Branded Prescription Drug Fee (BPD) – Pharmaceutical Manufacturers and Importers

The Affordable Care Act created an annual fee payable beginning in 2011 by certain manufacturers and importers of brand name pharmaceuticals. On July 24, 2014, the IRS issued final and temporary regulations on the branded prescription drug fee. The regulations describe the rules related to the fee, including how it is computed and how it is paid. Also on July 24, 2014, the IRS issued Notice 2014-42, which provides additional guidance on the branded prescription drug fee for the 2015 fee year and subsequent fee years. For information on the fee for the 2012, 2013 and 2014 fee years, see Notice 2011-92 , Notice 2012-74 and Notice 2013-51.

For additional information, visit our Affordable Care Act Provision 9008 Branded Prescription Drug Fee page.

Expatriate Health Coverage 

The Expatriate Health Coverage Clarification Act (EHCCA) was enacted on December 16, 2014.  Section 3(a) of the EHCCA generally provides that the Affordable Care Act (ACA) does not apply to expatriate health plans, employers with respect to expatriate health plans (but solely in the employer’s capacity as plan sponsor of the expatriate health plan), and expatriate health insurance issuers with respect to coverage offered by such issuers under expatriate health plans.  The EHCCA generally applies to expatriate health plans issued or renewed on or after July 1, 2015.  On June 30, 2015, the IRS and Treasury Department issued Notice 2015-43, which provides transition relief and interim guidance on the application of certain provisions of the ACA to expatriate health insurance issuers, expatriate health plans, and employers in their capacity as plan sponsors of expatriate health plans, as defined in EHCCA.  Notice 2015-43 does not apply to the health insurance providers fee (IPF – ACA § 9010 fee).  For purposes of the § 9010 fee, Notice 2015-29, applies to the 2014 and 2015 fee years, and future guidance will address the 2016 and later fee years.

Group Health Plan Requirements

The Affordable Care Act establishes a number of new requirements for group health plans. Interim guidance on changes to the nondiscrimination requirements for group health plans can be found inNotice 2011-1, which provides that employers will not be subject to penalties until after additional guidance is issued. Additionally, TD 9575 and REG-140038-10, issued by DOL, HHS and IRS, provide information on the summary of benefits and coverage and the uniform glossary. Notice 2012-59 provides guidance to group health plans on the waiting periods they may apply before coverage starts. On June 20, 2014, HHS, DOL and IRS issued final regulations on the ninety-day waiting period limitation..

More information on group health plan requirements is available on the websites of the Departments of Health and Human Services and Labor and in additional guidance.

Further, Notice 2013-54 provides guidance regarding the application of the Affordable Care Act’s market reforms to certain types of group health plans, including health reimbursement arrangements (HRAs), health flexible spending arrangements (health FSAs) and certain other employer healthcare arrangements, including arrangements under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy.

Health Insurance Provider Fee (IPF-ACA § 9010 fee)

The Affordable Care Act created an annual fee on certain health insurance providers beginning in 2014. On Nov. 26, 2013, the Treasury Department and IRS issued final regulations on this annual fee imposed on covered entities engaged in the business of providing health insurance for United States health risks. On Aug. 12, 2014, the Treasury Department and IRS issued Notice 2014-clarifying the scope of the term “covered entity” and the fact that reporting is not required in 2014 for an entity that would not qualify as a covered entity, even if it is a member of a controlled group that is a covered entity. On February 23, 2015, the IRS and Treasury Department issued temporary regulations providing further guidance on the definition of a covered entity for the 2015 fee year and each subsequent fee year.

On March 30, 2015, the Treasury Department and IRS issued Notice 2015-29, which provides guidance on how the special rule for expatriate health plans for the 2014 and 2015 fee years under the Expatriate Health Coverage Clarification Act of 2014 applies to the annual fee on health insurance providers.  This notice obsoletes Notice 2014-24, which provided a temporary safe harbor for covered entities that reported direct premiums written for expatriate plans on a Supplemental Health Care Exhibit (SHCE).

On January 29, 2016,  the Treasury Department and IRS issued Notice 2016-14, which provides guidance for fee year 2016 on how the definition of expatriate health plans under the Expatriate Health Coverage Clarification Act of 2014 applies to the annual fee on health insurance providers.  This notice provides that, solely for the 2016 fee year, the definition of expatriate health plan will be the same as provided in the Department of Health and Human Services MLR final rule definition.

The Consolidated Appropriations Act of 2016, Title II, § 201, Moratorium on Annual Fee on Health Insurance Providers, suspends collection of the health insurance provider fee for the 2017 calendar year. Thus, health insurance issuers are not required to pay these fees for 2017. This moratorium does NOT affect the filing requirement and payment of these fees for 2016. Form 8963 (Rev. February 2016) must be filed by April 18, 2016.

For additional information visit our Affordable Care Act Provision 9010 – Health Insurance Providers Fee page and these questions and answers.

Information Reporting on Health Coverage by Insurers (Section 6055)

On March 5, 2014, the Department of the Treasury and IRS issued final regulations on minimum essential coverage information reporting by providers of MEC to the IRS and each covered individual. The information reporting is to be provided by health insurance issuers, self-insured employers, government agencies and certain other parties that provide health coverage. Additionally, on July 9, 2013, the Department of the Treasury and the IRS issued Notice 2013-45announcing transition relief for 2014 from this annual information reporting. Notice 2015-68 was issued on September 17, 2015, and announces that the Department of the Treasury and the IRS intend to propose regulations addressing various issues related to information reporting by providers of MEC. For additional information on minimum essential coverage information reporting see our questions and answers and this fact sheet issued by the U.S. Department of the Treasury.

The 2015 Form 1095-B and 1094-B and instructions that insurers will use to report on health coverage that they provide for individuals that they cover are available.

On December 28, 2015, IRS issued Notice 2016-4, which extends the due dates for the 2015 information reporting requirements, both furnishing to individuals and filing with the Internal Revenue Service (Service), for insurers, self-insuring employers, and certain other providers of minimum essential coverage under I.R.C. § 6055, and the information reporting requirements for applicable large employers under I.R.C. § 6056.  Specifically, this Notice (1) extends the due date for furnishing the 2015 Form 1095-B, Health Coverage, and the 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, from January 31, 2016, until March 31, 2016, and (2) extends the due date for filing with the Service the 2015 Form 1094-B, Transmittal of Health Coverage Information Returns, the 2015 Form 1095-B, Health Coverage, the 2015 Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and the 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage from February 29, 2016, to May 31, 2016 if not filing electronically, and from March 31, 2016, to June 30, 2016 if filing electronically. This Notice also provides guidance to individuals who, as a result of these extensions, might not receive a Form 1095-B or Form 1095-C by the time they file their 2015 tax returns.

Medical Device Excise Tax

On Dec. 5, 2012, the IRS and the Department of the Treasury issued final regulations on the new 2.3-percent medical device excise tax (IRC §4191) that manufacturers and importers will pay on their sales of certain medical devices starting in 2013. On Dec. 5, 2012, the IRS and the Department of the Treasury also issued Notice 2012-77, which provides interim guidance on certain issues related to the medical device excise tax.

The Consolidated Appropriations Act, 2016 (Pub. L. 114-113), signed into law on Dec. 18, 2015, includes a two year moratorium on the medical device excise tax imposed by Internal Revenue Code section 4191.  Thus, the medical device excise tax does not apply to the sale of a taxable medical device by the manufacturer, producer, or importer of the device during the period beginning on Jan. 1, 2016, and ending on Dec. 31, 2017.

Additional information is available on the Medical Device Excise Tax page and Medical Device Excise Tax FAQs on IRS.gov.

Medical Loss Ratio (MLR)

Beginning in 2011, insurance companies are required to spend a specified percentage of premium dollars on medical care and quality improvement activities, meeting a medical loss ratio (MLR) standard. Insurance companies that are not meeting the MLR standard will be required to provide rebates to their consumers beginning in 2012. For information on the federal tax consequences to an insurance company that pays a MLR rebate and an individual policyholder who receives a MLR rebate, as well as information on the federal tax consequences to employees if a MLR rebate stems from a group health insurance policy, see our frequently asked questions.

Medicare Shared Savings Program

The Affordable Care Act establishes a Medicare shared savings program (MSSP) which encourages Accountable Care Organizations (ACOs) to facilitate cooperation among providers to improve the quality of care provided to Medicare beneficiaries and reduce unnecessary costs. More information can be found in Notice 2011-20, which solicited written comments regarding what additional guidance, if any, is needed for tax-exempt organizations participating in the MSSP through an ACO. This guidance also addresses the participation of tax-exempt organizations in non-MSSP activities through ACOs. Additional information on the MSSP is available on the Department of Health and Human Services website.

The Centers for Medicare and Medicaid Services has released final regulations describing the rules for the Shared Savings Program and accountable care organizations. Fact Sheet 2011-11 confirms that Notice 2011-20 continues to reflect IRS expectations regarding the Shared Savings Program and ACOs, and provides additional information for charitable organizations that may wish to participate.

On October 24, 2014, the Department of the Treasury and the IRS issued Notice 2014-67, which describes the conditions under which a hospital or other health care facility with tax-exempt bonding authority may participate in an ACO without jeopardizing the tax-exempt status of the bonds financing that facility.

Patient-Centered Outcomes Research Institute Fee

The Affordable Care Act established the Patient-Centered Outcomes Research Institute. Funded by the Patient-Centered Outcomes Research Trust Fund, the institute will help patients, clinicians, purchasers and policy-makers make informed health decisions by advancing clinical effectiveness research. The trust fund will be funded in part by fees paid by issuers of certain health insurance policies and sponsors of certain self-insured health plans.

The IRS and the Department of the Treasury have issued final regulations (PDF) on this fee. On Sept. 18, 2014, the IRS issued Notice 2014-56, which establishes the applicable dollar amount for policy and plan years ending after Sept. 30, 2014, and before Oct. 1, 2015. On Oct. 9, 2015, the IRS issued Notice 2015-60, which establishes the applicable dollar amount for policy and plan years ending after Sept. 30, 2015, and before Oct. 1, 2016. Additional information on the fee is available on the PCORI page and in our questions and answers and chart summary. Form 720, Quarterly Federal Excise Tax Return, was revised to provide for the reporting and payment of the PCORI fee. Although Form 720 is a quarterly return, for PCORI, Form 720 is filed annually only, by July 31. If for any reason you need to make corrections after filing your annual Form 720 for PCORI, write “Amended PCORI” at the top of the second filing.

Retiree Drug Subsidies

Under § 139A of the Internal Revenue Code, certain special subsidy payments for retiree drug coverage made under the Social Security Act  are not included in the gross income of plan sponsors. Plan sponsors receive these retiree drug subsidy payments based on the allowable retiree costs for certain qualified retiree prescription drug plans. For taxable years beginning on or after Jan. 1, 2013, new statutory rules affect the ability of plan sponsors to deduct costs that are reimbursed through these subsidies. See our questions and answers for more information.

Section 162(m) Amended – Limitation on Deduction for Compensation Paid by Certain Health Insurance Providers

The Affordable Care Act amended section 162(m) of the Code to limit the compensation deduction available to certain health insurance providers. The amendment goes into effect for taxable years beginning after Dec. 31, 2012, but may affect deferred compensation attributable to services performed in a taxable year beginning after Dec. 31, 2009. On Sept. 18, 2014, the Treasury Department and IRS issued final regulations on this provision.

Section 833 Amended – Treatment of Certain Health Organizations

The Affordable Care Act amended section 833 of the Code, which provides special rules for the taxation of Blue Cross and Blue Shield organizations and certain other organizations that provide health insurance. IRS Notice 2010-79 provides transitional relief and interim guidance on the computation of an organization’s taxpayer’s Medical Loss Ratio (MLR) for purposes of section 833, the consequences of nonapplication and changes in accounting method. Notice 2011-04 provides additional information and the procedures for qualifying organizations to obtain automatic consent to change its method of accounting for unearned premiums. Notice 2012-37 extends the transitional relief and interim guidance provided in Notice 2010-79 for another year to any taxable year beginning in 2012 and the first taxable year beginning after Dec. 31, 2012.

On January 6, 2014, the IRS issued final regulations that describe how the MLR for purposes of section 833 is computed.

Tax-Exempt 501(c)(29) Qualified Nonprofit Health Insurance Issuers

The Affordable Care Act requires the Department of Health and Human Services (HHS) to establish the Consumer Operated and Oriented Plan program (CO-OP program). It also provides for tax exemption for recipients of CO-OP program grants and loans that meet additional requirements under section 501(c)(29). IRS Notice 2011-23 outlined the requirements for tax exemption under section 501(c)(29) and solicited written comments regarding these requirements as well as the application process.Rev. Proc. 2015-17, issued in conjunction with final regulations, sets forth procedures for issuing determination letters and rulings on the exempt status of organizations applying for recognition of exemption under section 501(c)(29).

An overview of the CO-OP program is available on the HHS website.

Tax-Exempt Hospitals – Additional Requirements

The Affordable Care Act added new requirements for charitable hospitals (see Notice 2010-39 andNotice 2011-52). On June 26, 2012, the IRS published proposed regulations that provide information on the requirements for charitable hospitals relating to financial assistance and emergency medical care policies, charges for emergency or medically necessary care provided to individuals eligible for financial assistance, and billing and collections. On April 5, 2013, the IRS published proposed regulations on the requirement that charitable hospitals conduct community health needs assessments (CHNAs) and adopt implementation strategies at least once every three years. These proposed regulations also discuss the related excise tax and reporting requirements for charitable hospitals and the consequences for failure to satisfy the section 501(r) requirements. On August 15, 2013, the IRS published temporary regulations and proposed regulations providing information on which form to use when making an excise tax payment for failure to meet the CHNA requirements and the due date for filing the form. Notice 2014-2 confirms that hospital organizations can rely on proposed regulations under section 501(r) of the Internal Revenue Code published on June 26, 2012 and April 5, 2013, pending the publication of final regulations or other applicable guidance.  On December 29, 2014, the IRS issued final regulations TD 9708 providing guidance on the requirements described in section 501(r), the entities that must meet these requirements, and the reporting obligations relating to these requirements under section 6033.  In addition, the final regulations provide guidance on the consequences for failing to satisfy the section 501(r) requirements.  The regulations apply to taxable years beginning one year after December 29, 2014, which is the date the regulations were posted for public inspection by the Federal Register.  On March 10, 2015, the IRS issued Rev. Proc. 2015-21, which finalizes, with some modifications, the correction and disclosure procedures proposed in Notice 2014-3, under which certain failures to meet the requirements of section 501(r) will be excused. On June 26, 2015, the IRS issued Notice 2015-46, which clarifies how a charitable hospital organization may comply with the requirement in the final regulations that a hospital facility include a provider list in its financial assistance policy (FAP).

Transitional Reinsurance Program

The ACA requires all health insurance issuers and self-insured group health plans to make contributions under the transitional Reinsurance Program to support payments to individual market issuers that cover high-cost individuals. For information on the tax treatment of contributions made under the Reinsurance Program, see our frequently asked questions.

 

Source: U.S. Department of Transportation, “Tax Provisions for Other Organizations” https://www.irs.gov/ website. Accessed February 10, 2016. https://www.irs.gov/Affordable-Care-Act/Affordable-Care-Act-Tax-Provisions#Tax Provisions for Other Organizations

© Copyright 2016. All rights reserved. This content is strictly for informational purposes and although experts have prepared it, the reader should not substitute this information for professional insurance advice. If you have any questions, please consult your insurance professional before acting on any information presented. Read more.

Employer Shared Responsibility Provision

The Affordable Care Act establishes that certain employers must offer health coverage to their full-time employees or a shared responsibility payment may apply. On Feb. 10, 2014, the Department of the Treasury and the IRS issued final regulations on the Employer Shared Responsibility provisions. For additional information on the Employer Shared Responsibility provisions and the proposed regulations, see our questions and answers. On July 9, 2013, the Department of the Treasury and the IRS announced transition relief from the Employer Shared Responsibility provisions for 2014. For more information, please see Notice 2013-45. For additional transition relief generally applicable to 2015, see the preamble to the final regulations. On Sept. 18, 2014, the Department of the Treasury and the IRS issued Notice 2014-49, which provides guidance on how to apply the look-back measurement method in situations in which the measurement period applicable to an employee changes.
On December 16, 2015, the Treasury Department and IRS issued Notice 2015-87 which provides further guidance on the application of various provisions of the ACA to employer-provided health coverage.  Specifically,  the notice provides guidance on: (1) certain aspects of the employer shared responsibility provisions (ESRP), including clarifying the identification of employee contributions when employers offer health reimbursement arrangements (HRAs), flex credits, opt-out payments, or fringe benefits payments required under the McNamara-O’Hara Service Contract Act or other similar laws; (2) the application of the adjusted 9.5 percent affordability threshold under the Premium Tax Credit rules to the section ESRP safe harbor provisions; (3) the employer status of certain entities for section ESRP purposes; (4) certain aspects of the application of the ESRP rules to government entities; (5) the information reporting provisions for applicable large employers; (6) the application of the rules for health savings accounts (HSAs) to persons eligible for benefits administered by the Department of Veterans Affairs; and (7) the application of the COBRA continuation coverage rules to unused amounts in a health flexible spending arrangement (health FSA) carried over and available in later years, and conditions that may be put on the use of carryover amounts.

Expatriate Health Coverage – See Tax Provisions for Other Organizations

Group Health Plan Requirements – See Tax Provisions for Other Organizations

On December 16, 2015, the Department of Treasury and IRS issued Notice 2015-87 which provides further guidance on the application of the market reforms that apply to group health plans under the ACA to various types of employer health care arrangements.  This notice supplements the guidance provided in Notice 2013-54, Notice 2015-17 and the final regulations implementing the market reform provisions of the ACA.

Health Coverage for Older Children – See Tax Provisions for Individuals

Health Flexible Spending Arrangements – See Tax Provisions for Individuals

Health Reimbursement Arrangements, Health Flexible Spending Arrangements and Certain Other Employer Healthcare Arrangements – Application of Affordable Care Act Market Reforms

The Affordable Care Act’s market reforms apply to group health plans. On Sept. 13, 2013, the IRS issued Notice 2013-54, which explains how the Affordable Care Act’s market reforms apply to certain types of group health plans, including health reimbursement arrangements (HRAs), health flexible spending arrangements (health FSAs) and certain other employer healthcare arrangements, including arrangements under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy. The notice also provides guidance on employee assistance programs or EAPs and on section 125(f)(3), which prohibits the use of pre-tax employee contributions to cafeteria plans to purchase coverage on an Affordable Insurance Exchange (also known as a Health Insurance Marketplace). The notice applies for plan years beginning on and after Jan. 1, 2014, but taxpayers may apply the guidance provided in the notice for all prior periods. On February 18, 2015, the IRS issued Notice 2015-17  which provides transition relief from the excise tax under section 4980D with respect to failures to satisfy the market reforms by certain small employers  reimbursing premiums for individual insurance policies, S corporations reimbursing premiums for 2-percent shareholders, and certain health care arrangements for employees with health coverage under Medicare and TRICARE.

DOL has issued a notice in substantially identical form to Notice 2013-54, DOL Technical Release 2013-03. On Jan. 24, 2013, DOL and HHS issued FAQs that address the application of the Affordable Care Act to HRAs. On Nov. 6, 2014, DOL issued additional FAQs that address the application of the Affordable Care Act to HRAs and other payment arrangements.

Additional information is also available regarding consequences to the employer if the employer does not establish a health insurance plan for its own employees, but reimburses those employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace).

On Jan. 9, 2014, DOL and HHS issued FAQs that addressed, among other things, future rules relating to excepted benefits.

On December 16, 2015, the Treasury Department and IRS issued Notice 2015-87 which provides further guidance on the application of various provisions of the ACA to employer-provided health coverage.  Notice 2015-87 provides guidance on the application of the market reforms that apply to group health plans under the ACA to various types of employer health care arrangements.  The notice includes guidance that covers: (1) health reimbursement arrangements (HRAs), including HRAs integrated with a group health plan, and similar employer-funded health care arrangements; and (2) group health plans under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy, such as a reimbursement arrangement described in Revenue Ruling 61-146, or an arrangement under which the employer uses its funds to directly pay the premium for an individual health insurance policy covering the employee (collectively, an employer payment plan).  The notice supplements the guidance provided in Notice 2013-54; FAQs about the Affordable Care Act Implementation (Part XXII) issued by the Department of Labor on November 6, 2014; Notice 2015-17; and final regulations implementing the market reform provisions of the ACA published on November 18, 2015.

High Cost Employer-Sponsored Health Coverage Excise Tax

Section 4980I, which was added to the Code by the Affordable Care Act, applies to taxable years beginning after December 31, 2019.  Under this provision, if the aggregate cost of applicable employer-sponsored coverage provided to an employee exceeds a statutory dollar limit, which is revised annually, the excess is subject to a 40 percent excise tax.  On February 23, 2015, the IRS issued Notice 2015-16, which is intended to initiate and inform the process of developing guidance about the excise tax on high cost employer sponsored health coverage.  Notice 2015-16 describes potential approaches that could be incorporated in future guidance and invites comments on these potential approaches and other issues under section 4980I.

On July 30, 2015, the IRS issued Notice 2015-52, which is intended to continue the process of developing regulatory guidance regarding the excise tax on high cost employer-sponsored health coverage under section 4980I.  The notice supplements Notice 2015-16 by addressing additional issues under section 4980I, including the identification of the taxpayers who may be liable for the excise tax, employer aggregation, the allocation of the tax among the applicable taxpayers, the payment of the applicable tax and further issues regarding the cost of applicable coverage that were not addressed in Notice 2015-16.

The Consolidated Appropriations Act, 2016 (Pub. L. 114-113), signed into law on Dec. 18, 2015, delayed the effective date of the excise tax on high cost employer-sponsored health coverage from taxable years beginning after Dec 31, 2017, to taxable years beginning after Dec. 31, 2019.

Information Reporting on Health Coverage by Employers (Section 6056)

On March 5, 2014, the Department of the Treasury and IRS issued final regulations on employer health insurance coverage information reporting by applicable large employers to the IRS and its employees. The information reporting relates to health insurance coverage that is offered by certain employers, referred to as applicable large employers, and reporting is to be provided by each member of an applicable large employer. Additionally, on July 9, 2013, the Department of the Treasury and the IRS issued Notice 2013-45, announcing transition relief for 2014 from this annual information reporting. For additional information on the employer health insurance coverage information reporting see our questions and answers and this fact sheet issued by the U.S. Department of the Treasury.

The 2015 Forms 1095-C and 1094-C and instructions that employers will use to report on health coverage that they offer to their employees are available.

On December 28, 2015, IRS issued Notice 2016-4, which extends the due dates for the 2015 information reporting requirements, both furnishing to individuals and filing with the Internal Revenue Service (Service), for insurers, self-insuring employers, and certain other providers of minimum essential coverage under I.R.C. § 6055, and the information reporting requirements for applicable large employers under I.R.C. § 6056.  Specifically, this Notice (1) extends the due date for furnishing the 2015 Form 1095-B, Health Coverage, and the 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, from January 31, 2016, until March 31, 2016, and (2) extends the due date for filing with the Service the 2015 Form 1094-B, Transmittal of Health Coverage Information Returns, the 2015 Form 1095-B, Health Coverage, the 2015 Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and the 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage from February 29, 2016, to May 31, 2016 if not filing electronically, and from March 31, 2016, to June 30, 2016 if filing electronically. This Notice also provides guidance to individuals who, as a result of these extensions, might not receive a Form 1095-B or Form 1095-C by the time they file their 2015 tax returns.

Information Reporting on Health Coverage by Insurers (Section 6055) – See Tax Provisions for Other Organizations

Minimum Value

On April 26, 2012, the Department of the Treasury and IRS issued Notice 2012-31, which provides information and requested public comment on an approach to determining whether an eligible employer-sponsored health plan provides minimum value. Additionally, on April 30, 2013, the Treasury Department and the IRS issued proposed regulations relating to minimum value of eligible employer-sponsored plans and other rules regarding the premium tax credit. Starting in 2014, whether such a plan provides minimum value will be relevant to eligibility for the premium tax credit and application of the employer shared responsibility payment.

On November 4, 2014, the Department of the Treasury and IRS issued Notice 2014-69, which provides additional guidance regarding whether an employer-sponsored plan provides minimum value coverage if the plan fails to substantially cover in-patient hospitalization services or physician services.

Reporting Employer Provided Health Coverage in Form W-2

The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax Statement, in Box 12, using Code DD. Many employers are eligible for transition relief for tax-year 2012 and beyond, until the IRS issues final guidance for this reporting requirement.

The amount reported does not affect tax liability, as the value of the employer excludible contribution to health coverage continues to be excludible from an employee’s income, and it is not taxable. This reporting is for informational purposes only, to show employees the value of their health care benefits.

More information about the reporting can be found on Form W-2 Reporting of Employer-Sponsored Health Coverage.

 

Source: U.S. Department of Transportation, “Tax Provisions for Employers” https://www.irs.gov/ website. Accessed February 10, 2016. https://www.irs.gov/Affordable-Care-Act/Affordable-Care-Act-Tax-Provisions#Tax Provisions for Individuals

© Copyright 2016. All rights reserved. This content is strictly for informational purposes and although experts have prepared it, the reader should not substitute this information for professional insurance advice. If you have any questions, please consult your insurance professional before acting on any information presented. Read more.

Additional Medicare Tax

A new Additional Medicare Tax went into effect on Jan. 1, 2013. The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation and self-employment income that exceeds a threshold amount based on the individual’s filing status. The threshold amounts are $250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately and $200,000 for all other taxpayers. An employer is responsible for withholding the Additional Medicare Tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year. On Nov. 26, 2013, the IRS and the Department of the Treasury issued final regulations which provide guidance for employers and individuals relating to the implementation of Additional Medicare Tax, including the requirement to withhold Additional Medicare Tax on certain wages and compensation, the requirement to report Additional Medicare Tax, and the employer process for adjusting underpayments and overpayments of Additional Medicare Tax. In addition, the regulations provide guidance on the employer and individual processes for filing a claim for refund for an overpayment of Additional Medicare Tax. For additional information on the Additional Medicare Tax, see our questions and answers.For tax years 2010 and 2011, the Affordable Care Act raised the maximum adoption credit per child and the credit was refundable. For more information related to the adoption credit for tax years 2010 and 2011, see our news release, tax tip, Notice 2010-66, Revenue Procedure 2010-31, Revenue Procedure 2010-35 and Revenue Procedure 2011-52.

Health Coverage for Older Children

Health coverage for an employee’s children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various work place and retiree health plans. These changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return. Learn more by reading our news release or this notice.Effective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements (FSAs) or health reimbursement arrangements unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. This standard applies only to purchases made on or after Jan. 1, 2011. A similar rule went into effect on Jan. 1, 2011, for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs). Employers and employees should take these changes into account as they make health benefit decisions. For more information, see news release IR-2010-95, Notice 2010-59, Revenue Ruling 2010-23 and our questions and answers. FSA and HRA participants can continue using debit cards to buy prescribed over-the-counter medicines, if requirements are met. For more information, see news release IR-2010-128 andNotice 2011-5. Additionally, Notice 2013-57 provides information about the definition of preventive care for purposes of high deductible health plans associated with HSAs. Further, Notice 2013-54 provides guidance regarding the application of the Affordable Care Act’s market reforms to certain health FSAs. Starting in 2014, the individual shared responsibility provision calls for each individual to either have minimum essential coverage for each month, qualify for an exemption or make a payment when filing his or her federal income tax return. On June 26, 2013, the IRS released Notice 2013-42, which provides transition relief for employees eligible to enroll in a non-calendar year employer-sponsored health plan that begins in 2013 and ends in 2014. On Aug. 27, 2013, the Department of the Treasury and the IRS issued final regulations on the individual shared responsibility provision. On July 24, 2014, the IRS issued Rev. Proc. 2014-46, which provides the 2014 monthly national average premium for qualified health plans that have a bronze level of coverage. This amount is used to determine the maximum individual shared responsibility payment that may be due. On Jan. 16, 2015, the IRS issued Rev. Proc. 2015-15, which provides the 2015 monthly national average premium for qualified health plans that have a bronze level of coverage. On Nov. 21, 2014, the Department of the Treasury and the IRS issued final regulations addressing the treatment of health reimbursement arrangements, cafeteria plans, and wellness program incentives for purposes of determining the unaffordability exemption for individuals with offers of employer sponsored coverage. The regulations also provide that certain limited benefit Medicaid and TRICARE coverage is not minimum essential coverage (Notice 2014-10, issued on Jan. 23, 2014, provides transition relief from the shared responsibility payment for months in 2014 in which individuals have this limited benefit coverage). On Nov. 21, 2014, the IRS issuedNotice 2014-76, which identifies the hardship exemptions from the individual shared responsibility payment that a taxpayer may claim on a federal income tax return without obtaining an exemption certification from a Health Insurance Marketplace. For additional information on the individual shared responsibility provision, see our ISRP page and questions and answers. Additional information on exemptions and minimum essential coverage is available in final regulations issued by the U.S. Department of Health & Human Services.

Information Reporting on Health Coverage by Insurers (Form 1095-B) – See Tax Provisions for Other Organizations

Itemized Deduction for Medical Expenses – Changes

Beginning Jan. 1, 2013, you can claim deductions for medical expenses not covered by your health insurance when they reach 10 percent of your adjusted gross income. This change affects your 2013 tax return that you will file in 2014. There is a temporary exemption from Jan. 1, 2013, to Dec. 31, 2016, for individuals age 65 and older and their spouses. For additional information, see our questions and answers.The Affordable Care Act provides a one-time $250 rebate in 2010 to assist Medicare Part D recipients who have reached their Medicare drug plan’s coverage gap. This payment is not taxable. This payment is not made by the IRS. More information can be found atwww.medicare.gov.A new Net Investment Income Tax went into effect on Jan. 1, 2013. The 3.8 percent Net Investment Income Tax applies to individuals, estates and trusts that have certain investment income above certain threshold amounts. On Nov. 26, 2013, the IRS and the Treasury Department issued final regulations, which provide guidance on the general application of the Net Investment Income Tax and the computation of Net Investment Income. In addition, on Nov. 26, 2013, the IRS and the Treasury Department issued proposed regulations on the computation of net investment income as it relates to certain specific types of property. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Net Investment Income Tax, see our questions and answers.Starting in 2014, individuals and families can take a new premium tax credit to help them afford health insurance coverage purchased through an Affordable Insurance Exchange (also known as a Health Insurance Marketplace). The premium tax credit is refundable so taxpayers who have little or no income tax liability can still benefit. The credit also can be paid in advance to a taxpayer’s insurance company to help cover the cost of premiums. On May 18, 2012, the Department of the Treasury and the IRS issued final regulations, which provide guidance for individuals who enroll in qualified health plans through Marketplaces and claim the premium tax credit, and for Marketplaces that make qualified health plans available to individuals and employers. On Jan. 30, 2013, the Department of the Treasury and IRS released final regulationson the premium tax credit affordability test for related individuals. Notice 2013-41, issued on June 26, 2013, provides information for determining whether or when individuals are considered eligible for coverage under certain Medicaid, Medicare, CHIP, TRICARE, student health or state high-risk pool programs. This determination will affect whether the individual is eligible for the premium tax credit. On November 7, 2014, the Department of the Treasury and IRS issuedNotice 2014-71, which advises that an individual enrolled in a qualified health plan who becomes eligible for Medicaid coverage for pregnancy-related services that is minimum essential coverage, or for CHIP coverage based on pregnancy, is treated as eligible for minimum essential coverage under the Medicaid or CHIP coverage for purposes of the premium tax credit only if the individual enrolls in the coverage.On July 24, 2014, the Department of the Treasury and the IRS issued proposed, temporary andfinal regulations providing further guidance on the premium tax credit. In particular, the regulations provide relief for certain victims of domestic abuse or spousal abandonment from the requirement to file jointly in order to claim the premium tax credit. In addition, the regulations provide special allocation rules for reconciling advance credit payments, address the indexing in future years of certain amounts used to determine eligibility for the credit and compute the credit, and provide rules for the coordination between the credit and the deduction under section 162(l) for health insurance costs of self-employed individuals. Rev. Proc. 2014-41, also released on July 24, 2014, provides methods for determining the section 162(l) deduction and the premium tax credit for health insurance costs of self-employed individuals who claim the deduction under section 162(l). On Jan. 26, 2015, the IRS issued Notice 2015-9, which provides limited penalty relief for taxpayers who have a balance due on their 2014 income tax return as a result of reconciling advance payments of the premium tax credit against the premium tax credit allowed on the tax return. Specifically, Notice 2015-9 provides relief from the penalty under section 6651(a)(2) for late payment of a balance due and the penalty under section 6654(a) for underpayment of estimated tax. The relief applies only for the 2014 taxable year.On April 24, 2015, the IRS issued Notice 2015-37, which advises that an individual who may enroll in a CHIP buy-in program that HHS has designated as minimum essential coverage is eligible for minimum essential coverage under the program for purposes of the premium tax credit only for the period the individual is enrolled.

• On April 10, 2015, the IRS issued Notice 2015-30 providing penalty relief for the 2014 taxable year for taxpayers who received a Form 1095-A, Health Insurance Marketplace Statement, that was delayed or believed to be incorrect and who timely file their 2014 income tax return, including extensions. This relief applies to the following (1) the penalty for late payment of a balance due (section 6651(a)(2)), (2) the penalty for failure to pay an amount due upon notice and demand (section 6651(a)(3)), (3) the penalty for underpayment of estimated tax (section 6654(a), and (4) the accuracy-related penalty (section 6662).
• On May 2, 2014, the Department of the Treasury and the IRS issued final regulations on the reporting requirements for Marketplaces.
• On April 30, 2013, the Department of the Treasury and the IRS issued proposed regulationsrelating to minimum value of eligible employer-sponsored plans and other rules regarding the premium tax credit. On November 4, 2014, the Department of the Treasury and IRS issuedNotice 2014-69, which provides additional guidance regarding whether an employer-sponsored plan provides minimum value coverage if the plan fails to substantially cover in-patient hospitalization services or physician services. Notice 2014-69 also advises taxpayers that the Department of Treasury and the IRS intend to propose new regulations providing that plans that fail to provide substantial coverage for inpatient hospitalization or physician services do not provide minimum value. On August 31, 2015, the Department of Treasury and the IRS issuedproposed regulations supplementing the prior proposed regulations and amending the definition of minimum value. On December 16, 2015, the Department of Treasury and IRS issued final regulations providing guidance on the Premium Tax Credit.  The final regulations adopted some of the proposed rules regarding the Premium Tax Credit, including the definition of Modified Adjusted Gross Income (MAGI); rating areas for purposes of determining benchmark plans used in determining applicable credits; the effect of eligibility for COBRA continuation coverage on Premium Tax Credit eligibility; coverage months for newborns and new adoptees; proration of monthly premiums for individuals enrolled for less than a month; and determining the benchmark plan for family members living at different addresses.  The final regulations also withdrew and re-proposed some of the rules relating to minimum value of eligible employer-sponsored plans and reserved on other proposed rules relating to minimum value of eligible employer-sponsored plans.  The re-proposed and reserved rules will be finalized separately.

 

 

• Premium Tax Credit

• Net Investment Income Tax

• Medicare Part D Coverage Gap “Donut Hole” Rebate

• Information Reporting on Health Coverage by Employers (Form 1095-C) – See Tax Provisions for Employers

• Individual Shared Responsibility Provision

 

• In addition, starting in 2013, there are new rules about the amount that can be contributed to an FSA. Notice 2012-40 provides information about these rules and flexibility for employers applying the new rules. On Oct. 31, 2013, the Department of the Treasury and IRS issued Notice 2013-71, which provides information on a new $500 carryover option for employer-sponsored healthcare flexible spending arrangements. Learn more by reading the news release issued by the U.S. Department of the Treasury.

 

• Health Flexible Spending Arrangements

 

• For tax year 2012, the credit has reverted to being nonrefundable, with a maximum amount (dollar limitation) of $12,650 per child. If you adopted a child in 2012, see Tax Topic 607 for more information.

 

• Adoption Credit

 

On December 22, 2015, the IRS issued Notice 2016-02, which provides guidance for taxpayers eligible to claim the Health Coverage Tax Credit who enrolled in a qualified health plan through a Health Insurance Marketplace in tax years 2014 or 2015, and who claimed or are eligible to claim the premium tax credit.

For more information on the credit, see our premium tax credit page and our questions and answers.

 

Source: U.S. Department of Transportation, “Tax Provisions for Individuals” https://www.irs.gov/ website. Accessed February 10, 2016. https://www.irs.gov/Affordable-Care-Act/Affordable-Care-Act-Tax-Provisions#Tax Provisions for Individuals

© Copyright 2016. All rights reserved. This content is strictly for informational purposes and although experts have prepared it, the reader should not substitute this information for professional insurance advice. If you have any questions, please consult your insurance professional before acting on any information presented. Read more.

Dear Valued Customer,

A new Additional Medicare Tax went into effect on Jan. 1, 2013. We’re focused on it in this issue of the “———————-“ because it’s important information, but it’s complex and contains myriad rules and regulations

The information below relates to tax provisions for individuals and for employers and other organizations. For additional information on the Additional Medicare Tax, see the questions and answers provided by the IRS to help you understand the basics. These FAQ’s address topics like the rate of Additional Medicare Tax, what wages are subject to Additional Medicare Tax, and much more. Please connect with us for more information.

We appreciate your continued business and look forward to serving you.

Kind regards,