Keeping Up with Health Care Reform
Are you receiving questions from clients about health care reform? According to the 2013 PCPS CPA Firm Top Issues Survey, the effect on firms of new federal and state regulations (such as increasing complexity and compliance costs) was one of the top five issues for sole practitioners. It’s quite possible that health care reform, which is a hot topic for many small businesses and the CPAs who serve them, was behind that result. For many practitioners and their clients, tackling the provisions of the Patient Protection and Affordable Care Act is a critical concern. Some of the requirements are already effective, while others have upcoming effective dates and one significant provision has been postponed. Here’s a rundown of just a few of the provisions that clients may be talking about:
- For businesses with fewer than 25 full time equivalent (FTE) employees, the Small Business Health Care Tax Credit, which became effective in 2010, offers a maximum credit of 35% for premiums paid by small non-tax-exempt business employers and 25% for small tax-exempt employers. The small business employer must meet the following three requirements to qualify: (1) fewer than 25 FTE employees, (2) average annual wages of less than $50,000, and (3) contribute 50% or more toward single (not family) health insurance coverage for each employee. Beginning in the 2014 tax year and thereafter, the maximum credit will rise to 50% of premiums paid (35% for tax-exempt employers), but employers must participate in the Small Business Health Options Program (SHOP) and the credit will only be available for two years.
- Open enrollment in SHOP began on October 1, 2013. On the same date, employers were required to provide all employees with written notification of the options in the marketplace. From now on, employers must provide the same notification to new employees within 14 days of hiring.
- The postponed enactment of several provisions includes the reporting and penalty assessment components of the employer shared responsibility mandate, which requires employers with 50 or more full-time workers either to provide health care coverage or to pay a penalty. Implementation of that mandate has been delayed for one year, to January 1, 2015.
CPAs can find a timeline of provisions and related guidance at the AICPA Health Care Reform Resources Center. The guidance also includes the PCPS Health Care Reform Toolkit, which features a strategy checklist, customizable brochures and PowerPoint presentations for business and individual clients.
Do’s and Don’ts for Health Care Reform Implementation
By Michael Trabold, director of compliance at Paychex
At Paychex, we are receiving many questions from our CPA firm partners regarding health care reform. Here are some of the do’s and don’ts that I would recommend for practitioners:
Do monitor all the provisions that might affect your clients. Practitioners should be aware of current and upcoming required implementation dates so they’re ready to offer help and advise clients. For example, under one major provision, as of January 1, 2014, a business can’t impose a waiting period of more than 90 days for a new employee to qualify for employer health care coverage. There are also some lesser-known aspects of health care reform that should not be forgotten. For example, also effective January 1, 2014, employee wellness programs will qualify for enhanced benefits. Employers will be able to offer employees inducements of up to 30% of premium costs if they participate in wellness programs. The idea behind this benefit is that the more employees who participate in wellness programs, the healthier they will be over time and the lower the employer’s health care premiums should be, so companies should be sure to take advantage of these programs.
Do remind clients about the Small Business Health Care Tax Credit. Even though it was one of the first provisions enacted, many companies haven’t taken advantage of it because there’s a perception that it’s difficult to use. However, the IRS has tried to streamline this provision, and in 2014 the credit will jump from a maximum 35% of premiums paid to a maximum 50% for small non-tax-exempt employers with less than 25 FTEs. CPAs can add value by reminding their clients of these provisions and helping them take advantage.
Don’t let businesses put their heads in the sand and ignore the requirements, especially now that compliance with the reporting and penalty assessment components of the employer shared responsibility requirement has been moved to January 1, 2015. We’re telling our clients not to use the postponement as an excuse to delay changes that will maximize a beneficial outcome. CPAs can help clients to begin to plan now for this requirement and to ensure they’re on track for all the provisions that will become effective before that time.
Don’t forget the questions businesses will receive from their own employees, especially about the individual mandate, which will require most Americans to have health care coverage beginning next year. CPAs should be prepared to help clients address employee concerns.
CPAs and their clients can turn to the extensive health care reform related resources available on our site. They include a timeline, FAQs and a dedicated section for accountants which we update regularly to reflect recent developments.