Obama Care – New Developments For 2015

1. Employers subject to the heath care mandate.


All companies with 50 or more full­time equivalent employees are required to offer health care benefits to full­time employees and their dependents. If not provided, they are subject to a fine (see below). The insurance plan must provide “minimum value” (plan pays at least 60% of the cost of covered health benefits and provide substantial coverage of inpatient hospital and doctors services).

2. Fines for non compliance: The amount is the lesser of:


(a) $3,000 times the number of full­time employees, in excess of 30, who buy a federally subsidized policy through a state exchange and receive a premium assistance tax credit. To avoid this tax, the employer must pay at least 60% of benefit costs. The share of the premium paid by a worker can’t be more than 9.5% of earned income, based on the prior year=s W­2. Since large employers are ineligible to buy group coverage on an exchange for two or three years, they should buy coverage through their present insurance brokers.

(b) $2,000 times the number of full­time employees in excess of 30, who gets a subsidy at a state exchange. The tax applies if even one full­time employee gets a subsidy at a state exchange. Since the tax is really a penalty, it is not tax deductible.

Plans that favor” highly paid” workers (as defined by IRS regs.)will result in a penalty of $100 per worker, once the penalty phases in. At this time, the rules are not finalized. Firms that offer insurance plans must pay by July 31, 2015 an annual fee of $1 for each of the average number of employees covered in 2012. The fee continues through 2018. A fee of $63 per employee will be levied at the end of 2015 on all firms that offer insurance. The first payment must
be made in 2016.

Self­employed persons can purchase insurance through a state exchange and may be eligible for a government subsidy (credit) to help buy it. This is available for those with incomes up to 400% of the U.S. poverty level (presently, $45,900 for singles and $94,200 for a family of four).

3. Reporting [IRS Instructions for Forms 1094­C and1095­C]:


For a “large” business employing 50 or more) full­time-equivalent employees, employees are required to purchase health coverage for all full­time employees (more than 30 hours per week or, if the employer elects, at least 130 hours of service per month [Prop. Regs. Sec 54.4980H­(a)(18)]. The 50 employee requirement is determined by the sum of all full­time employees and full­time equivalents for each calendar month in the preceding year, divided by 12. If the result is 50 or more, the employer is a large employer for the calendar year unless a seasonal worker exception applies.[Sec. 498H(c)(2)]. If employees are paid by the hour, actual hours of service are used. For non-hourly employees, the employer must count actual hours or apply an equivalent of eight hours daily or 40 hours per week, provided the method used does not substantially understate the employees hours of service that would cause the employees not to be treated as full time [Prop. Regs. Sec 54.4980H­(3)(b)].

If the firm employs 50 or more full­time equivalent employees,form 1095C is used to report to the IRS insurance data for each full-time employee for each employee who was a full­time employee of the employer for any month of the calendar year .regarding eligibility of employees for the premium tax credit. Form 1095­C is also used in determining employers that offer employer­sponsored self­insured coverage. It is also use to report information to the IRS for employees who have minimum essential coverage under the employer plan and therefore are not liable for the individual shared responsibility payment for the months that they are covered under the plan.

The employer must also file form 1094C to report to the IRS summary information for each employer to determine whether an employer owes a payment under the employer shared responsibility provisions under section 4980H. Each employer has its own reporting obligation related to the health coverage the employer offered (or did not offer) to each of its full­time employees.

If an employer is offering health coverage to employees other thanunder a self­insured plan, such as through an insured health plan or a multi­employer health plan, the issuer of the insurance or the sponsor of the plan providing the coverage is required to furnish the information about their health coverage to any enrolled employees. Forms must be given to each employee by March 31 and filed with the IRS by May 31 (June 30 if e­filing). You can get an automatic 30­day extension of time to fileby completing Form 8809, Application for Extension of Time To File Information Returns. The form may be submitted on paper as a fill­in form, or through the FIRE System or an electronic file. No signature or explanation is required for the extension. However, you must file Form 8809 by the due date of the returns in order to get the 30­ day extension. Under certain hardship conditions you may apply for an additional 30­ day extension.

4. Individual penalties for not having health care coverage.


The penalty is $315 or 1% of household income. The maximum amount is the average cost for a family of five under a bronze level plan. The penalty starts at the $50,000 household income level for a family of five and increases as income gets larger.

5. Premium Credit:


If coverage is not offered to 95% of full­time equivalent employees, the fine is $2,160 times the number of full­time employees less 30. This applies if even one employee elects to buy insurance through a government exchange and receives a subsidy to help pay for the insurance. Firms that offer unaf ordable insurance will owe $3,240 for each full­time employee who receives a tax credit for purchasing insurance on an exchange.

Dr. Goedde is a former college professor who taught income tax, auditing, personal finance, and financial accounting and has 25 years of experience preparing income tax returns and consulting. He published many accounting and tax articles in professional journals. He is presently retired and does tax return preparation and consulting. He also writes articles on various aspects of taxation. During tax season he works as a volunteer income tax return preparer for seniors and low income persons in the IRS’s VITA program.

Twitter LinkedIn 

Subscribe to TaxConnections Blog

Enter your email address to subscribe to this blog and receive notifications of new posts by email.