ObamaCare Exchanges vs. Employer Health Insurance

In our continuing effort to keep you informed on what has become a developing debacle, here is an interesting article for those who have the good fortune of having Employer Sponsored Health Insurance.

By Susan Ladika

Published October 16, 2013

Bankrate.com

If you already have health insurance through your job, you’re probably wondering whether Obamacare will give you some new options. Will you be able to comparison-shop for a plan on the new online exchanges that might be better than your employer health insurance? The answer is a big, resounding “maybe.”

Like almost everything else having to do with health care reform, there are plenty of nuances and caveats. Trying to decipher them and choose the best health insurance plan for your situation “makes homeowners insurance seem really simple,” says Brian Haile, senior vice president for health policy at the tax services company Jackson Hewitt.

Exchanges will be open to all, but …

The exchanges are online health insurance marketplaces set up under the Affordable Care Act. In 34 states, the marketplaces operate through the federal government’s HealthCare.gov website, while 16 states and the District of Columbia are running their own exchanges.

Even if your employer already offers health insurance, there’s nothing to prevent you from shopping on your state’s exchange. However, if you decide to leave your work-based plan and purchase coverage on the exchange, you “may not qualify for some of the benefits that the uninsured have,” notes E. Denise Smith, a professor of health care management at Gardner-Webb University in Boiling Springs, N.C.

Here’s the big hiccup: Unless your employer’s coverage for an individual is considered unaffordable under the law (that is, if your share of the premiums costs more than 9.5% of your household income) or inadequate (picking up less than 60% of the cost of covered benefits), you aren’t eligible for a government subsidy to help pay for your insurance. Subsidies are one of the things that can make plans on the new state exchanges appealing.

Subsidies in the form of tax credits are available even if you earn up to 400% of the federal poverty level, currently about $46,000 for an individual and $94,000 for a family of four. The subsidies vary based on income and the size of your family.

Trade in your employer plan?  

And that brings us back to the central question: If you have employer health insurance, should you check out the Obamacare exchanges anyway? There are differing opinions.

“It would generally not benefit an employee to leave their employer-sponsored plan,” Smith concludes, adding that your employer would be under no obligation to help pay for an exchange plan.

Haile says you may not be able to do better than your work-based coverage. “Look at how robust your employer plan is” and the benefits it provides, such as whether it includes dental and vision care, which are not part of the essential health benefits that must be offered with plans sold in the Obamacare exchanges, he says.

Still, if your employer-sponsored health insurance seems to eat up a big chunk of your budget, you might want to explore your options on the state exchange, Haile says.

Few workers have ‘unaffordable’ plans

Again, one of the key criteria of whether you’d qualify for subsidized insurance through your state’s exchange is if your share of the premium for an individual health plan where you work would amount to more than 9.5% of your household income. Whether you take more expensive family coverage doesn’t matter; the benchmark is what an individual policy would cost.

The rule means that someone earning $40,000 a year and paying $3,775 for individual coverage would not be eligible for a subsidy, says Brian Poger, CEO of Benefitter, a software company that’s helping employers navigate their way through health care reform. That same worker paying even more for family coverage would still not be eligible because, again, the premium for an individual is less than $3,800 (or 9.5% of $40,000).

The 9.5%-of-income threshold is one that few workers would meet, according to one recent study. The ADP Research Institute found that only 8.6% of employees are required to pay premium contributions that would meet the Affordable Care Act’s definition of “unaffordable.”

How will you know whether your premiums and income put you in that group and make you a good candidate for an exchange plan? Right now, it’s a little unclear.

“The answer is sort of a mish-mash,” Haile says. Many of Obamacare’s employer requirements were delayed until 2015, though companies were still supposed to provide notices by Oct. 1 telling workers whether their current coverage would be considered affordable. But the U.S. Labor Department says there’s no fine or penalty for failing to provide the notices.

Exchange coverage for family members

Under those same delayed “employer mandate” provisions, companies with at least 50 full-time workers will be required to offer health insurance to their workers and the workers’ dependent children in 2015. But coverage for workers’ spouses will not be mandatory, notes Christine Barber, senior policy analyst at Community Catalyst, a health care advocacy group.

“If your spouse isn’t covered by your employer’s insurance and doesn’t have insurance through his or her own employer, your spouse could shop for insurance on the exchange and potentially qualify for a subsidy,” Barber says.

Others who might find it valuable to shop on the exchanges are working singles under the age of 30 who don’t have health issues and would be able to purchase a catastrophic plan, Haile says.  

Catastrophic plans available on the state exchanges will have low monthly premiums but high deductibles. According to Haile, they’re not eligible for subsidies.

All workers at a particular company often pay the same rate for their employer health insurance, regardless of age or medical history, he says. Opting for an Obamacare catastrophic plan “could be cheaper if you’re the young kid on the block,” especially if your co-workers are decades older, which could drive up everybody’s insurance costs.  

Advertisements

7 things to know about employer-provided health insurance

By William H. Byrnes, Esq., and Robert Bloink, Esq., LL.M. | October 14, 2013

No one agrees on the exact numbers, but it’s a safe bet to say that over the next few years millions of Americans will sign up for health insurance on the now-open public exchanges.

Some of those people will have been shifted to the exchanges by mostly smaller employers. But larger employers aren’t likely to be part of that wave. In fact, industry analysts say most Americans will continue to get coverage through an employer.

This BenefitsPro story is excerpted from:

Moreover, even though many small businesses aren’t under any obligation to provide health care coverage to employees, nearly two-thirds may do just that in coming years.

That’s according to a survey of 532 small businesses designed to elicit their attitudes toward health coverage. Sponsored by small business insurer Employers Holdings Inc., the survey found that two in five small businesses with between one and 250 employees already offer coverage, and another one in five intends to do so within the next three years.

The point is, employer-provided health insurance isn’t going away anytime soon.

So, with all of that in mind, here are seven things to know about deductions, credits, what’s taxable and more if you’re setting up a health insurance plan for your company.

1. May an employer deduct as a business expense the cost of premiums paid for accident and health insurance for employees?

An employer generally can deduct as a business expense all premiums paid for health insurance for one or more employees. This includes premiums for medical expense insurance.

This BenefitsPro story is excerpted from:

Premiums are deductible by an employer whether coverage is provided under a group policy or under individual policies. The deduction for health insurance is allowable only if benefits are payable to employees or their beneficiaries; it is not allowable if benefits are payable to the employer. Where a spouse of an employer is a bona fide employee and the employer is covered as a family member, the premium is deductible. A corporation can deduct premiums it pays on group hospitalization coverage for commission salespersons, regardless of whether they are employees. Premiums must qualify as additional reasonable compensation to the insured employees.

If a payment is considered made to a fund that is part of an employer plan to provide the benefit, the deduction for amounts paid or accrued may be limited.

An accrual basis employer that provides medical benefits to employees directly instead of through insurance or an intermediary fund may not deduct amounts estimated to be necessary to pay for medical care provided in the year but for which claims have not been filed with the employer by the end of the year if filing a claim is necessary to establish the employer’s liability for payment.

2. What credit is available for small employers for employee health insurance expenses?

A credit is available for employee health insurance expenses of an eligible small employer for taxable years beginning after Dec. 31, 2009, provided the employer offers health insurance to its employees.

This BenefitsPro story is excerpted from:

An eligible small employer is an employer that has no more than 25 full time employees, the average annual wages of whom do not exceed $50,000 (in 2010, 2011, 2012, and 2013; the amount is indexed thereafter).

An employer must have a contribution arrangement for each employee who enrolls in the health plan offered by the employer through an exchange that requires that the employer make a non-elective contribution in an amount equal to a uniform percentage, not less than 50 percent, of the premium cost.

Subject to phase-out based on the number of employees and average wages, the amount of the credit is equal to 50 percent, and 35 percent in the case of tax exempts, of the lesser of (1) the aggregate amount of non-elective contributions made by the employer on behalf of its employees for health insurance premiums for health plans offered by the employer to employees through an exchange, or (2) the aggregate amount of non-elective contributions the employer would have made if each employee had been enrolled in a health plan that had a premium equal to the average premium for the small group market in the ratings area.

For years 2010, 2011, 2012, and 2013, the following modifications apply in determining the amount of the credit:

(1) the credit percentage is reduced to 35 percent (25 percent in the case of tax exempts);

(2) the amount under (1) is determined by reference to non-elective contributions for premiums paid for health insurance, and there is no exchange requirement; and

(3) the amount under (2) is determined by the average premium for the state small group market.

The credit also is allowed against the alternative minimum tax.

In 2014 small employers will have exclusive access to an expanded Small Business Healthcare Tax Credit under the Affordable Care Act. This tax credit covers as much as 50 percent of the employer contribution toward premium costs for eligible employers who have low- to moderate-wage workers.

3. Is the value of employer-provided coverage under accident or health insurance taxable income to an employee?

Generally, no.

This BenefitsPro story is excerpted from:

This includes medical expense and dismemberment and sight loss coverage for the employee, his or her spouse and dependents, and coverage providing for disability income for the employee. There is no specific limit on the amount of employer-provided coverage that may be excluded from an employee’s gross income. Coverage is tax-exempt to an employee whether it is provided under a group or individual insurance policy.

Likewise, the value of critical illness coverage is not taxable income to an employee.

Accidental death coverage is excludable from an employee’s gross income under IRC Section 106(a).

If an employee pays the premiums on his or her personally-owned medical expense insurance and is reimbursed by his or her employer, the reimbursement likewise is excludable from the employee’s gross income under IRC Section 106.

Where an employer simply pays an employee or retiree a sum that may be used to pay the premium but that amount is not required to be used for that purpose, the amount is taxable to the employee.

Under the Patient Protection and Affordable Care Act of 2010 (“PPACA 2010”), the exclusion from gross income for amounts expended on medical care is expanded to include employer provided health coverage for any adult child of the taxpayer if the adult child has not attained the age of 27 as of the end of the taxable year. According to Notice 2010-38, the adult child does not have to be eligible to be claimed as a dependent for tax purposes for this income exclusion to apply.

If an employer’s accident and health plan continues to provide coverage pursuant to a collective bargaining agreement for an employee who is laid off, the value of the coverage is excluded from the gross income of the laid-off employee. Terminated employees who receive medical coverage under a medical plan that is part of the former employer’s severance plan are considered to be employees for purposes of IRC Sections 105 and 106. Thus, an employer’s contributions toward medical care for employees are excludable from income under IRC Section 106. Otherwise, the exclusion is available only to active employees.

4. What are the tax consequences of payments received by employees under employer-provided accident or health insurance?

Although the amounts that both employers and employees pay for premiums for employer sponsored health and accident insurance plans must now be stated on the employee’s Form W-2, the tax consequences of receiving benefits pursuant to those plans have not changed. However, some payments must be included in the employee’s gross income, explained below.

This BenefitsPro story is excerpted from:

Amounts received by an employee under employer-provided accident or health insurance, group or individual, that reimburse the employee for hospital, surgical, and other medical expenses incurred for care of the employee or his or her spouse and dependents generally are tax-exempt without limit.

Nonetheless, benefits must be included in gross income to the extent that they reimburse an employee for any expenses that the employee deducted in a prior year. Moreover, if reimbursements exceed actual expenses, the excess must be included in gross income to the extent that it is attributable to employer contributions.

Where an employer reimburses employees for salary reduction contributions applied to the payment of health insurance premiums, these amounts are not excludable under IRC Section 105(b) because there are no employee-paid premiums to reimburse.

Likewise, where an employer applies salary reduction contributions to the payment of health insurance premiums and then pays the amount of the salary reduction to employees regardless of whether the employee incurs expenses for medical care, these so-called advance reimbursements or loans are not excludable from gross income under IRC Section 105(b) and are subject to FICA and FUTA taxes.

Sight Loss and Dismemberment Benefits

Payments not related to absence from work for the permanent loss, or loss of use, of a member or function of a body or permanent disfigurement of the employee or his or spouse or a dependent are excluded from income if the amounts paid are computed with reference to the nature of the injury.

A lump-sum payment for incurable cancer under a group life-and-disability policy qualified for tax exemption under this provision.

Benefits determined by length of service rather than type and severity of injury did not qualify for the exemption.

Benefits determined as a percentage of a disabled employee’s salary rather than the nature of the employee’s injury were not excludable from income. An employee who has permanently lost a bodily member or function but is working and drawing a salary cannot exclude a portion of that salary as payment for loss of the member or function if that portion was not computed with reference to the loss.

Critical Illness Benefits

Amounts received by an employee under employer-provided critical illness policies where the value of the coverage was not includable in the employee’s gross income are includable in the employee’s gross income. The exclusion from gross income under IRC Section 105(b) applies only to amounts paid specifically to reimburse medical care expenses. Because critical illness insurance policies pay a benefit irrespective of whether medical expenses are incurred, these amounts are not excludable under IRC Section 105(b).

Wage Continuation and Disability Income

Sick pay, wage continuation payments, and disability income payments, both preretirement and postretirement, generally are fully includable in gross income and taxable to an employee.

Accidental Death Benefit

Accidental death benefits under an employer’s plan are received income tax-free by an employee’s beneficiary under IRC Section 101(a) as life insurance proceeds payable by reason of the insured’s death. Death benefits payable under life insurance contracts issued after December 31, 1984, are excludable only if the contract meets the statutory definition of a life insurance contract in IRC Section 7702.

Survivors’ Benefits

Benefits paid to a surviving spouse and dependents under an employer accident and health plan that provided coverage for an employee and the employee’s spouse and dependents both before and after retirement, and to the employee’s surviving spouse and dependents after the employee’s death, are excludable to the extent that they would be if paid to the employee.

5. What nondiscrimination requirements apply to employer provided health insurance plans?

Under PPACA 2010, a group health plan other than a self-insured plan must satisfy the requirements of IRC Section 105(h)(2). More specifically, PPACA 2010 states that rules similar to the rules in IRC Section 105(h)(3) (nondiscriminatory eligibility classifications), Section 105(h)(4) (nondiscriminatory benefits), and Section 105(h)(8) (certain controlled groups) apply to insured plans. The term highly compensated individual has the meaning given that term by IRC Section 105(h)(5).

This BenefitsPro story is excerpted from:

An accident or health insurance policy may be an individual or a group policy issued by a licensed insurance company, or an arrangement in the nature of a prepaid health care plan regulated under federal or state law including an HMO. Unless a policy involves shifting of risk to an unrelated third party, a plan will be considered self-insured.

A plan is not considered self-insured merely because prior claims experience is one factor in determining the premium. Furthermore, a policy of a captive insurance company is not considered self-insurance if, for the plan year, premiums paid to a captive insurer by unrelated companies are at least one-half of the total premiums received and the policy is similar to those sold to unrelated companies.

Likewise, a plan that reimburses employees for premiums paid under an insured plan does not have to satisfy nondiscrimination requirements.

6. What nondiscrimination requirements apply to self-insured health plans?

Nondiscrimination requirements apply to self-insured health benefits, although the IRS announced in Notice 2011-1 on Dec. 22, 2010, that compliance with nondiscrimination rules for health insurance plans will be delayed until regulations or other administrative guidance has been issued. This guidance remains pending. The IRS indicated that the guidance will not apply until plan years beginning in specified periods after guidance is issued. Some plans will be grandfathered.

This BenefitsPro story is excerpted from:

Benefits under a self-insured plan generally are excludable from an employee’s gross income. If a self-insured medical expense reimbursement plan or the self-insured part of a partly-insured medical expense reimbursement plan discriminates in favor of highly compensated individuals, certain amounts paid to highly compensated individuals are taxable to them.

A self-insured plan is one in which reimbursement of medical expenses is not provided under a policy of accident and health insurance. According to regulations, a plan underwritten by a cost-plus policy or a policy that, in effect, merely provides administrative or bookkeeping services is considered self-insured.

A medical expense reimbursement plan cannot be implemented retroactively. To allow this would render meaningless the nondiscrimination requirements of IRC Section 105.

A self-insured plan may not discriminate in favor of highly compensated individuals either with respect to eligibility to participate or benefits.

Eligibility

A plan discriminates as to eligibility to participate unless the plan benefits the following:

(1) 70 percent or more of all employees, or 80 percent or more of all the employees who are eligible to benefit under the plan if 70 percent or more of all employees are eligible to benefit under the plan; or

(2) Employees who qualify under a classification set up by the employer and found by the IRS not to be discriminatory in favor of highly compensated individuals.

Excludable Employees

For purposes of these eligibility requirements, an employer may exclude from consideration those employees who:

(1) have not completed three years of service at the beginning of the plan year; years of service during which an individual was ineligible under (2), (3), (4), or (5) below must be counted for this purpose;

(2) have not attained age 25 at the beginning of the plan year;

(3) are part-time or seasonal employees;

(4) are covered by a collective bargaining agreement if health benefits were the subject of good faith bargaining; or

(5) are nonresident aliens with no U.S.-source earned income.

Benefits

A plan discriminates as to benefits unless all benefits provided for participants who are highly compensated individuals are provided for all other participants. Benefits are not available to all participants if some participants become eligible immediately and others after a waiting period. Benefits available to dependents of highly compensated employees must be equally available to dependents of all other participating employees. The test is applied to benefits subject to reimbursement, rather than to actual benefit payments or claims.

Any maximum limit on the amount of reimbursement must be uniform for all participants and for all dependents, regardless of years of service or age. Further, a plan will be considered discriminatory if the type or amount of benefits subject to reimbursement is offered in proportion to compensation and highly compensated employees are covered by the plan. A plan will not be considered discriminatory in operation merely because highly compensated participants use a broad range of plan benefits to a greater extent than other participants.

An employer’s plan will not violate nondiscrimination rules merely because benefits under the plan are offset by benefits paid under a self-insured or insured plan of the employer or of another employer or by benefits paid under Medicare or other federal or state law. A self-insured plan may take into account benefits provided under another plan only to the extent that the benefit is the same under both plans. Benefits provided to a retired employee who was highly compensated must be the same as benefits provided to all other retired participants.

Highly Compensated Individual

An employee is a highly compensated individual if the employee falls into any one of the following three classifications:

(1) The employee is one of the five highest paid officers;

(2) The employee is a shareholder who owns, either actually or constructively through application of the attribution rules more than 10 percent in value of the employer’s stock; or

(3) The employee is among the highest paid 25 percent, rounded to the nearest higher whole number, of all employees other than excludable employees who are not participants and not including retired participants. Fiscal year plans may determine compensation on the basis of the calendar year ending in the plan year.

A participant’s status as officer or stockholder with respect to a particular benefit is determined at the time when the benefit is provided.

7. What are the tax consequences for amounts paid by an employer to highly compensated employees under a discriminatory self-insured medical expense reimbursement plan?

The taxable amount of payments made to a highly compensated individual from a discriminatory self-insured medical expense reimbursement plan is the excess reimbursement. Two situations produce an excess reimbursement.

This BenefitsPro story is excerpted from:

The first situation occurs when a benefit is available to a highly compensated individual but not to all other participants, or that otherwise discriminates in favor of highly compensated individuals; the total amount reimbursed under the plan to the employee with respect to that benefit is an excess reimbursement.

The second situation occurs when benefits are available to all other participants and are not otherwise discriminatory and where a plan discriminates as to participation; here, excess reimbursement is determined by multiplying the total amount reimbursed to the highly compensated individual for the plan year by a fraction. The numerator is the total amount reimbursed to all participants who are highly compensated individuals under the plan for the plan year; the denominator is the total amount reimbursed to all employees under the plan for such plan year. In determining the fraction, no account is taken of any reimbursement attributable to a benefit not available to all other participants.

Multiple plans may be designated as a single plan for purposes of satisfying nondiscrimination requirements. An employee who elects to participate in an optional HMO offered by the plan is considered benefited by the plan only if the employer’s contributions with respect to the employee are at least equal to what would have been made to the self-insured plan and the HMO is designated, with the self-insured plan, as a single plan. Regulations do not suggest how to determine contributions to a self-insured plan.

Unless a plan provides otherwise, reimbursements will be attributed to the plan year in which payment is made; thus, they will be taxed in an individual’s tax year in which a plan year ends.

Amounts reimbursed for medical diagnostic procedures for employees, but not dependents, performed at a facility that provides only medical services are not considered a part of a plan and do not come within these rules requiring nondiscriminatory treatment.

Contributory Plan
Reimbursements attributable to employee contributions are received tax-free, subject to inclusion if the expense was previously deducted. Amounts attributable to employer contributions are determined in the ratio that employer contributions bear to total contributions for the calendar years immediately preceding the year of receipt, up to three years; if a plan has been in effect for less than a year, thensuch determination may be based upon the portion of the year of receipt preceding the time when the determination is made, or such determination may be made periodically (such as monthly or quarterly) and used throughout the succeeding period. For example, if an employee terminates his services on April 15, 2013, and 2013 is the first year the plan has been in effect, such determination may be based upon the contributions of the employer and the employees during the period beginning with January 1 and ending with April 15, or during the month of March, or during the quarter consisting of January, February, and March.

No one agrees on the exact numbers, but it’s a safe bet to say that over the next few years millions of Americans will sign up for health insurance on the now-open public exchanges.

Some of those people will have been shifted to the exchanges by mostly smaller employers. But larger employers aren’t likely to be part of that wave. In fact, industry analysts say most Americans will continue to get coverage through an employer.

This BenefitsPro story is excerpted from:

Moreover, even though many small businesses aren’t under any obligation to provide health care coverage to employees, nearly two-thirds may do just that in coming years.

That’s according to a survey of 532 small businesses designed to elicit their attitudes toward health coverage. Sponsored by small business insurer Employers Holdings Inc., the survey found that two in five small businesses with between one and 250 employees already offer coverage, and another one in five intends to do so within the next three years.

The point is, employer-provided health insurance isn’t going away anytime soon.

So, with all of that in mind, here are seven things to know about deductions, credits, what’s taxable and more if you’re setting up a health insurance plan for your company.

1. May an employer deduct as a business expense the cost of premiums paid for accident and health insurance for employees?

An employer generally can deduct as a business expense all premiums paid for health insurance for one or more employees. This includes premiums for medical expense insurance.

This BenefitsPro story is excerpted from:

Premiums are deductible by an employer whether coverage is provided under a group policy or under individual policies. The deduction for health insurance is allowable only if benefits are payable to employees or their beneficiaries; it is not allowable if benefits are payable to the employer. Where a spouse of an employer is a bona fide employee and the employer is covered as a family member, the premium is deductible. A corporation can deduct premiums it pays on group hospitalization coverage for commission salespersons, regardless of whether they are employees. Premiums must qualify as additional reasonable compensation to the insured employees.

If a payment is considered made to a fund that is part of an employer plan to provide the benefit, the deduction for amounts paid or accrued may be limited.

An accrual basis employer that provides medical benefits to employees directly instead of through insurance or an intermediary fund may not deduct amounts estimated to be necessary to pay for medical care provided in the year but for which claims have not been filed with the employer by the end of the year if filing a claim is necessary to establish the employer’s liability for payment.

2. What credit is available for small employers for employee health insurance expenses?

A credit is available for employee health insurance expenses of an eligible small employer for taxable years beginning after Dec. 31, 2009, provided the employer offers health insurance to its employees.

This BenefitsPro story is excerpted from:

An eligible small employer is an employer that has no more than 25 full time employees, the average annual wages of whom do not exceed $50,000 (in 2010, 2011, 2012, and 2013; the amount is indexed thereafter).

An employer must have a contribution arrangement for each employee who enrolls in the health plan offered by the employer through an exchange that requires that the employer make a non-elective contribution in an amount equal to a uniform percentage, not less than 50 percent, of the premium cost.

Subject to phase-out based on the number of employees and average wages, the amount of the credit is equal to 50 percent, and 35 percent in the case of tax exempts, of the lesser of (1) the aggregate amount of non-elective contributions made by the employer on behalf of its employees for health insurance premiums for health plans offered by the employer to employees through an exchange, or (2) the aggregate amount of non-elective contributions the employer would have made if each employee had been enrolled in a health plan that had a premium equal to the average premium for the small group market in the ratings area.

For years 2010, 2011, 2012, and 2013, the following modifications apply in determining the amount of the credit:

(1) the credit percentage is reduced to 35 percent (25 percent in the case of tax exempts);

(2) the amount under (1) is determined by reference to non-elective contributions for premiums paid for health insurance, and there is no exchange requirement; and

(3) the amount under (2) is determined by the average premium for the state small group market.

The credit also is allowed against the alternative minimum tax.

In 2014 small employers will have exclusive access to an expanded Small Business Healthcare Tax Credit under the Affordable Care Act. This tax credit covers as much as 50 percent of the employer contribution toward premium costs for eligible employers who have low- to moderate-wage workers.

3. Is the value of employer-provided coverage under accident or health insurance taxable income to an employee?

Generally, no.

This BenefitsPro story is excerpted from:

This includes medical expense and dismemberment and sight loss coverage for the employee, his or her spouse and dependents, and coverage providing for disability income for the employee. There is no specific limit on the amount of employer-provided coverage that may be excluded from an employee’s gross income. Coverage is tax-exempt to an employee whether it is provided under a group or individual insurance policy.

Likewise, the value of critical illness coverage is not taxable income to an employee.

Accidental death coverage is excludable from an employee’s gross income under IRC Section 106(a).

If an employee pays the premiums on his or her personally-owned medical expense insurance and is reimbursed by his or her employer, the reimbursement likewise is excludable from the employee’s gross income under IRC Section 106.

Where an employer simply pays an employee or retiree a sum that may be used to pay the premium but that amount is not required to be used for that purpose, the amount is taxable to the employee.

Under the Patient Protection and Affordable Care Act of 2010 (“PPACA 2010”), the exclusion from gross income for amounts expended on medical care is expanded to include employer provided health coverage for any adult child of the taxpayer if the adult child has not attained the age of 27 as of the end of the taxable year. According to Notice 2010-38, the adult child does not have to be eligible to be claimed as a dependent for tax purposes for this income exclusion to apply.

If an employer’s accident and health plan continues to provide coverage pursuant to a collective bargaining agreement for an employee who is laid off, the value of the coverage is excluded from the gross income of the laid-off employee. Terminated employees who receive medical coverage under a medical plan that is part of the former employer’s severance plan are considered to be employees for purposes of IRC Sections 105 and 106. Thus, an employer’s contributions toward medical care for employees are excludable from income under IRC Section 106. Otherwise, the exclusion is available only to active employees.

4. What are the tax consequences of payments received by employees under employer-provided accident or health insurance?

Although the amounts that both employers and employees pay for premiums for employer sponsored health and accident insurance plans must now be stated on the employee’s Form W-2, the tax consequences of receiving benefits pursuant to those plans have not changed. However, some payments must be included in the employee’s gross income, explained below.

This BenefitsPro story is excerpted from:

Amounts received by an employee under employer-provided accident or health insurance, group or individual, that reimburse the employee for hospital, surgical, and other medical expenses incurred for care of the employee or his or her spouse and dependents generally are tax-exempt without limit.

Nonetheless, benefits must be included in gross income to the extent that they reimburse an employee for any expenses that the employee deducted in a prior year. Moreover, if reimbursements exceed actual expenses, the excess must be included in gross income to the extent that it is attributable to employer contributions.

Where an employer reimburses employees for salary reduction contributions applied to the payment of health insurance premiums, these amounts are not excludable under IRC Section 105(b) because there are no employee-paid premiums to reimburse.

Likewise, where an employer applies salary reduction contributions to the payment of health insurance premiums and then pays the amount of the salary reduction to employees regardless of whether the employee incurs expenses for medical care, these so-called advance reimbursements or loans are not excludable from gross income under IRC Section 105(b) and are subject to FICA and FUTA taxes.

Sight Loss and Dismemberment Benefits

Payments not related to absence from work for the permanent loss, or loss of use, of a member or function of a body or permanent disfigurement of the employee or his or spouse or a dependent are excluded from income if the amounts paid are computed with reference to the nature of the injury.

A lump-sum payment for incurable cancer under a group life-and-disability policy qualified for tax exemption under this provision.

Benefits determined by length of service rather than type and severity of injury did not qualify for the exemption.

Benefits determined as a percentage of a disabled employee’s salary rather than the nature of the employee’s injury were not excludable from income. An employee who has permanently lost a bodily member or function but is working and drawing a salary cannot exclude a portion of that salary as payment for loss of the member or function if that portion was not computed with reference to the loss.

Critical Illness Benefits

Amounts received by an employee under employer-provided critical illness policies where the value of the coverage was not includable in the employee’s gross income are includable in the employee’s gross income. The exclusion from gross income under IRC Section 105(b) applies only to amounts paid specifically to reimburse medical care expenses. Because critical illness insurance policies pay a benefit irrespective of whether medical expenses are incurred, these amounts are not excludable under IRC Section 105(b).

Wage Continuation and Disability Income

Sick pay, wage continuation payments, and disability income payments, both preretirement and postretirement, generally are fully includable in gross income and taxable to an employee.

Accidental Death Benefit

Accidental death benefits under an employer’s plan are received income tax-free by an employee’s beneficiary under IRC Section 101(a) as life insurance proceeds payable by reason of the insured’s death. Death benefits payable under life insurance contracts issued after December 31, 1984, are excludable only if the contract meets the statutory definition of a life insurance contract in IRC Section 7702.

Survivors’ Benefits

Benefits paid to a surviving spouse and dependents under an employer accident and health plan that provided coverage for an employee and the employee’s spouse and dependents both before and after retirement, and to the employee’s surviving spouse and dependents after the employee’s death, are excludable to the extent that they would be if paid to the employee.

5. What nondiscrimination requirements apply to employer provided health insurance plans?

Under PPACA 2010, a group health plan other than a self-insured plan must satisfy the requirements of IRC Section 105(h)(2). More specifically, PPACA 2010 states that rules similar to the rules in IRC Section 105(h)(3) (nondiscriminatory eligibility classifications), Section 105(h)(4) (nondiscriminatory benefits), and Section 105(h)(8) (certain controlled groups) apply to insured plans. The term highly compensated individual has the meaning given that term by IRC Section 105(h)(5).

This BenefitsPro story is excerpted from:

An accident or health insurance policy may be an individual or a group policy issued by a licensed insurance company, or an arrangement in the nature of a prepaid health care plan regulated under federal or state law including an HMO. Unless a policy involves shifting of risk to an unrelated third party, a plan will be considered self-insured.

A plan is not considered self-insured merely because prior claims experience is one factor in determining the premium. Furthermore, a policy of a captive insurance company is not considered self-insurance if, for the plan year, premiums paid to a captive insurer by unrelated companies are at least one-half of the total premiums received and the policy is similar to those sold to unrelated companies.

Likewise, a plan that reimburses employees for premiums paid under an insured plan does not have to satisfy nondiscrimination requirements.

6. What nondiscrimination requirements apply to self-insured health plans?

Nondiscrimination requirements apply to self-insured health benefits, although the IRS announced in Notice 2011-1 on Dec. 22, 2010, that compliance with nondiscrimination rules for health insurance plans will be delayed until regulations or other administrative guidance has been issued. This guidance remains pending. The IRS indicated that the guidance will not apply until plan years beginning in specified periods after guidance is issued. Some plans will be grandfathered.

This BenefitsPro story is excerpted from:

Benefits under a self-insured plan generally are excludable from an employee’s gross income. If a self-insured medical expense reimbursement plan or the self-insured part of a partly-insured medical expense reimbursement plan discriminates in favor of highly compensated individuals, certain amounts paid to highly compensated individuals are taxable to them.

A self-insured plan is one in which reimbursement of medical expenses is not provided under a policy of accident and health insurance. According to regulations, a plan underwritten by a cost-plus policy or a policy that, in effect, merely provides administrative or bookkeeping services is considered self-insured.

A medical expense reimbursement plan cannot be implemented retroactively. To allow this would render meaningless the nondiscrimination requirements of IRC Section 105.

A self-insured plan may not discriminate in favor of highly compensated individuals either with respect to eligibility to participate or benefits.

Eligibility

A plan discriminates as to eligibility to participate unless the plan benefits the following:

(1) 70 percent or more of all employees, or 80 percent or more of all the employees who are eligible to benefit under the plan if 70 percent or more of all employees are eligible to benefit under the plan; or

(2) Employees who qualify under a classification set up by the employer and found by the IRS not to be discriminatory in favor of highly compensated individuals.

Excludable Employees

For purposes of these eligibility requirements, an employer may exclude from consideration those employees who:

(1) have not completed three years of service at the beginning of the plan year; years of service during which an individual was ineligible under (2), (3), (4), or (5) below must be counted for this purpose;

(2) have not attained age 25 at the beginning of the plan year;

(3) are part-time or seasonal employees;

(4) are covered by a collective bargaining agreement if health benefits were the subject of good faith bargaining; or

(5) are nonresident aliens with no U.S.-source earned income.

Benefits

A plan discriminates as to benefits unless all benefits provided for participants who are highly compensated individuals are provided for all other participants. Benefits are not available to all participants if some participants become eligible immediately and others after a waiting period. Benefits available to dependents of highly compensated employees must be equally available to dependents of all other participating employees. The test is applied to benefits subject to reimbursement, rather than to actual benefit payments or claims.

Any maximum limit on the amount of reimbursement must be uniform for all participants and for all dependents, regardless of years of service or age. Further, a plan will be considered discriminatory if the type or amount of benefits subject to reimbursement is offered in proportion to compensation and highly compensated employees are covered by the plan. A plan will not be considered discriminatory in operation merely because highly compensated participants use a broad range of plan benefits to a greater extent than other participants.

An employer’s plan will not violate nondiscrimination rules merely because benefits under the plan are offset by benefits paid under a self-insured or insured plan of the employer or of another employer or by benefits paid under Medicare or other federal or state law. A self-insured plan may take into account benefits provided under another plan only to the extent that the benefit is the same under both plans. Benefits provided to a retired employee who was highly compensated must be the same as benefits provided to all other retired participants.

Highly Compensated Individual

An employee is a highly compensated individual if the employee falls into any one of the following three classifications:

(1) The employee is one of the five highest paid officers;

(2) The employee is a shareholder who owns, either actually or constructively through application of the attribution rules more than 10 percent in value of the employer’s stock; or

(3) The employee is among the highest paid 25 percent, rounded to the nearest higher whole number, of all employees other than excludable employees who are not participants and not including retired participants. Fiscal year plans may determine compensation on the basis of the calendar year ending in the plan year.

A participant’s status as officer or stockholder with respect to a particular benefit is determined at the time when the benefit is provided.

7. What are the tax consequences for amounts paid by an employer to highly compensated employees under a discriminatory self-insured medical expense reimbursement plan?

The taxable amount of payments made to a highly compensated individual from a discriminatory self-insured medical expense reimbursement plan is the excess reimbursement. Two situations produce an excess reimbursement.

This BenefitsPro story is excerpted from:

The first situation occurs when a benefit is available to a highly compensated individual but not to all other participants, or that otherwise discriminates in favor of highly compensated individuals; the total amount reimbursed under the plan to the employee with respect to that benefit is an excess reimbursement.

The second situation occurs when benefits are available to all other participants and are not otherwise discriminatory and where a plan discriminates as to participation; here, excess reimbursement is determined by multiplying the total amount reimbursed to the highly compensated individual for the plan year by a fraction. The numerator is the total amount reimbursed to all participants who are highly compensated individuals under the plan for the plan year; the denominator is the total amount reimbursed to all employees under the plan for such plan year. In determining the fraction, no account is taken of any reimbursement attributable to a benefit not available to all other participants.

Multiple plans may be designated as a single plan for purposes of satisfying nondiscrimination requirements. An employee who elects to participate in an optional HMO offered by the plan is considered benefited by the plan only if the employer’s contributions with respect to the employee are at least equal to what would have been made to the self-insured plan and the HMO is designated, with the self-insured plan, as a single plan. Regulations do not suggest how to determine contributions to a self-insured plan.

Unless a plan provides otherwise, reimbursements will be attributed to the plan year in which payment is made; thus, they will be taxed in an individual’s tax year in which a plan year ends.

Amounts reimbursed for medical diagnostic procedures for employees, but not dependents, performed at a facility that provides only medical services are not considered a part of a plan and do not come within these rules requiring nondiscriminatory treatment.

Contributory Plan
Reimbursements attributable to employee contributions are received tax-free, subject to inclusion if the expense was previously deducted. Amounts attributable to employer contributions are determined in the ratio that employer contributions bear to total contributions for the calendar years immediately preceding the year of receipt, up to three years; if a plan has been in effect for less than a year, thensuch determination may be based upon the portion of the year of receipt preceding the time when the determination is made, or such determination may be made periodically (such as monthly or quarterly) and used throughout the succeeding period. For example, if an employee terminates his services on April 15, 2013, and 2013 is the first year the plan has been in effect, such determination may be based upon the contributions of the employer and the employees during the period beginning with January 1 and ending with April 15, or during the month of March, or during the quarter consisting of January, February, and March.

Withholding
An employer does not have to withhold income tax on an amount paid for any medical care reimbursement made to or for the benefit of an employee under a self-insured medical reimbursement plan within the meaning of IRC Section 105(h)(6).

Note: The content in this publication is not intended or written to be used, and it cannot be used, for the purposes of avoiding U.S. tax penalties. It is offered with the understanding that the writer is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought.

The Essentials of Planning For Your Day

Have you ever heard someone say, or maybe you have said it yourself; “there aren’t enough hours in the day”, or, “I’m so busy that I can’t fit one more minute into my busy schedule”?

Both statements are very common among entrepreneurs and it’s probably true for many of us; but is it really true for most of us?

I believe that most business people lack the ability to properly plan for their workday. I also believe that when one accurately plans for each day, hour by hour, minute by minute, we become more productive individuals. I know that there are studies that prove what I am about to say, right now I’m just speaking from my own experience.

Before I even begin to speak about time management, let’s take a minute to talk about how we should respect other people’s time.

Time, it is an essential and scarce commodity, that is why we value it so much.

Business people, especially entrepreneurs, have been told that the secret to success is networking.  That, of course, is another interesting subject to ponder upon at another time.  Nonetheless, for the sake of making a point let’s briefly touch upon how Networking could conceivably ruin our scheduled life.

The need to effectively Network leads us to joining a myriad of organizations, each one with their own methods for accomplishing the task at hand, which is meeting new people and hoping to win new business as a result.

Breakfasts, lunches, after-hours events, get-togethers, committees, and not to mention the all too necessary one-on-ones.  It’s a miracle that we have time to do our jobs. Time has become so precious that we can actually attach a dollar value to it. In managing our time we discover that every waking minute is necessary to accomplish our goal; success!

So, if we are aware that our time is so precious, why is it that sometimes we don’t have the same awareness for other people’s time?  Say what?  Before we can speak of our own time, we need to understand the importance of someone else’s time because there is a direct correlation between one and the other.

Maybe if I illustrate.

A few months back I had an appointment to meet a possible future client at a known local coffee shop.  The person I was to meet, while on his way to our meeting, finds out that he had to divert to the airport to pick up his wife whose plane was about to land any minute.  Something he had to do, sometimes we don’t have a choice, we need to change our schedule on the fly.  My appointment had left my cell phone number at home, so he decided to go ahead and meet me at the designated location, at the agreed time, where he immediately explained his situation and proceeded to apologize and say that he couldn’t stay for the meeting, I understood, we rescheduled and that was the end of that.  Why did I use this example; you ask?  Well, although there are holes to be poked in the way that my appointment handled this particular circumstance, he did respect my time enough to show up and offer me an explanation which I really appreciated.

Just remember, when leaving your home or office in the morning take the necessary information with you where you can contact your appointment if you are unable to arrive on time or if you need to reschedule.  Remember, your appointment’s time is equally as precious as yours.  Believe it or not, respecting the other person’s time will help you to begin respecting your own.

Now, back to the main subject.

Because unexpected situations appear in our daily life, we need to be “scheduly prepared”.  I know, I just made up a new word and phrase, but it’ll makes sense once I explain.

“Scheduly prepared”, simply means that by scheduling your whole day you will be able to overcome any inconvenience that may arise during that particular day and find enough time to squeeze in those tasks that at one time you thought were impossible to include in your day.

For example, my weekly calendar is set up as follows: I have scheduled every day from Monday thru Saturday, from 7 to 8 AM Gym time.  That means that on those days at that specific time I expect myself to be at the gym.  At noontime I have scheduled “lunch” for one hour.  On Monday thru Friday I have scheduled from 9 AM to 5 PM office time.  Notice that I have not included any specific appointments, the reason for that is that I don’t know which day I will have appointments or a breakfast or a luncheon, with the exception of the set monthly activities which fall on the same day of every month.  I usually don’t know how the following week is going to look like until Friday of the present week or the following Monday, at which time I will adjust my calendar to reflect any changes in schedule.

Another example is: I know that on the first and third wednesday of the month I have a business breakfast which lasts two hours, I also know that on the second and third Tuesday of the month I have another business breakfast and a committee meeting, respectively, and on the last Wednesday of the month another committee meeting, so these are permanent adjustments to my schedule.  On those early morning appointments I know I can’t go to the gym so I take the gym out, but adjust the office hours to reflect both meeting and travel times.

Wow!! Now you’re confusing me; Travel time? Yes, travel time. That may be part of the issue that you may be having, sometimes we don’t take into consideration travel time.

For example: I have a breakfast in the city of Doral that ends at 9 AM.  If my appointment that morning is also in Doral then I can set the appointment for 9:30 AM.  That gives me plenty of time to leave the breakfast venue, get to the parking lot and drive to the appointment with time to spare.

Given the same scenario, but the appointment is now in the city of Coral Gables.  Now I have to take into consideration distance and traffic, so I will set my second appointment of the morning for 10:30 AM.  Does it take an hour and half to get to Coral Gables, of course not, maybe a half hour in normal traffic, if there were such a thing as normal traffic in Miami.  Back to the scenario; I do have to walk from the breakfast venue to get to the car, drive out of the parking lot, and that alone may take 15 minutes, that’s if someone does’t stop me to ask a question or strike up a conversation.  So by giving me an hour and a half to the next appointment, I have assured myself that I don’t have to rush through traffic, that I have anticipated any detours on the way and, most importantly, I will arrive at my destination on time. Remember, arriving on time is part of the key to time management.

So, what happens if after all of my careful planning I have managed to arrive a  half hour early?  Good question!  If I’m early to the appointment, depending on how early I may be, I will either find a coffee shop with a wifi connection where I can sit and answer my emails, or I will sit in my car and answer simple phone calls.  The point being,that every non-driving minute of my time is productive.

Am I a mind reader or what?  Did you not just ask yourself; what’s a simple phone cal?  A simple phone call is one which will not require detailed explanations or research to answer any question posed during the conversation.  For instance, a call to the office to see if I have any mail, or to a client just to acknowledge their phone call and to tell them that I will get back to them after my next meeting.

I have now effectively blocked out every conceivable minute of the day, for every workday of the week.  I know what you’re thinking; I have painted myself into a corner and that you are right, there is no time left in the day.  Well, look at your calendar again.  See all those times that you have blocked out as office or lunch hours, those times can be rerouted into anything that you need to do. Networking, Appointments, go to the gym, if you would rather hit the gym in the evening, attend association meetings, after-hours events, etc.; whatever you need to do, the time is there to pick and choose from.  Miraculous? No, just excellent planning.

By blocking every minute of your work-day you have overcome what is probably your worst enemy; which is getting up each morning and wasting your most valuable time trying to figure out where you need to go, who you need to see or which task needs to be completed.  If you do not have business related appointments or breakfasts, or association meetings, or after hours events, you should have your Task Reminder filled with uncompleted tasks which can be accomplished during your scheduled office hours. Now you can wake up in the morning and look at your calendar and know exactly where it is that you will be each and every day and what hours can be rerouted for business appointments and any other activity that you once thought could not be included into your day.

Your Calendar and Task Reminder, are the two most valuable time management tools you will ever need.  Both of these tools have helped me to arrive at appointments on time, attend all association meetings and travel extensively.  By the way, did I forget to mention that my business requires extensive travel?  Well, it does.

If your business requires extensive travel, that may be another monkey wrench thrown into your scheduling dilemma, one which can be easily resolved by being “Scheduly Prepared.”

Another time that we forget to include in our day is family time.  Yes, they need to be scheduled in as well.  No, I’m not being sacrilegious, I just know how many times we are chastised by our spouse and children for “not having time for them”, and they are right, we rarely fit our loved ones into our busy schedule, and by not doing so they end up at the bottom of the “time totem pole”.  So, if we get into the habit of including our family in our daily calendar they will have gained their rightful place in our busy life.

In a nutshell:

  • Schedule every minute of your workday
  • First thing to add to your calendar are those events that are constant
  • Make sure that you have a daily task list to remind you of what you have to do while in the office
  • When leaving your home or office make sure that you have your appointment’s contact information readily available
  • If you can’t make it to an appointment or need to reschedule, makes sure that you give your appointment sufficient time for him or her to reroute their day
  • Don’t let extensive travel throw you off schedule
  • Include in your calendar leisure or family time
  • Be Scheduly Prepared!!!!

Your time is the only precious commodity in your life whose outcome you can actually control, so do it.

Believe me, if I can, I know that you can too!

Stir-Frying Chop Suey in China By Jill Petzinger

Fortune Cookie’s pagoda-festooned broadsheet menu, piles of red-and-white takeaway cartons and ornate, kitschy tableware wouldn’t look out of place in any Chinatown in the U.S. But the restaurant, which serves American-Chinese classics like sweet-and-sour chicken and chow mein, isn’t in Chinatown. It’s in Shanghai.
Opened in July by a pair of young American entrepreneurs, the restaurant offers a menu of richly sauced staples like orange chicken, chop suey, moo shu pork and General Tso’s beef. Diners will also find crab rangoon, that oddly delicious starter of surimi and cream cheese, deep-fried in a wonton skin.
While dishes like these are familiar to American expats, they’re an anomaly in China. They were developed by Chinese immigrants from Canton to the U.S. during the 1800s, who adapted their cuisine due to a lack of ingredients from their homeland, as well as the need to cater to the American palate.
More In Food-Drink. Stir-Frying Chop Suey in China. Why You Can’t ‘Own’ a Recipe. Your Own Island Vineyard in New Zealand. Where Chef Daniel Boulud Eats on the Road. Lukewarm Water, Hot Soda Latest Craze to Hit Japan

Fortune Cookie’s American founders, David Rossi and Fung Lam, knew they were going against the grain – and that was the point. “We wanted to build a cool, special place that hasn’t existed before,” said Mr. Rossi. “The idea is pretty crazy, but it’s in the realm of ‘crazy-could-work.’”

Mr. Rossi, 33, and Mr. Lam, 31, met during a restaurant development class at Cornell Graduate School. They had originally set out to open a dim sum restaurant in the U.S., but moved to Shanghai last year after a trip there in 2011.

The pair had intended to open a salad bar in Shanghai, but the fourth-floor space they found didn’t lend itself to walk-ins. So instead they turned to the background of Mr. Lam, and a genre of cuisine they both sorely missed.
Mr. Lam is the third generation in a family of Chinese-restaurant owners. His grandfather opened his first restaurant, Kum Kau, in Brooklyn in 1969, and the family went on to open restaurants and takeaways in New York, New Jersey, Texas and Arizona. The dishes served at Fortune Cookie hew to these restaurants’ original recipes and haven’t been adapted for local Chinese palates.
“They say the Chinese palate is more sensitive, that’s why they don’t use so much sauce on everything,” said Mr. Lam, whose father flew in to train the Chinese cooks to make what is, to them, foreign food.

According to Mr. Lam, Chinese customers are taking a shine to the food, especially young people who have encountered it while studying in the U.S. The most frequent feedback is that American-size portions are too big, compared to the much smaller portions in local restaurants.

Tongfei Zhang, an editor at That’s Shanghai magazine, said “the sauces are a bit heavy, they look more like a soup to me,” though she noted there were similarities between Fortune Cookie’s sweet-and-sour pork and a dish found in many Shanghainese restaurants.
Overall, Ms. Zhang said, she liked the dishes but wouldn’t necessarily come here with her local friends. “The flavors would be okay for local people from Shanghai, who have a sweet tooth, but it is very sweet,” she said. “Even the broccoli is sweet.”

It’s a different story for the nostalgic expats who flock here on weekends, drawn in part by the fun atmosphere and interior design by Studio 1:1.
Hart Hagerty, a Shanghai-based American fashion designer and consultant, says she comes here when she needs some indulgent comfort food.
“It feels like a taste of home,” she said.

Fortune Cookie, 83 Chang Shu Lu, 4th floor; Tel.: +86 21 6093 3623. Dinner for two around 200 yuan.

Affordable Care Act, The SHOP

This is the third segment of my intent to educate my readers on the intricacies of ACA (The Affordable Care Act).

In this blog we are going to continue speaking to the Marketplace which will be available online as of October 1st, 2013.  The subject of todays information is on what is called the SHOP.  The SHOP is the Marketplace being set up for companies with less than 50 employees.

Prior to going into details, let’s refresh your memory.  A Marketplace is an internet portal established by the Federal or State Governments which will offer the consumer the ability to establish eligibility for premium discounts, tax incentives and search for the best available health insurance program in your State.  Not every States will offer a Marketplace for their residents; if your state has  decided not to pursue this avenue, the Federal Marketplace will be available to everyone.  Every insurance carrier licensed in your state to sell health insurance will appear in the Marketplace.

There are two types of Marketplaces, for individuals and their families and for companies with less than 50 employees.  Today we will speaking about the latter.

A company with less than 50 employees is not required to offer their employees health insurance.  However, if the employer decide that they do want to offer this benefit, the employer has the right to choose the company, the program and how much of the premium the employee will out-of-pocket.

Remember that in the previous blog I explained that there are four programs to choose from, Bronze, Silver, Gold and Platinum.  Bronze being the most basic of the four and Platinum being the most complete.  All four programs are required to meet the most basic criteria as established by ACA.

Although most small businesses will, most probably, opt out of offering any sort of health plans for their employees, it is always good to know what is available to the employer as well as the employee.

If the employer chooses to offer any one of the plans previously listed, the employer may be eligible for tax incentives, especially if they are providing coverage for employees earning less than the poverty level.

The employee may benefit from coverage obtained through a SHOP, only because the rates may be better than going through the individual Marketplace.  On the other hand, the employee may be eligible for premium discounts through the individual Marketplace which will not be available if he/she chooses to join the employer’s plan.  The only way to know if the employee will benefit from one program or the other is by researching each Marketplace according to their specific needs.  This is an instance where the Health Insurance Professional (HIP) comes in very handy.

The HIP has learned to navigate through the Marketplaces being able to readily offer advice and guidance to both the employer and the employee.

Even if you do not plan to offer your employees a Health Insurance Plan, you might want to afford them the ability to ask questions and gain knowledge so that they may have a better understanding of what they and their family can expect from ACA.

If you would like to have us come in and speak to your employees, please contact us at info@soraglobal.com and we will be happy to set up an appointment to come in after October 1st.

Obamacare could ease divorce’s financial sting

Elizabeth O’Brien @elizobrien
@marketwatch retirement healthcare reporter. Views my own, etc.

It’s been well noted that divorce among the over-50-crowd is on the rise, spreading like crow’s feet even as the overall divorce rate has dipped. Financial headaches related to health care can loom large in later-life divorces, experts say. Yet if the Affordable Care Act works as intended, the law could prove to be a game-changer, by easing the financial burden of health insurance for divorced people who get dropped from their spouses’ plans.

About 115,000 women lose their private health insurance every year in the wake of divorce, according to a study last year out of the University of Michigan, and many don’t regain coverage quickly. Many of these women either don’t have jobs outside the home or work at jobs that don’t provide insurance, and some women with employer-sponsored coverage can no longer afford the premiums. Many former spouses qualify for post-divorce COBRA health benefits under their ex-spouse’s plan, but this coverage is both prohibitively expensive and limited in duration, typically to 36 months, advisers say.

The cost of health insurance is one of the many factors that makes “gray divorce” particularly hurtful to the retirement readiness of women. A study released earlier this year by the National Bureau of Economic Research noted that people who are single (for any reason, including divorce) typically lag far behind married people in the amount they’ve saved. Older women who are too young to qualify for Medicare have been particularly financially vulnerable if they lose insurance, since pre-existing conditions often make it hard to find affordable coverage—or any coverage at all—on the individual market.

But post-divorce health-care costs will decline for some Jan. 1, and coverage will become more accessible, starting with the full implementation of the Affordable Care Act. Under President Obama’s signature health-care law, insurance companies will no longer be able to deny people coverage or charge them more due to pre-existing conditions. “It gives the non-working spouse the freedom to move on and not worry about their health,” said Judy Resnick, a private wealth adviser with the Johnston, Resnick, Mittman Group, in Century City, Calif., part of Bank of America Merrill Lynch’s private banking and investment group. “It will take one of the fears out of divorcing—I think it’s huge.”

By Elizabeth O’Brien
It’s been well noted that divorce among the over-50-crowd is on the rise, spreading like crow’s feet even as the overall divorce rate has dipped. Financial headaches related to health care can loom large in later-life divorces, experts say. Yet if the Affordable Care Act works as intended, the law could prove to be a game-changer, by easing the financial burden of health insurance for divorced people who get dropped from their spouses’ plans.

About 115,000 women lose their private health insurance every year in the wake of divorce, according to a study last year out of the University of Michigan, and many don’t regain coverage quickly. Many of these women either don’t have jobs outside the home or work at jobs that don’t provide insurance, and some women with employer-sponsored coverage can no longer afford the premiums. Many former spouses qualify for post-divorce COBRA health benefits under their ex-spouse’s plan, but this coverage is both prohibitively expensive and limited in duration, typically to 36 months, advisers say.

The cost of health insurance is one of the many factors that makes “gray divorce” particularly hurtful to the retirement readiness of women. A study released earlier this year by the National Bureau of Economic Research noted that people who are single (for any reason, including divorce) typically lag far behind married people in the amount they’ve saved. Older women who are too young to qualify for Medicare have been particularly financially vulnerable if they lose insurance, since pre-existing conditions often make it hard to find affordable coverage—or any coverage at all—on the individual market.

But post-divorce health-care costs will decline for some Jan. 1, and coverage will become more accessible, starting with the full implementation of the Affordable Care Act. Under President Obama’s signature health-care law, insurance companies will no longer be able to deny people coverage or charge them more due to pre-existing conditions. “It gives the non-working spouse the freedom to move on and not worry about their health,” said Judy Resnick, a private wealth adviser with the Johnston, Resnick, Mittman Group, in Century City, Calif., part of Bank of America Merrill Lynch’s private banking and investment group. “It will take one of the fears out of divorcing—I think it’s huge.”

Associated Press
Divorced people over 50, and women in particular, could see their health-insurance costs drop if the Affordable Care Act works as intended.
(Despite the efforts of some Republicans in Congress to defund Obamacare, a report by the bipartisan Congressional Research Service has noted that “substantial ACA implementation” might continue even during a temporary government shutdown. Link courtesy of The Washington Post’s Wonkblog.)

Health-care concerns can be so pressing that some older would-be divorcers wait to finalize their divorce until they turn 65 and are eligible for Medicare, attorneys said. The fear of going without coverage due to a pre-existing condition “sends fear up and down the spines of women,” said Janice L. Green, a family law attorney in Austin, Texas. In the past, some couples would get a legal separation but remain married for the health benefits, but fewer employers these days offer the option of covering the separated spouse, said Lili Vasileff, a certified divorce financial planner and founder of Divorce and Money Matters in Greenwich, Ct. (She added that failure to disclose a change in marital status, including legal separation, to an employer could get the employee in serious hot water, held liable for fraud and required to pay back all insurance charges paid on the separated or ex-spouse’s behalf.)

A factor in alimony talks

Lower prices aren’t the only potential benefit the law offers to older divorcers. Health-care costs are often a factor in divorce negotiations, and the Affordable Care Act might make it easier to calculate costs for ex-spouses who buy individual coverage through the marketplaces, said Erika Salerno, a family law attorney with Kreis Enderle in Kalamazoo, Mich. That’s because these exchanges are designed to make comparison-shopping for policies easier, with more transparent price information—experts have said the experience will be like booking a vacation through a travel site like Travelocity. The coverage offered within each of the metal-tiered policy levels—platinum, gold, silver and bronze—is standardized so that each requires policyholders to assume the same percentage of out-of-pocket costs.

Under Obamacare, many people will be eligible for a government tax credit toward their insurance coverage, and the availability of this subsidy will likely factor into spousal support calculations, said David Tracy, manager of the Tulsa Family Law Center and a member of the American Academy of Matrimonial Lawyers. Indeed, health insurance costs often enter the equation when one spouse owes another spousal support (some states call this alimony, others maintenance). Those with pre-existing conditions often argue for larger support payments, since their costs will be greater.

Starting next year, if a spouse who doesn’t have workplace-based insurance is eligible for subsidies, the opposing side may try to use that fact to argue for lower support payments, Salerno said. For policies bought on the state marketplaces, households qualify for sliding-scale subsidies if members make up to 400% of the federal poverty level, or $94,200 for a family of four, $62,040 for a family of two, and $45,960 for a single person. What’s more, the ex-spouse who’s paying support might become eligible for a subsidy as a result, Tracy said, since alimony is counted as taxable income by the recipient but is tax deductible for the payer.

Many states will also expand their Medicaid program under the Affordable Care Act, raising the eligibility threshold to allow coverage for people making up to 138% of the federal poverty level, or about $15,800 for a single person and $32,500 for a family of four, to use the government insurance program for the poor. It’s possible that this new level will open up the program to more divorced people who don’t get employer-sponsored coverage, and that attorneys for the opposing side might argue for lower support payments on that basis. “I can’t imagine there won’t be a crafty lawyer arguing that,” Salerno said.

More on insurance and divorce

Regardless of how the Affordable Care Act may change the landscape, there are some other health-related considerations for those contemplating or in the midst of divorce after age 50. Here are a few key factors to consider:

Insurance premiums . At the start of divorce proceedings, Green advocates obtaining a temporary court order to ensure that all insurance premiums get paid as usual. This goes for health insurance, where one spouse could drop the other; life insurance, whose value can be used to secure alimony payments; and long-term-care insurance premiums.

Lost future caregiving . In some instances when a longtime couple is divorcing, Green has worked into the divorce agreement the value of future caregiving that would have been provided by the departing spouse. “How do you measure the sense of security, knowing someone is there?” she said. While it may be harder to quantify the emotional peace of mind, there are ways to quantify the financial benefit of future caregiving that becomes lost to an ex-spouse, she said. (She’s included this in a divorce agreement even when the couple has adult children and when neither spouse is sick.) If they don’t already have it, Resnick advises her divorcing clients to buy long-term care insurance if they can pass medical underwriting.

Long-term-care coverage . If a couple already owns long-term-care insurance together, they need to research what happens to their coverage in a divorce. While couples in the past were sometimes issued a single policy for both lives, most of today’s policies are issued separately, one for each member, said Jesse Slome, executive director of the American Association for Long-Term Care Insurance. With separate policies, the parties must notify the insurer so they can get billed separately, and they’d likely retain any spousal discount, Slome said. It gets more complicated if the couple has a so-called “shared care” rider on their policy, which allows one spouse to tap the other’s benefit pool, he said, noting divorcing parties should consider dropping that rider.

Power of attorney . If you’ve named your soon-to-be ex as your health-care power of attorney, you’ll need to change that to another person who you’d like to make medical decisions for you if you’re no longer able to do so yourself.