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 October 9, 2014

2. INDIVIDUAL MANDATE 1/1/2014 Individual advance tax credits available Income requirements (100% to 400% of Fed. Poverty Level) 20142013 Single @ 400% = $46,680 $45,960 Family of 4 @ 400% = $95,400 $94,200 Credit amount lessens as income goes up / sliding scale 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 Individual cost sharing subsidies available Income requirements (100% to 250% of Fed. Poverty Level) 2014 Single @ 250% = $29,175 Family of 4 @ 250% = $59,625 Applied automatically Must buy a silver plan Out-of-pocket expenses partially paid by government (sliding scale) Out-of-pocket maximums are also lowered Qualifying person: Buy Bronze (no subsidy) or Silver (subsidy)? Requires analysis

4. INDIVIDUAL MANDATE 1/1/2014 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 A way to leave Spouse credit eligible But – Household Income may make spouse ineligible!

5. Small Employer Health Coverage Small & Medium sized Employers 2014 - 2015 Small Employer Less than 50 Employees (full-time & full-time equivalents) Final 4980H Employer penalty regulations issued 2/10/2014 2015 Transition rule exemption for medium sized ERs 50-99 Employees (full-time & full-time equivalents) Certification and various other requirements Can’t reduce workforce Can’t reduce current coverage

6. 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 be subject to income & payroll taxes

7. Small Employer Health Coverage Employer pre-tax payment for individual health insurance premiums Virtually impossible due to Notice 2013-54 No stand alone HRAs, Section 125 Plans, or Employer Payment plans Effective 1/1/2014

8. Small Employer Health Coverage Employer pre-tax payment for individual health insurance benefits Consider a HDHP + HSA strategy Employee individual HDHP policy (on or off Exchange) Tax-free HSA contributions by Employer – comparability rule Note: HSA $ may NOT be used to pay premiums! Plus – if individual HDHP is on the Exchange Potential Employee premium subsidy! The Maine Exchange now offers HSA eligible (HDHP) individual policies

9. Small Employer Health Coverage Private Exchanges Defined contribution health plans Large companies are adopting A way to provide EEs with a variety of health plan choices New exchanges are available for smaller companies ER premium payments are pre-tax When structured properly as a group policy

10. Small Business HealthCare Tax Credit IRC §45R - Maximum credit equals 50% [35% for 501c NFPs] 25 or fewer FTE’s to qualify for any credit Aggregation rules apply Average annual wages less than $50,800 (2014), and Employer pays 50% or more of insurance premiums Must use SHOP starting in 2014 Two consecutive taxable year limit starting in 2014

11. Small Business HealthCare Tax Credit Maximum credit (50% / 35%) 10 or fewer FTEs to qualify $25,400 (2014) or less average wages to qualify Credit phase out between 10-25 FTE’s Average wages 25K-50K

12. Small Business HealthCare Tax Credit DETERMINATION OF NUMBER OF FTEs Divide total annual hours/2,080 = number of FTEs EE hours in excess of 2,080 do not count Excluded employees Owners & their family members Seasonal Workers (< 120 days/year)

13. Small Business HealthCare Tax Credit DETERMINATION OF AVERAGE ANNUAL WAGES Divide total wages by # of FTEs = Average annual wages All wages paid to qualifying employees are included – even for hours in excess of 2,080. But – exclude wages paid to: Owners & their family members Seasonal Workers (< 120 days/year) The relevant period is the Employer’s taxable year.

14. Small Business ANNUAL aca REPORTING ACA Reporting under IRC SectionS 6055 & 6056 Section 6055 – Minimum Essential Coverage reporting Any size ER with a self-insured plan providing MEC [Insurers report for insured plans] Voluntary for 2014; required for 2015 Form 1095-B information return [Form 1094-B is the Transmittal] Section 6056 – Large Employer FT EE reporting Only applies to Applicable Large Employers (incl. medium-sized ERs for 2015) Voluntary for 2014; required for 2015 Form 1095-C information return [Form 1095-B is the Transmittal]

15. 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