The Affordable Care Act — Tax Implications For Employers

by Juliana Reno  on Monday, Aug. 12, 2013 12:00 am  

Juliana Reno

• The employer has an obligation to self-report any excise taxes due.

• There are some exceptions to the excise tax, as well as provisions setting the minimum and maximum amount of the tax. (The maximum amount is really high.)

PCORI Fees.
Most employer group health plans must pay fees (a.k.a. taxes) to help fund the Patient-Centered Outcomes Research Institute (“PCORI”). The first PCORI fees for calendar-year plans were due on July 31, 2013, in the amount of $1 times the average number of covered lives.

Tax Point:

• PCORI fees are tax-deductible business expenses for the employer.

Transitional Reinsurance Fees.
Most employer group health plans must pay fees to help fund reinsurance for insurance companies as they transition to covering high-risk individuals without adjustments for pre-existing conditions. The first Transitional Reinsurance fees will be payable in late 2014 or early 2015, in the amount of $63 times the average number of covered lives.

Tax Point:

• Transitional Reinsurance fees are tax-deductible business expenses for the employer.

Small Business Tax Credits.
Nonrefundable tax credits are available to employers with 25 or fewer full-time employees, if the average wages do not exceed $50,000 and if the employer contributes at least 50 percent of the cost of health coverage. The credits are on a sliding scale, depending on the number of employees, the amount of the employer contributions, and whether the employer is a for-profit or non-profit entity. Small employers will want to determine, with their tax advisor, whether the tax credit will be to their financial advantage.

Tax Points:

• For 2013, the maximum credit is 35 percent of employer-paid premiums. For 2014, the maximum credit is 50 percent of employer-paid premiums, and purchasing coverage from the exchange is required.

• The credit reduces the amount that the employer would otherwise be able to claim as a deductible expense.

 

 

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