Category: Health Insurance

Maintaining New Governments Standards with Reporting Health Plan Coverage

2015 brought new standards of reporting Health Plan Coverage to both employees and the IRS. Although official reports won’t be due until January of 2016, there are several steps to take now to ensure you are prepared when the time comes.  Depending on if you are a small or large employer, the requirements are as follows:

  • Small Employer: If you are an employer with self-insured health plans and are not considered a large employer (over 50 full-time equivalent employees), you are required to issue Form 1095-B to every covered employee, and file copies with the IRS.
  • Large Employer: If you are considered a large employer, you are required to issue a Form 1095-C to every employee and file copies with the IRS.

The following information will be required to report for each employee receiving a 1095-C

  1. Health care coverage. You must report the health care coverage that was offered or not offered to the employee
  2. Amount. You will need to report the amount that was paid by the employee for their portion of the lowest-cost monthly premium. This applies to self-only minimum value coverage.
  3. Reasoning. Should an employee not be offered insurance at any time within the calendar year you must indicate the reasoning using the corresponding code. For instance, if the employee was not employed in that month (2A) or employed at a part time level (2B).

A list of codes is available at www.irs.gov/instructions/i109495c/index.html and should be reviewed to ensure all form requirements are begin met throughout the year.

Self-insured Employer Reporting

Any employer offering a self-insured health plan must provide the following information:

  1. List of each employee, including spouse, dependents or others covered under the plan who was given coverage for a minimum of one month throughout the year.
  2. Date of birth and social security number for each covered individual.
  3. Each month for which the person was covered

Large Employers will report using Form 1095-C, part 3. If you are not considered a large employer you will want to use 1095-B.

See www.irs.gov/instructions/i109495b/index.html. For the comprehensive requirements of form 1095.

Transition Relief for Large Employers

Transitional relief has been provided by the IRS for a variety of employer and plan situations including penalties for incomplete or incorrect returns. Generally, the relief will provide extra time to develop processes for data collection in compliance with the new requirements. However, no relief will be extended to employers who can show a concerted effort to collect and provide required information. Transitional relief will be extended in specific circumstances, some of which are detailed below:

  • If by December 27, 2012, your health plan was not on a calendar you may be eligible for transitional relief for the first calendar months of 2015. Please note you must have offered affordable coverage providing minimal benefits by the first day of 2015.
  • If your company has wavered at the 50 Full Time Employee (FTE) mark you may be eligible for Transitional Relief. You may use a six consecutive month measuring period in 2014 to assess whether you are considered a Large Employer.
  • The requirement states that you must offer coverage for all days within the month, for January 2015 if you provided coverage before the first payday you will be considered as offering coverage as of January 1, 2015.
  • If you did not offer coverage in 2013 or 2014 for dependents you will not be subject to shared responsibility liability in 2015. However, you must prove that you are taking steps to offer dependent coverage.
  • Should you have more than 50 but fewer than 100 FTE, for 2015, you are not held liable for the shared responsibility payment. However, you must show that you
    • Have fewer than 100 FTE employees
    • has not reduced its hours of service or workforce between 2/9/2014 and 12/31/14
    • Are maintaining previously offered coverage. Forms 1094C and 1095-C will verify these requirements.
  • An employer will have a reduced penalty if they have over 99 FTE employees and have offered affordable minimum coverage to at least 70% of its employees

The Affordable Care Act requirements have had their challenges. Concerns have been identified and requirement changes have been made. However, it is advisable to prioritize compliance and planning to adhere to these regulations. Reports to the IRS and employees are imperative to the compliance process and should be followed.

At Beck & Company, Certified Public Accountants and Business Advisors, we are an accounting and consulting firm delivering specialized expertise, creative thinking, and unsurpassed service to ensure that our clients’ financial endeavors flourish.

Serving small and mid-sized organizations and individuals, we provide audit, tax, accounting, and consulting service that address all aspects of your business with one goal in mind – exceeding your expectations. We are able to do this by drawing on our combined business backgrounds and experience in public accounting to help you in virtually any area of your business. Contact us for more information on our accounting and consulting services that can help you.

A Closer Look at Healthcare Reform Guidance for Small Businesses

Over the past two weeks, we have been taking a look at an overview of the ever-developing new health care laws and how they impact small businesses. We looked at past guidelines, upcoming deadlines, and options small business employers have when it comes to providing health care coverage. We also examined three reimbursement methods for small business employers that give them choices in terms of how they will provide their employees with coverage options. For more information, visit here.

There is so much background knowledge needed to understand all of this that we thought it would be beneficial to dig a little deeper into healthcare reform regulations for small businesses. Let’s take a closer look.

Background into Healthcare Reform Decisions

Back in 2013, the Internal Revenue Service (IRS) issued Notice 2013-54. This notice defined that an employer had created an “Employer Payment Plan” considered to be a group health plan under the Affordable Care Act (ACA) when the employer reimburses an employee for individual health insurance premiums or directly pays the insurance company for this employee’s individual policy. Even still, the Employer Payment Plans will fail to comply with two aspects of the ACA—the prohibition of annual limits on an individual’s benefits and the preventive health service requirements. If these were not complied with, employers would be subject to an excise tax, according to Section 4980D, of $100 per day for each individual that doesn’t meet compliance.

On February 18, 2015, the IRS issued new guidance. Through this, transitional relief was offered to employers that reimburse their employees for the cost of premiums for individual health coverage. This also allowed for arrangements to increase employees’ compensation to help pay for the cost of these individual policies.

Caveats to the Excise Tax—Transitional Relief for Small Businesses

As defined by the IRS as employers that employed an average of less than 50 full-time (and full-time equivalent) employees on business days during the preceding calendar year, small employers were offered limited relief from the Section 4980D excise tax. For these employers only, the excise tax would not be asserted on them for failure to comply with the Market Reforms by Employer Payment Plans that we discussed above. This is applicable through June 30, 2015. In addition to being exempt from the excise tax during this period, small employers are not required to file Form 8928 solely because of the Employer Payment Plan for timeframe during which the employer qualifies for the relief. But, it is important to note that after the June 30th deadline, small employers may be liable for the excise tax, but this does not apply to reimbursement arrangements (health reimbursement arrangements and others) for medical expenses other than insurance premiums.

How Small Employers are Responding

Because of Notice 2013-54, employers don’t want to risk the excise tax by sponsoring Employer Payment Plans. Instead, many have chosen to increase after-tax compensation for employees who can then purchase their own coverage. This practice is only exempt from the ACA and is not considered a group health plan if the compensation is increased and the employer does NOT require that the compensation be used to fund health insurance. It is important to understand that employers that require the extra compensation to be used for health coverage will be considered part of an Employer Payment Plan that IS subject to the 4980D excise tax. Please note that whether an Employer Payment Plan is offered on an after-tax basis will still be subject to treatment as a group health plan.

What to do for the Future

If you, as a small employer, have Employer Payment Plans in place, you’ll want to modify them before June 30th to avoid the Section 4980D excise tax. As Beck and Company’s Certified Public Accountants and Business Advisors, we understand that you, as small business owners, want to do what you can for your employees and hope the information has helped you understand the regulations more thoroughly. To learn more about our accounting services to help you navigate through these tricky processes, visit here.

Contact us here at Beck and Company CPAs so we can help you with your unique needs as small business owners navigating the new healthcare reform regulations.

Health Insurance Options for Small Business Employees

Keeping up with the ever-evolving world of health insurance rules and regulations has probably never been quite as difficult or confusing as it is currently. It is essential to understand current policies, future deadlines, and available options to help your small business be informed and make the best choices for your employees and their health insurance while remaining compliant with government rules. To learn more, visit here. Let’s take a closer and more in-depth look at methods the Internal Revenue Service (IRS) permits employers of small businesses to reimburse employees for the cost of health insurance premiums in three ways. If the regulations were not followed for reimbursement, please note that these reimbursements would then be considered taxable income for the employee.

Reimbursement Method #1: Reimbursements that are administered by the Employer

A payment may be issued to the employee by the employer to reimburse them for a portion or for their full health insurance premiums. If this payment is received, it is the responsibility of the employee to provide proof of both payment and coverage for the times in which they received reimbursement. If the employer does obtain proof from the employee that the funds received from the employer were used by the employee to purchase health insurance, the payments are not taxable income. Instead of paying just the employee, the employer has the option to give a check that is made payable to the employee’s insurance company that must be remitted to the insurance provider. The most important factor of this method is sufficient proof obtained by the employer from the employee that the reimbursement is being used for health insurance and that there was coverage throughout the course of time in which there was reimbursement.

Reimbursement Method #2: HSA- Health Savings Account

Employers are allowed to contribute towards the amount of the premiums of an employee’s health savings account, but the combined amount maximum contributed between employers and employees has limits established by the IRS. Employer contributions do not count as taxable income on the part of the employee, but this is only the case if the funds are used to pay medical expenses and premiums. If they are not expenses that would be deductible, the employee must then report this and pay tax on this amount.

Reimbursement Method #3: HRA- Health Reimbursement Arrangement

With a health reimbursement arrangement (HRA), an employer may establish one for employees that can stand alone or be offered alongside other plans (flexible spending, cafeteria plan, etc.). HRAs can only be contributed to by the employer, and contributions are not included as part of the employee’s taxable income. The IRS does not put limitations on HRAs so there are not limits on the deductible or the employee expenses, and the employer has flexibility in how the plan terms are established.

Policies that are not eligible for reimbursement by employers

The three methods above are acceptable forms of reimbursements for employee health coverage, but there are policies and plans that do not meet IRS regulations. This means these would not qualify for a medical expense deduction cannot be tax-exempt reimbursements. These include hospitalization plans and policies that pay a flat amount for hospitalization or falling ill. Life insurance is not included either. Finally, policies that pay wages of employees while they are ill or disabled are also not included.

As Beck and Company’s Certified Public Accountants and Business Advisors, we understand that you, as small business owners, want to do what you can for your employees and hope the information has helped you understand what you can and cannot do in terms of health coverage reimbursement. Our client accounting services are designed with you and your business in mind to help with the complexities and changes of health insurance and taxation policies. We want to help you understand and navigate through confusing rules and regulations so you can protect your business and still care for your employees and their health insurance needs. To learn more about our accounting services to help you in this process and many others, visit here.

Contact Beck and Company CPAs for further assistance and for us to help you answer any personalized or specific questions you have related to these health insurance reimbursement guidelines.

Small Businesses and Individual Health Insurance: What you Need to Know

It is unbelievable and hard to comprehend just how much has changed in the world of health insurance in the United States in such a short period of time. So much has transformed in just the last few months to a year alone, and keeping up with all of the changes and regulations can be daunting to say the least. As a small business, it is important to stay up-to-date on the latest regulations and policies to avoid penalties and stay compliant. At the same time, following it all can be confusing. Do you know and also truly understand the latest information and its implications for your business? Let’s take a closer look at current policies, future deadlines, and available options to help your small business be informed and make the best choices for your employees and their health insurance while remaining compliant with government rules.

Past Rules and Regulations, Upcoming Deadlines

On September 30, 2013, the Internal Revenue Service (IRS) issued rules prohibiting employers from paying for or reimbursing employee insurance premiums when they enroll in an individual health insurance plan. The fines for not being in compliance are steep. Employers who continue to pay for or reimburse insurance premiums face fines as great as $100 per employee per day. This adds up quickly!

There is good news, though, for those in small businesses of fewer than 50 employees. For these businesses, the IRS has provided a special transitional relief period by waiving penalties for this practice.  Unfortunately, the good news of this relief is followed by bad news related to a deadline for when this transitional relief period will run out. This deadline is coming up on July 1, 2015. After this date, there will no longer be a transitional relief for small employers seeking to provide reimbursement to employees for their personal health insurance plans.

Exploring Alternative Options that still Assist your Employees with Coverage

So, how do you, as small business owners, remedy the situation? There are other options besides reimbursement or paying for health insurance policies. One of these would be to increase employees’ pay overall and not connect this pay in any way to pay for health insurance. Another option, now that small businesses cannot be penalized for adverse medical history with higher premiums, is to establish a group health insurance plan instead of having employees find their own policy. With the new laws since 2014, a wider spectrum of products with more benefits and tax advantages are now available with group plans.

As Beck and Company’s Certified Public Accountants and Business Advisors, we realize just how much heart and effort goes into striving to do what you can for employees as a small business. We understand that this is true in terms of wanting to assist them with health insurance as well. It is important to know the regulations and abide by them while simultaneously doing what you can for your employees.  That is why we are here to help. Our client accounting services are designed with you and your business in mind. We want to help you understand and navigate through confusing rules and regulations so you can protect your business and still care for your employees and their health insurance needs. To learn more about our accounting services to help you in this process and many others, visit here.

Contact Beck and Company CPAs for further assistance to find out more about employee health insurance rules, regulations, and options for your specific business and its needs. Then, stay tuned next week as we explore your options for health insurance coverage for employees even further.