“Small employers” who qualify for this 2010 income tax credit (including churches and section 501(C) (3) charitable organizations) must satisfy ALL of the following conditions:

One component of  the huge  healthcare legislation is a tax credit for small employers who pay at least 50% of their employees’ health insurance premiums. Unlike most of the future healthcare bill provisions, this employer federal tax credit can be claimed for year 2010 tax returns due this Spring.

Calculations for this new tax credit are very complex (even by tax law standards!) and are reported on new IRS Form 8941 – a one page tax form which requires completion of 7 different worksheets to accurately calculate the tax credit. You can review IRS Form 8941 with instructions at www.irs.gov.  IRS information and resources

Initially, the IRS outlined rules for the tax credit in Notice 2010-44. A follow-up document, Notice 2010-82, explained transition relief related to the rules for a qualifying arrangement and provided more details about the requirements. For example, Notice 2010-82 clarifies how an employer that offers more than one plan determines whether its contribution amount meets the threshold for a qualifying arrangement. The IRS has released several additional items related to the tax credit, including:

Three Simple Steps Fact Sheet |  Frequently Asked Questions |  YouTube Video |  More information is available on the IRS website

“Small employers” who qualify for this 2010 income tax credit (including churches and section 501(C) (3) charitable organizations) must satisfy ALL of the following conditions:

1)      You paid at least 50% of the “single employee” premium cost for year 2010. Insurance costs are for primary health insurance and dental and vision insurance. Employer contributions to HSAs, HRAs and FSA medical accounts are not deemed insurance and thus are not eligible for the tax credit; AND

2)      You employed fewer than 25 “full-time equivalent” (FTE) employees during 2010. In determining FTE employees, 30 employees who worked 20 hours per week count as 15 FTE employees. Employees who you exclude from this FTE “count” include:

• Owners of the employer and their relatives (parents, children, in-laws, aunts/uncles, etc);
• “Seasonal” employees who worked 120 or fewer days for you during 2010; AND

3)   Your “average annual wages” paid to employees during 2010 were less than $50,000 per FTE employee. For this purpose “wages” are gross wages paid before any tax or retirement withholdings.

IF YOU MEET ALL 3 OF THESE CONDITIONS, YOU LIKELY QUALIFY FOR THE TAX CREDIT.

How Much is the Tax Credit?

Small employers who pay at least 50% of their employees’ health insurance, have 10 or fewer full-time equivalent employees, with average annual wages of $25,000 or less per “FTE” employee, will receive a tax credit of 35% (25% for churches and 501(C) (3) charitable organizations) of the employer-paid health insurance premiums in 2010. This can be a large tax credit! HOWEVER, as the FTE employee count trends from 10 employees to 25, and the “average wages” per FTE employee trends from $25,000 to $50,000, the tax credit percentage decreases from the 35%/25% ”starting” tax credit rates.

CAN I “EYEBALL” IT?

Catalist has posted a “Short-Cut Small Employer Insurance Credit Percentage” worksheet as a downloadable form, CLICK HERE .  Note that the worksheet is divided unto 2 sections, For-Profit Business and Nonprofit Entity. A for-profit business with 14 “FTE” employees and with average 2010 wages per FTE employee of $35,000 would be eligible to claim a federal tax credit of 12% of the employer-paid health insurance premiums paid during 2010. If the employer paid $30,000 of health insurance premiums for their employees in 2010, their 2010 tax credit would be $3,600.

CLAIMING THE TAX CREDIT

So you have met all three of the eligibility requirements and have “eyeballed” our worksheet and estimated you can claim a tax credit of several thousand dollars. Now what?

You begin the process of completing IRS Form 8941, which for-profit employers will attach to their 2010 business income tax return, and churches and other 501 (C) (3) charities/ministries will complete and attach to non-profit IRS Form 990-T.

Since the Form 8941 calculations are confusing and lack substantial guidance from the IRS, we recommend that you be “pragmatic” and make your best effort to complete an accurate Form 8941 and claim the tax credit based on your calculations. “Close is good enough” in horseshoes and with Form 8941 calculations! If your calculations are later found to be slightly incorrect by the IRS, and you have made a “reasonable effort” to accurately prepare Form 8941, then you will be fine.

The calculations require that you capture 2010 payroll information for employee hours paid during 2010, and gross wages paid for 2010. Legal updates and tax considerations intended to inform clients and colleagues of Catalist about current payroll issues and planning techniques.  You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques.  For a recommendations, Catalist recommends first consulting with Strategic Partner Profitable Accounting Services.

[UnitedHealthCare] will launch a national direct-mail campaign in early April to support Generations of Wellness^®, a program created to serve the health needs of African-American small businesses and families. This campaign is directed to African-American small-business owners and companies with large percentages of African-American employees.

The Generations of Wellness direct-mail piece above provides recipients with resources on how they can reduce their health care costs by directing them to a toll-free number and Web site address. Prospects have the option of receiving a complementary guide to Health care management solutions for business or Product Portfolio (California only).

As a reminder, interested parties can also access health-tip fliers, family health history tree, a physician directory, a health care glossary and many other helpful tools via uhcgenerations.com.

CLICK HERE TO VIEW MAILER / FLYER

Contact your Consultants at Catalist Health for more information.

New Hospice Benefit
All plans will now include the Hospice Benefit as part of the “Core Benefits.” Medicare pays for all but very limited co-payments for outpatient drugs ($5). Included in all Medigap plans a benefit to pay this co-payment will be included.

Medicare provides coverage for inpatient respite care up to 5 days less a co-payment amount of 5% of the daily benefit. The new Hospice benefit will pick up this 5% co-pay.

New Plans
The new regulation also makes the following two new plan options available to beneficiaries, which have higher cost–sharing responsibilities and lower estimated premiums:

• New Plan M includes 50 percent coverage of the Medicare Part A deductible and does not cover the Medicare Part B Deductible. Plan M has all the core benefits plus the foreign Travel Emergency Benefit.
• New Plan N does not cover the Medicare Part B deductible and adds a new co–payment structure of $10 for each physician visit and $50 for each emergency room visit (waived upon admission to the hospital). Plan N has all the core benefits plus the foreign Travel Emergency Benefit.

Benefit Chart of Medicare Supplement Plans Sold for Effective Dates on or After June 1, 2010

*Plan F also has an option called a high deductible plan F. This high deductible plan pays the same benefits as Plan F after one has paid a calendar year [$1900] deductible. Benefits from high deductible plan F will not begin until out-of-pocket expenses exceed [$1900]. Out-of-pocket expenses for this deductible are expenses that would ordinarily be paid by the policy. These expenses include the Medicare deductibles for Part A and Part B, but do not include the plan’s separate foreign travel emergency deductible.

For help understanding how this may impact your Medicare Plans or Health Care costs, please contact a representative at CATALIST HEALTH by calling – 1 – 866 – 460 – 4321 or by e-mailing info@catalistfinancial.com

One of the goals of health care reform is to make coverage more affordable, but the proposed annual $6.7 billion health insurance premium tax will have the opposite effect by increasing costs for families and employers across the country. The new health insurance premium tax will:

Increase premiums for families and small businesses: CBO has stated that new taxes on health plans will result in “higher premiums for private coverage.” These taxes would increase costs for families and employers at a time when they are already struggling with rising health care costs.

Cause immediate disruption for policyholders: While broader reforms will not begin until 2014, the new health insurance premium tax would go into effect in 2010 – after contracts have been negotiated and after individuals have enrolled in their plan for next year. Imposing new taxes next year that cannot be supported by current premium levels will cause significant disruption and higher costs for policyholders, and could impede the ability of health plans to meet promised benefits.

Create an unsustainable burden on health plans: Health plans will be required to pay a $6.7 billion tax beginning next year for the next 10 years, in addition to “stabilization‟ fees of $25 billion in 2013, 2014, and 2015. According to Fortune magazine‟s analysis of the companies listed under “Insurance and Managed Care‟, earnings in 2008 totaled $8.61 billion with a profit margin of 2.2% — ranking the industry 35th on the Fortune list.

The new tax is non-deductible and is layered on top of existing state and federal taxes paid by health insurance plans, including: premium taxes, assessments to support high risk pools, state and federal income taxes, employment taxes, sales and use taxes, and property taxes.

Put benefits at risk for families and employers: The new health insurance premium tax is assessed based on market share and is not tax deductible. As shown in this chart, the new tax will disproportionately impact health plans with the lowest net income, and for some health plans, could result in an effective tax rate of more than 100 percent. This would put at risk the reserves health plans are required by law to keep on hand to pay out benefits for families and businesses.