital gains excluded from the sale of a principal residence, non-taxable veteran’s benefits, and IRA, 403(b) plan, 401(k) plan, 457 plan, or pension distributions. Proceeds from stock bonus plans, profit-sharing plans or qualified annuity plans are also exempt. PART B: Excise Tax on Comprehensive, High-Cost Health Insurance Plans 4.8 What is the new excise tax on comprehensive, high-cost insurance plans? In an effort to penalize employers who offer excessively rich health benefit plans, PPACA includes an excise tax on high-cost health plans, called “Cadillac” health arrangements. This is a new, non-deductible 40% excise tax that some experts have estimated will affect more than half of large employers’ active health plans by 2018. The Congressional Budget Office estimates that 19 percent of workers with employment- based coverage would be affected by the excise tax in 2016, and hypothesize that “most people would avoid the cost of the excise tax by enrolling in plans that had lower premiums.” The study then states that this is only a guess, as how enrollees, insurers, employers and other key actors will respond to the tax is extremely uncertain. Currently, employees are able to exclude from gross income calculations both employer contributions for health care coverage and the value of medical services that the employee receives under the coverage. Edward A. Zelinsky writes, “This favorable tax treatment effectively immunizes the employee from confronting the cost of his medical coverage and services. This, in turn, leads to elevated levels of medical service consumption and the large costs attendant to such consumption.” Thus, the excise tax was included in PPACA to generate additional revenue to help pay for the uninsured and to motivate employers to use utilization reducing measures that would not reward overutilization of health care services. EMPLOYER PLANS WIL THE EXCIS 4.9 4.10 When does the excise tax become effective? The tax becomes effective January 1, 2018. How is the excise tax calculated? The 40% nondeductible tax will be levied on employers and assessed against the annual value of any excess benefit provided under applicable employer-sponsored coverage.22 Excess benefit is defined as exceeding the aggregate of $10,200 for single coverage or $27,500 for family coverage in 2018. Those in high-risk professions and retirees are subject to higher thresholds. 4.11 What is excluded from the excise tax calculation? Stand-alone vision and dental benefit expenses are excluded from the calculation. Employers with a workforce of older or female workers who have higher-than-average health costs will be held to higher thresholds. 10 Published by BenefitMall®

Table of Contents for the Digital Edition of PPACA Tax Overview BenefitMall Reference Guide

PPACA Tax Overview BenefitMall Reference Guide
Table of Contents
Individual Mandate & Tax Implications
Premium Subsidies
Employer Requirements & Tax Implications
PART A: Small Employer Tax Credits
PART B: Large Employer Tax Penalties
PART C: Employer W-2 Reporting Requirements
PART D: Employer Deductions for Retiree Drug Coverage
Additional PPACA Tax Provisions Impacting Employers & Employees
PART A: The Unearned Income Medicare Contribution Tax
PART B: Excise Tax on Comprehensive, High-Cost Health Insurance Plans
PART C: Assessing the Impact of PPACA on HSAs, MSAs, FSAs, & HRAs
Medicaid & Medicare Changes & the Impact on Employers
PART A: The Expanding Medicaid Program
PART B: Emphasis on Prevention & Related Services
PART C: Medicare Part D Updates
PART D: Putting the Coverage Puzzle Together

PPACA Tax Overview BenefitMall Reference Guide

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