IRS issues final regulations on employer sponsored health insurance

In December of 2015, the Internal Revenue Service (IRS) issued final regulations that addressed some of the questions pertaining to whether employer sponsored health insurance meets the Patient Protection and Affordable Care Act minimum value requirements.  Amongst a variety of miscellaneous items pertaining to minimum value, the final regulations clarify the impact of a health reimbursement arrangement (HRA) on affordability. The regulations also clarify some of the rules regarding eligibility for the health insurance premium tax credit.

Under the final regulations, the new amounts made available by an employer to an employee in a HRA that can be used to pay health insurance premiums, when the employer also offers qualifying health coverage, will be counted towards affordability. Similarly, if the new amounts are available to an employee in a HRA integrated with qualified employer coverage, and the new amount can only be used to reduce cost-sharing, that new amount will be counted for minimum value purposes.

The health insurance premium tax credit had rules finalized in the same regulations. One rule includes the eligibility of a household that has income from a child. The premium tax credit is based on household income and when a parent includes a child’s income on their income tax return for tax credit eligibility purposes, the amount used is the child’s modified adjusted gross income, not the gross income reported on the child’s tax return.

The final regulations also addressed the impact of wellness incentives on the health insurance premium tax credit. The regulations clarify that wellness incentives that reduce the cost of health insurance premiums to an employee will not be included in the calculation for minimum value or affordability, instead the regulations assume the employee will not qualify for the incentive. This rule has one exception, which is if the incentive is based on tobacco use. If so, the regulations assume that the employee will qualify for the incentive and the incentive can be used in the minimum value and affordability calculation. Thus, only tobacco use wellness incentives can be used in the minimum value and affordability calculation for purposes of premium tax credit eligibility.

Overall, a variety of miscellaneous rules regarding health insurance were finalized in the regulation. The entirety of the IRS regulation can be found at the following link:

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Tax Credit for New Small Employer Pension Plans

Thinking about adoping a retirement plan for your employees?  Here’s something to consider…

Small employers who adopt a pension plan for employees may be eligible for a tax credit to cover startup costs.

Under Section 45E of the Internal Revenue Code, an employer that adopts a new plan covering at least one non-highly compensated employee (“HCE”) can take up to a $500 credit (50% of first $1,000) for each of the retirement plan’s first three years of operation for startup and administration costs of the plan.

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HIRE Act Introduces New Tax Incentives for Employers For Hiring Employees

The  Hiring Incentives to Restore Employment (“HIRE”) Act, signed into law March 18, 2010, includes several important tax provisions designed to promote job growth and stimulate the United States economy.

Hire Now Tax Cut

$13 billion in tax breaks  are available to qualified employers both in the form of payroll forgiveness for Social Security taxes paid for qualified new hires, as well as a tax credit to employers for keeping those employees on payroll for 52 consecutive weeks.

Social Security Tax Forgiveness

Qualified Employer. A qualified employer is any non-governmental entity hiring in the United States. Federal, state or local governments or instrumentalities, except for state colleges and universities, do not qualify. Any employer may choose to opt out of the forgiveness program.

Qualified Employee. A  qualified employee is any previously unemployed individual hired between February 3, 2010 and January 1, 2011.  The individual must be able to show no more than 40 hours employment in the 60 days prior to hiring. The new hire cannot replace an employee unless the replaced employee’s departure was either voluntarily or for cause. Relatives of the employer, or shareholders owning more than 50 percent of the business, are not eligible employees.

Retained Worker Tax Credit

Employers will be eligible for an additional tax credit for each qualified retained worker kept on the payroll for 52 consecutive weeks. That credit will come as an increase to the Code Sec. 38(b) credit by the lesser of $1,000 or 6.2 percent of wages paid during the 52-week period.

Qualified Retained Worker. A new worker kept on the payroll for 52 consecutive weeks might qualify as a retained worker. To ensure just pay, that worker needs to earn an amount equal to at least 80 percent of his or her first 26-week accumulated wage in his or her second 26 weeks.

Employers may claim the retained worker credit only if the full 52-week period is met. Should a worker spend 51 consecutive weeks in employment and then leave, the employer would not be eligible for any portion of the tax credit.

© 2010 Parsonage Vandenack Williams LLC

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