The Affordable Care Act — Tax Implications For Employers

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

Juliana Reno

Additional Medicare Tax.
This is not a tax that the employer has to pay, but the employer does have to calculate it, withhold it from the employee’s pay, and forward it to the IRS along with other payroll taxes. Effective Jan. 1, 2013, the general rule is that the employer must withhold an additional 0.9 percent on earnings over $200,000 for single filers and on earnings over $250,000 for joint filers.

Form W-2 Reporting. (This is not a tax — it is only a reporting requirement — but W-2s are so intimately associated with taxes that it seems appropriate to include.) If an employer issued 250 or more W-2s for one year, then for the following year, the employer must include the cost of certain health plans on all W-2s.

Cadillac Tax. Effective in 2018, if health plan premiums exceed a certain dollar amount, the enrollee will be taxed 40 percent on the excess amount. Although this tax is not borne by employers, employers should be aware of the threshold and should devise a communication plan so that employees are not caught unaware.

Nondiscrimination. Under the ACA, fully-insured plans must not discriminate in favor of highly compensated employees. (Self-funded plans have been subject to a similar rule for many years.) The penalty for violating this rule is likely to be the loss of favorable tax treatment for the coverage. The IRS has indicated that it will not be enforcing this provision until after it issues regulations on the topic.

 

 

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