On December 24, 2013, the Departments of Labor, Health and Human Services, and the Treasury issued highly anticipated proposed regulations that would amend the definition of limited excepted benefits. Excepted benefits are generally exempt from the Patient Protection and Affordable Care Act’s (ACA) market reform requirements. The proposed rules would be effective for plan years beginning in 2015. While the proposed regulations provide guidelines on excepted benefits, employers should watch for the final rules to accurately design ACA-compliant excepted benefits plans. To get a better handle on how the proposed rules on excepted benefits impact employers, Wolters Kluwer of Employee Benefits Management Directions, spoke with Joanna C. Kerpen, partner in the employee benefits practice group at McDermott Will & Emery.
Recently issued final regulations on the employer pay-or-play rules under the Affordable Care Act (ACA) clarify the requirement that employers provide health coverage to full-time employees and their dependents, or pay a penalty and provide additional transition relief for 2015.
A second federal district court judge has ruled in favor of the government on one of the most serious challenges to the Patient Protection and Affordable Care Act of 2010 (ACA). The court dismissed a challenge to the availability of premium tax credits under the ACA. The plaintiffs now have appeals pending in two federal circuits, and similar challenges remain pending in two other federal trial courts.
Recently issued proposed regulations would expand the categories of excepted benefits under the Employee Retirement Income Security Act of 1974 (ERISA), the Internal Revenue Code (the Code) and the Public Health Service Act. In general, excepted benefits are exempt from the market reform and certain other requirements added to ERISA and the Code by the Affordable Care Act.
Recent guidance clarifies important issues under the Affordable Care Act, including mental health parity requirements; coverage of preventive care services; cost-sharing requirements; and out-of-pocket maximums, wellness programs and expatriate plans.
Open enrollment is well underway for individuals and small employers under the state and federally facilitated marketplace exchanges created by the Affordable Care Act.
As exchange coverage becomes available, many employers are in the process of evaluating whether, or at what level, to continue to offer health insurance benefits to their employees. Some employers are staying the course and offering robust medical plan choices to their employees. Others are turning to private health exchanges for solutions and still others are deciding that their employees may be better off obtaining subsidized coverage in the state or federally facilitated marketplace exchanges.
A large part of this decision turns on whether an employer will incur tax penalties for failure to offer adequate coverage to its employees and whether its employees will, in fact, be better off obtaining coverage elsewhere.
The Internal Revenue Service recently released final regulations and updated questions and answers to help employers and taxpayers comply with the new 0.9 percent Medicare payroll tax increase on high-income earners that became effective in 2013. Employers are responsible for withholding and reporting the increased payroll tax and may be liable for amounts that are not withheld. Employers should check with their payroll service providers to make sure they are compliant for 2013 and, if not, make any necessary corrections by the last payroll of 2013 to avoid potential liability or penalties.
The Internal Revenue Service (IRS) recently issued final regulations relating to the additional Hospital Insurance (HI) tax on income above threshold amounts (the Additional Medicare Tax), as added by the Affordable Care Act. The IRS also issued updated Questions and Answers for the Additional Medicare Tax. Employers are responsible for withholding and reporting the 0.9 percent Additional Medicare Tax, which became effective in 2013. If an employer fails to withhold the correct amount from wages it pays to an employee, the employer may be liable for the amount not withheld and subject to applicable penalties.
Background
In general, employees and their employers must each pay a Medicare tax, at a rate of 1.45 percent, on the entire amount of the employees’ wages. Effective for employees beginning in 2013, the 0.9 percent Additional Medicare Tax is imposed on individuals for wages in excess of $250,000 for married taxpayers filing jointly, $125,000 for married taxpayers filing separately and $200,000 for single taxpayers. Thus, for high-wage earners, the employer portion of the Medicare tax remains at 1.45 percent, but the employee portion can be a total of 2.35 percent of wages in excess of the threshold amounts.
Employer Obligations
To comply with the Additional Medicare Tax requirement, employers must withhold the 0.9 percent Additional Medicare Tax from wages it pays to an employee in excess of $200,000 in a calendar year, without regard to the employee’s filing status, wages paid by another employer or income from self-employment. Thus, generally the employer need not obtain additional information from the employee regarding the employee’s expected actual liability to withhold amounts due under the Additional Medicare Tax. Note that the withholding obligation exists even if an employee is not ultimately liable for the Additional Medicare Tax (e.g., if an employee’s wages together with those of his or her spouse do not exceed the $250,000 for married taxpayers filing jointly). On the other hand, an employer is not required to withhold the Additional Medicare Tax so long as the employee’s wages do not exceed $200,000, even if the employer has reason to believe the employee will be liable for the Additional Medicare Tax (e.g., if an employee and his or her spouse each earn $150,000). Employers are required to begin withholding Additional Medicare Tax in the pay period in which the employer pays wages in excess of $200,000 to an employee.
Employers that do not deduct and withhold the Additional Medicare Tax are [...]
Recently issued guidance clarifies the application of certain provisions under the Affordable Care Act (ACA) to health reimbursement arrangements, employer payment plans, health flexible spending arrangements and employee assistance programs.
Recently issued guidance clarifies annual information reporting requirements for insurers and employers under the Affordable Care Act (ACA). The required reporting enables the Internal Revenue Service to determine compliance with the employer and individual mandates and individual eligibility for premium tax credits under the ACA.
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