New Rules Under the Affordable Care Act

May-2014-pg1New Rules Under the Affordable Care Act, the U.S. Treasury Department recently issued final regulations regarding the "shared responsibility" requirements placed on certain employers by the Affordable Care Act (ACA). These final regulations ease some rules and delay the phase-in of others.

Covered Employers

As of January 1, 2015, employers are required to provide qualifying health care coverage to their employees or else pay certain "shared responsibility" payments to the federal government. Responsibility under the ACA depends on the number of "full-time employees" the employer has:

  • Fewer than 50 ---- No obligation
  • 50 to 99 - Reporting requirements begin in 2015, but shared responsibility payments generally will not. go into effect until 2016
  • 100 or more Reqiuired to provide qualifying coverage to 70% of full-time employees in 2015 mid 95% in 2016, with shared responsibility payments commencing in 2015

A "full-time employee is in employee who is employed an average Of 30 hours per week, though the hours worked by part-time employees are also part ol the final calculation. For these purposes, count the number of full-time employees in the previous year.

Penalties for Noncompliance

Penalties will apply if two things occur: (1) any full-tune employee receives a premium tax credit for purchasing insurance on one Of the new Affordable Insurance Exchanges (also called a Health Insurance Marketplace) and (2) the employer either fails to provide qualifyimig insurance coverage through an employer-sponsored plan or offers insurance that is either "unaffordable" or that fails to provide "minimum value" as either of those terms are defined in the law.

Where the employer offers no coverage or fails to offer it to the required percentage of employees, the penalty is calculated by taking the number of full-time employees, subtracting 30, amid then multiplying that number by
$2,000. Where the employer offers coverage that is either "unaffordable" or that fails to provide "minimum value," the penalty is calculated by multiplying the number of full-time employees who receive a premium tax credit for that month by 1/12 of 3,000.

Potential Tax Relief Available

Small employers may be able to claim the small employer health insurance credit.

This credit may be available to employers with up to 25 full-time equivalent employees who earn average annual wages of no more than 50000. (Other requirements apply.)

Contact, us if we can help answer your questions about the ACA. •

Understanding Tax Rates

In 2014, the federal income-tax rate schedule for individuals contains seven brackets: 10%, 15%. 25%, 281Yo, 33%. 35%. ainI 39.6%. Because of this graduated rate schedule, most people pay tax at more than one rate.

For example, a married couple filing jointIy with taxable income of $120,100 will pay tax at a 10% rate on the first $18,150 of their taxable income a 15% rate on income from $18,151 to $73.800. and a 25% rate on nitomne t'roni $73,801 to $120.000. Their total tax: .$21,712.50.

Their marginal tax rate is 25%. An additional $1,000 deduction would save them $250 of tax, and a $1.000 raise would be worth $750 after federal income taxes are paid.

To figure their average tax rate. they'd take their total tax liability and divide it by their. gross income (before before deductions ). Assuming a gross income Of $150,000, their average tax rate would be about 14.5%.

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