The Affordable Care Act “What’s in it for my small business?”

1. The Affordable Care Act “What’s in it for my small business?” TAX CONSIDERATIONS December 10, 2013

2. INDIVIDUAL MANDATE 1/1/2014 – Small Employer Health Coverage Individual advance tax credits available Income requirements (100% to 400% of Fed. Poverty Level) 2013 Single @ 400% = $44,680 2013 Family of 4 @ 400% = $94,200 Coverage requirements May not be eligible for Medicaid or Medicare or private coverage May not be eligible for Employer coverage (Affordable & Minimum Value)

3. INDIVIDUAL MANDATE 1/1/2014 – Small Employer Health Coverage Pre-tax nature of employer coverage Employer premiums are fully deductible / payroll tax free Employee portion is income & payroll tax free (if paid through a Sec. 125 plan) Employers can provide pre-tax HRAs, Health FSAs and HSAs After-tax nature of Exchange coverage Employee cost, after subsidy (if any), is after-tax Any Employer ‘bonus’ will incur income & payroll taxes

4. INDIVIDUAL MANDATE 1/1/2014 – Small Employer Health Coverage Will an offer of Employer health coverage void Employee’s ability to qualify for an Exchange credit? Yes – if coverage is Affordable & provides Minimum Value But – Employer need not offer coverage to Spouse and/or Dependents A way to leave Spouse and Dependents credit eligible

5. INDIVIDUAL MANDATE 1/1/2014 – Small Employer Health Coverage May an Employer use an HSA and/or an HRA to help make a health plan Affordable? HSA – NO. May not use an HSA to pay premiums. HRA – Yes, if integrated and $ only available for premiums. May an Employer use an HSA and/or an HRA to help make a health plan meet Minimum Value? HSA – Yes. HRA – Yes, if integrated and $ only available for cost-sharing.

6. INDIVIDUAL MANDATE 1/1/2014 – Small Employer Health Coverage Employer pre-tax payment for individual health insurance premiums – prior to 1/1/2014 One way for small Employers to provide ‘custom’ employee health coverage Direct Employer premium payment or reimbursement Use of HRAs possible Avoided income taxes and payroll taxes Non-discrimination rules have been non-existent

7. INDIVIDUAL MANDATE 1/1/2014 – Small Employer Health Coverage IRS Notice 2013-54 – Effective 1/1/2014 HRA, Employer Payment Plan, Section 125 Health FSA These are group health plans subject to the ACA. Standing alone, they fail ACA requirements (e.g., prohibition on annual dollar limits) They may be integrated with an ACA compliant group health plan Integration with an individual policy is not allowed REVIEW ALL SUCH PLANS BEFORE 1/1/2014

8. INDIVIDUAL MANDATE 1/1/2014 – Small Employer Health Coverage IRS Notice 2013-54 – Effective 1/1/2014 Exceptions One-participant plans (sole-proprietors w/o employees) Standalone retiree-only plans ACA market reforms do not apply to such plans Certain Health FSAs if carefully designed (excepted benefits) Employer makes other group health coverage available Employer contributions to FSA must be <$500 or no more than 100% of Employee deferrals (i.e., $/$ match) Possible Exception: Use of a premium only plan (POP) for pre-tax individual insurance premiums

9. INTERESTED IN MORE? Contact Roger Prince, a Senior Manager in BerryDunn’s Employee Benefit Consulting Group, to learn more. rprince@berrydunn.comPhone 207.541.2314Websiteberrydunn.comBlogberrydunn.com/firmfooting