ppaca: accounting
TRANSCRIPT
The Pa'ent Protec'on and Affordable Care Act Bill Po5er, Senior Tax Director
• Businesses organized in multiple forms may be considered as a single employer
• Controlled groups can be parent-subsidiary, brother-sister, combinations or affiliated service groups
Determination of FTE in a Controlled Group
• Control exists if parent owns 80% of the subsidiary
• Could involve multiple subsidiaries
Parent - Subsidiary Controlled Group
• Where the same "ve or fewer individuals own 80% of the related entities, AND
• Effectively control more than 50% (identical ownership)
• Attribution o Family Members – spouse, children, grandchildren,
parents o Partner to Partner o Estates and Trusts and Bene"ciaries o Corporations and Shareholders
Brother – Sister Controlled Group
Example
Percentage of Ownership
Member A Corp B LLC Effec've
A 80% 20% 20%
B 10% 50% 10%
C 5% 15% 5%
D 5% 15% 5%
Total 100% 100% 40%
The four owners have more than 80% of A and B, so that requirement is satis"ed. But identical ownership is only 40% so they fail the 50% test. They are two separate employees
• Subjective determination • Related entities may or may not have
ownership relationships • Performing services to or on behalf of the
other entity, and when capital is not a material income producing factor
Affiliated Service Groups
Expansion of Coverage – Individual Mandate
• Individual Mandate o With limited exceptions, ALL individuals must maintain
“minimum essential coverage” or pay a penalty. § Government provided coverage § Employer sponsored coverage § Exchange coverage.
• Exemption from mandate o if required contribution to purchase insurance exceeds 8% of
household income. o Religious objection o American Indians o Incarcerated Individuals o Those with incomes below the tax "ling threshold
Expansion of Coverage – Individual Mandate
• Penalty amount is the lesser of a $at dollar amount of percentage of income. o 2014: $95 or 1% of household income o 2015: $325 or 2% of household income o 2016 and later: $695 or 2.5% of household income
• Effective in 2014 for employers with at least 50 full time employees
• Large employer must offer full time employees (FTE) and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer sponsored plan
• FTE must generally not be asked to pay more than 9.5% of their modi"ed household income for coverage
• Exceptions for new employees
Large Employer Penalties
• Employer not offering coverage • Employer offering coverage whose employee
receives a credit
Penalty for Non-Compliance
• Such employers are subject to a penalty if one or more FTE is certi"ed to the employer as being covered by an Exchange and received a premium tax credit
• Penalty for any month is an amount equal to the number of FTE’s in excess of 30 times 1/12th of $2,000
• Regardless of the number of FTE’s who are enrolled in the Exchange and received a premium credit
Employers Not Offering Coverage
• Some employers who offer health insurance coverage to FTE’s may be subject to a penalty
• Penalty can apply based on the number of FTE’s who purchase coverage through an Exchange and receive a credit or cost-sharing reduction
Employers Offering Coverage
Expansion of Medicare Taxes (2013)
• Employee portion of Medicare tax increased by 0.9% • Applies to wages or self-employment income in excess of
$200,000 ($250,000 in the case of a joint return, $125,000 in the case of a married taxpayer "ling separately).
• The additional Medicare tax increases the employee portion to 2.35% or a total Medicare rate of 3.8%.
• Employer has the obligation to withhold the additional tax on wages (without regard to spouse’s wages) if its employee earns more than $200,000; Employee is liable to the extent not withheld by employer.
• Self-employed are not allowed a deduction for ½ of the additional 0.9% tax.
Expansion of Medicare Taxes (2013)
• Individuals, estates and trusts required to pay 3.8% tax on net investment income such as interest, dividends, annuities, royalties, rents, capital gains and income from passive activities.
• Applies to the income in excess of $250,000 for joint returns, $125,000 for married "ling separate and $200,000 for all others
