Now that our President has signed the landmark health care reform package, much work needs to be done in dealing with new requirements. The Health Care Act establishes tax credits and subsidies to expand health coverage, and uses various penalties, fees and surtaxes to pay for it. The implementation dates of the various costs and benefits range from immediate to 2018.
Implementation Dates:
2010
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Small employers with no more than 25 employees are entitled to up to a 35 percent tax credit on the cost of providing health insurance for employees.
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Parents have the ability to cover adult children up to age 27 under their tax-qualified employer-provided health plans.
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Changes cannot be made to employer group plans except to add or delete participants and dependents.
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Lifetime limits on the dollar value of benefits are prohibited with six months of enactment.
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Preexisting conditions will have to be covered for children under the age of 20.
2011
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Health flexible savings arrangement (FSA) dollars will be limited to prescription medications.
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All employers must enroll employees in a new national long-term care program, unless the employee opts out.
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Fees will be imposed on the pharmaceutical industry and health insurance providers.
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The unveiling of a simplified cafeteria plan specifically tailored to small businesses.
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The tax on nonqualified distributions from a Health Savings Account increases to 20%.
2013
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Individuals who earn more than $200,000 for the year ($250,000 for married couples) will be paying an additional 0.9 percent in Hospital Insurance (Medicare) tax.
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Individuals whose adjusted gross income for the year exceeds $200,000 ($250,000 for joint filers), whether from wages or otherwise, will also be paying an additional 3.8 percent Medicare tax on net investment income.
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The threshold for deducting unreimbursed medical expenses as itemized deductions increases to 10% of adjusted gross income.
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A new $2,500 annual cap on expenses covered under health FSAs.
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An excise tax will be imposed on medical device manufacturers.
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An annual federal premium tax charged to private insurance plans of $2 per individual covered.
2014
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Employers with 50 or more employees generally will be required to provide a minimum level of health insurance for their employees or pay a penalty per employee.
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Most individuals will be required to obtain health insurance or be subject to a penalty tax.
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Tax credits to subsidize the cost of health insurance premiums will be available to individuals earning up to 400 percent of the poverty level.
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The health care reform package requires each state to establish an exchange to help individuals and qualified employers obtain coverage. Coverage will be offered at various levels. Qualified individuals may be eligible for premium assistance tax credits, cost-sharing or vouchers to help pay for coverage through an insurance exchange. An individual's income whether or not coverage is provided by his or her employer will all be taken into account when determining if the individual qualifies for a premium assistance tax credit, cost-sharing or voucher.
2018
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A 40 percent excise tax will be imposed on high-cost, "Cadillac" employer-sponsored health coverage.
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Substantially all other provisions become effective in 2018.
Over the course of the next few months, the IRS and other federal agencies will be filling in details on how to comply with all the provisions under the massive health care reform package. The IRS is expected to issue guidance soon on the provisions with effective dates in 2010 and 2011.
C&G will be staying on top of all developments, with an eye toward how to best maximize results under the new law for our clients.