1. berrydunn.com | GAIN CONTROL THE AFFORDABLE CARE ACT “WHAT’S IN IT FOR MY SMALL BUSINESS?” TAX CONSIDERATIONS October 9, 2014

2. 2 INDIVIDUAL MANDATE 1/1/2014 Individual advance tax credits available Income requirements (100% to 400% of Fed. Poverty Level) 2014 2013 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. 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. 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. 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. 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. 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. 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. 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. 10 SMALL BUSINESS HEALTH CARE 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. 11 SMALL BUSINESS HEALTH CARE 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. 12 SMALL BUSINESS HEALTH CARE TAX CREDIT DETERMINATION OF NUMBER OF FTE S 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. 13 SMALL BUSINESS HEALTH CARE 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. 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.com Phone 207.541.2314 Websiteberrydunn.com Blogberrydunn.com/firmfootingberrydunn.comberrydunn.com/firmfooting 15