The Affordable Care Act
After hearing about how complicated this law is and that many were upset about its implementation, I decided to make it part of my CPE (Continuing Professional Education) requirement for 2014.

Recently, I viewed the webinar on Obama-care and I must say, it doesn’t, at least in my opinion, appear to be a bad piece of legislation.  I caveat that by stating that I am not an attorney neither am I a legislator.  I was just very curious to know the tax implications especially as I anticipate getting questions about it from some clients.

At a minimum, many may ask some of the following questions: How will this benefit me, my family and my small business?  Must I take advantage of it?  If I don’t take advantage, are there any consequences?  I will try to answer as many of the questions in bullet format largely because I would like to focus on the salient parts of the presentation. 

For individuals

  1.  The “Pay or Play” mandate requires that every individual with household income > 138% of the Federal Poverty Line must enroll in a plan that offers “minimum essential coverage” OR pay a penalty.
  2. If individual qualifies for medicare, medicaid or a “qualified” employer sponsored plan does have to meet the Pay or Play mandate.
  3. The penalty for 2014 is 1% of household income > threshold or $95 whichever is greater with a maximum not to exceed 3 times the individual penalty.
  4. Individuals subject to the “Pay or Play” mandate may also qualify for a premium tax credit that can be used to pay for the purchase of a qualified health plan purchased on the state health exchange.
  5. The plan purchased must not exceed the individual’s income by more than 9.5%.

For Businesses

  1. All businesses must comply with the mandate starting January 1, 2015.
  2. Only applicable large employers, which equate to businesses with employed at least 50 “full-time employees,”are subject to the law.
  3. This 50 full time employees criterion does not include seasonal employees who worked for less than 120 days in a calendar year but may include part-time employees.
  4. Generally, sole proprietors, partners in a partnership and 2-percentr S corporation shareholders are not considered employees for the purposes of this law.
  5. Since employees compensated on a commission basis do not have set hours of work, the employer must implement a “reasonable good faith method” in determining hours worked to meet requirements of the rule.
  6. When the law takes effect for employers there will be a look-back measurement period for determining which employees must be offered insurance.
  7. Two penalties for employers are as following:
    • Penalty for not offering a group health benefit plan coverage for all its full-time employees
    • Penalty for not having an affordable (i.e., employee’s share of the premium may not exceed 9.5%) OR the plan’s share of covered health benefit costs (the “actuarial value”) does not offer minimum value – it is less than 60%