PPACA Tax Overview BenefitMall Reference Guide - (Page 6)
The tax credit for small business employers, or
“for-profit” companies that meet the requirements,
equals 35% of the employee’s annual premiums the
employer pays for the years before 2014, and will
increase to 50% after 2014. The tax credit for
“not-for-profit” organizations is substantially lower,
with those employers only eligible for a 25% tax credit
computed in the same manner as described above.6
The income tax credit is subject to several limitations.
Employers are only eligible for up to 50 percent of
an average premium costs for the surrounding area.7
Also, the credit is effectively phased out as additional
employees are hired, beginning with the eleventh
employee.8
as the average wage paid by the employer raises
above $25,000 annually.
PART B: Large Employer Tax Penalties
3.4
How does PPACA define a large
employer?
A large employer is defined as employing at least
50 full-time equivalent employees in the previous
calendar year, for at least 120 days.9
A full-time
employee is defined as one who works at least
30 hours of service per week.10
Part-time employees
are also added into this calculation by adding
together the total hours worked by all part-time
employees and dividing that total by 120.11
3.5
3.6
Do large employers get help funding
employer-sponsored coverage?
No. Under PPACA, a premium subsidy program is not
established for a large employer. In fact, a tax penalty
may be assessed against a large employer
as described below.
What is the tax penalty that may be
assessed against a large employer?
Perhaps the most important requirement that PPACA
imposes on large employers is the requirement that
large employers must offer medical coverage to
substantially all of its full-time employees and their
dependents beginning in 2015.12
If a large employer
fails to offer appropriate coverage, that employer may
be liable for a tax penalty.
3.7
What triggers the tax penalty for large
employers?
The tax penalty can be triggered in one of two ways:
1. If the employer does not offer coverage, and at
least one of its full-time employees claims the
premium assistance tax credit, or
2. The employer does offer coverage, but the
coverage fails to meet the minimum essential
6
Published by BenefitMall®
3.8
Finally, the amount of the credit decreases
coverage threshold (as defined in section 1.3)
and one full-time employee is certified to claim
the premium tax credit.13
What is the minimum essential coverage
threshold?
The type of coverage an individual, employer, or health
plan must meet to satisfy the requirements under
PPACA, avoid paying tax penalties and qualify for
premium subsidies are outlined in section 1.3 of this
reference guide. Minimum essential coverage can
include individual market policies, job-based coverage,
Medicare, Medicaid, CHIP
, TRICARE and certain other
coverage. For example, a bare bones or catastrophic
only policy would not qualify.
Minimum essential coverage can be obtained through
a government sponsored plan, an employer-sponsored
plan, plans obtained in the individual market,
grandfathered health plans, and any other health
benefits coverage recognized by the Secretaries of
HHS and the Treasury. The IRS defines “minimum
essential coverage” as a term “to include health
insurance coverage offered in the individual market
(such as a qualified health plan enrolled in through
an Affordable Insurance Exchange (Exchange)), an
eligible employer-sponsored plan, or governmentsponsored
coverage such as Medicare, Medicaid,
the Children’s Health Insurance Program, TRICARE,
or veterans’ health care under chapter 17 or 18 of
Title 38 U.S.C.”14
T EMPLOYER
AX PENALTY?
LARGE
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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