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There’s Still Time to Secure Health Insurance for 2019

Posted on November 29, 2018 by Adam Cohen

The open-enrollment period for U.S. taxpayers to secure medical health insurance for 2019 via the Health Insurance Marketplace runs from Nov. 1, 2018, through Dec. 15, 2019. While the new tax law introduced on Jan. 1, 2018, does eliminate the Obamacare individual shared responsibility penalty for individuals who go without insurance in 2019, there are other reasons taxpayers should consider enrolling in a marketplace plan for 2019.

Some states, such as the District of Columbia, Massachusetts and New Jersey, have implemented their own individual mandates that will assess penalties on residents who do not have minimum essential health care coverage in 2019 and who do not qualify for an exemption.

In addition, by enrolling in a marketplace health care plan, you will continue to receive many of the benefits and incentives that the Affordable Care Act (ACA) introduced, such as guaranteed coverage for pre-existing conditions and free annual physical exams and preventive care immunizations, screenings and counseling. Without a marketplace plan, you may be denied coverage from a private insurer, or you may be unable to afford care and treatment for an unexpected illness or injury to you or your family members.

Due in part to the elimination of the individual mandate, most families should expect to pay higher premiums for plans in 2019 than they did in prior years. However, the premium tax credit has also increased for 2019, helping qualifying taxpayers to subsidize their costs for coverage. High-income families that do not qualify for the premium subsidy may want to consider setting aside pre-tax dollars into health savings accounts (HSAs) to help them pay healthcare costs, including marketplace plan premiums.

About the Author: Adam Cohen, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant, where he works with closely held businesses and non-profit charities, hospitals and family foundations to maintain tax efficiency and comply with federal and state regulations. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via e-mail at info@bpbcpa.com.

Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.

Small Businesses Competing for Talent are Making Use of a Forgotten Benefit by Adam Cohen, CPA

Posted on September 18, 2018 by Adam Cohen

In the current labor market, small businesses that lack the budgets to afford employee benefits, such as onsite food service, medical care and even ping-pong tables, are having a hard time attracting workers. However, many of these small companies are just now recognizing that the government provided them with an affordable, tax-friendly and hassle-free option for helping workers afford the high costs of health care.

Just as President Obama was leaving the White House in 2016, he signed into law the 21st Century Cures Act. The law included a provision that allows businesses to establish Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs), in which they set aside pre-tax dollars for employees to use to purchase qualifying minimal essential health insurance and/or to reimburse employees for out-of-pocket medical expenses. It is important to note, however, that any tax credit employees receive from the Health Insurance Marketplace to help them pay for coverage premiums will be reduced, dollar-for-dollar, by the health reimbursement plan.

 

Employers, including not-for-profits, receive a tax deduction for the amounts they contribute to workplace, while employees receive the benefit of using tax-free dollars as reimbursements for insurance premiums and/or the costs of prescription medications, doctor’s office visits, health-related transportation and health insurance premiums. Moreover, with a QSEHRA, employers eliminate their burdens of paying for expensive healthcare premiums and spending countless hours administering health plans for their workforce.

Do all Small Business Qualify for a QSEHRA?

No. In order to establish a QSEHRA, a business must meet the following criteria:

  • It must have less than 50 full-time employees or full-time equivalent employees (which excludes part-time and seasonal employees and those who have health coverage from a spouse’s group plan);
  • It cannot offer group health insurance presently to its workers. If a policy is in place, it will need to be cancelled before establishing a QSEHRA;
  • Its employees must purchase health insurance that meets the minimal essential coverage (MEC) required by the Affordable Care Act (also known as Obamacare).

Are there Limits to the Amount an Employer Can Contribute to a QSEHRA?

The IRS annually adjusts the contribution limits for inflation. In 2018, the maximum amount an employer can contribute to a QSEHRA is $5,050 per year for individual workers or $10,250 for family coverage, up from $4,950 and $10,000 respectively in 2017. According to PeopleKeep’s “The QSEHRA: Annual Report”, small businesses contributed to QSEHRAs an average of $280 per month per employee and $477 per month for families in 2017.

How Can Employers Set up QSEHRAs?

 The first step businesses should take is to meet with their tax advisors to confirm that they qualify to establish this plan and they understand and can abide by their responsibilities to substantiate claims while ensuring employee’s HIPAA rights.

About the Author: Adam Cohen, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant, where he works with closely held businesses and non-profit charities, hospitals and family foundations to maintain tax efficiency and comply with federal and state regulations. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via e-mail at info@bpbcpa.com.

Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.

Are Health Savings Accounts the Future of Healthcare? UPDATED for Tax Reform by Adam Cohen, CPA

Posted on January 02, 2018 by Adam Cohen

While the current administration failed in its attempts to fully repeal the Affordable Care Act (also known as Obamacare), it did secure under a package of tax reform the elimination of the health care law’s individual mandate beginning in 2019. Regardless of how all of this will play out, one consistent trend that continues to emerge from the administration is an increased reliance on Health Savings Accounts (HSAs).

Currently, HSAs are available only to workers with high-deductible health insurance plans, which for 2017 were defined as those with an annual deductible of $1,300 for self-only coverage and $2,600 for family coverage. These amounts are indexed annually for inflation.

According to the most recent information from the Kaiser Family Foundation, only 19 percent of workers were enrolled in HSAs in 2016. However, this is expected to change, especially as more and more employers opt for high-deductible health plans.

HSA Tax Benefits

In the most basic terms, an HSA can be compared to a bank account for which eligible workers can set aside money to use solely for paying current and future health care expenses. Contributions to the account may be made by the individual, perhaps via automatic deferral from earnings, a family member or even one’s employer. However, unlike a typical savings account, HSAs allow individuals to contribute pre-tax dollars and earn interest on their investments free of taxes. In addition, annual contributions roll over from year to year, rather than following the use-it-or-lose-it rules of a traditional health reimbursement account (HRA) or health care flexible savings account (FSA).

Another tax benefit of HSAs is that qualifying participants may deduct from their taxable income not only their own HSA contributions but also those made by their employers. For 2017, the IRS allowed qualifying employees and their employers to contribute to an HSA up to $3,400 in pre-tax dollars for themselves, or $6,750 for a family plan, plus a $1,000 catch-up contribution for individuals age 55 and older. Because workers own their individual accounts, rather than their employers, they may continue to keep and contribute to their HSAs long after they switch jobs and even into retirement since there are no age-based distribution requirements. As account owners accumulate savings, they may choose to put these funds in an investment vehicle, such as stocks and bonds, which can allow their money to grow along with their retirement savings.

When HSA participants do take distributions to pay for qualifying medical expenses, including doctor visits and prescription medications, they may exclude those amounts from their taxable income in the year of the distributions. Additionally, workers may withdraw funds from their HSAs to pay for certain health insurance premium payments, including payments for COBRA coverage and for the health insurance of individuals receiving unemployment income. As an added plus, under the current Affordable Care Act, payments for preventative services, including annual visits to primary care physicians, are exempt from the HSA deductible.

Potential Pitfalls of HSAs

 

 

 

Despite all of the tax-advantaged benefits that HSAs provide, they do come with potential risks, especially when consumers fail to follow the rules.

For example, under current law, all withdrawals from an HSA that an individual 65 and younger uses for non-qualifying medical expenses will be subject to tax as well as a 20 percent penalty. In addition, account owners cannot use HSA savings to cover the eligible medical expenses of a dependent child who is older than 24 years of age.

With the future of health care unknown, taxpayers should take the time to understand all of their options relating to what will surely be rising health care costs in the future. The professional advisors and accountants with Berkowitz Pollack Brant have deep knowledge and experience helping taxpayers understand and comply with evolving laws while maintaining tax efficiency and wealth preservation.

About the Author: Adam Cohen, CPA, is an associate director in the Tax Services practice of Berkowitz Pollack Brant, where he works with closely held businesses and non-profit charities, hospitals and family foundations to maintain tax efficiency and comply with federal and state regulations.  He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via e-mail info@bpbcpa.com.

 

IRS Announces 2018 HSA Contribution Limits by Adam Cohen, CPA

Posted on June 05, 2017 by Adam Cohen

Taxpayers who participate in high-deductible health insurance plans will receive a minimal increase in the amount of pre-tax dollars they may contribute from payroll deductions into Health Savings Accounts (HSAs) in 2018.

The IRS recently announced that the annual HSA contribution limit in 2018 will be $3,450, compared with $3,400 in the current year. For family plans, the annual limitation on deductions will increase in 2018 to $6,900, from the current amount of $6,750.

To qualify for an HSA, taxpayers must participate in high-deductible health plans, which for 2018 are broadly defined as those with minimum annual deductibles of $1,350 for individuals, or $2,700 for family coverage, and those in which deductibles plus annual out-of-pocket expenses do not exceed $6,650 for self-coverage or $13,300 for families.

In addition to providing participants with lower insurance premiums, high-deductible health plans also allow taxpayers to receive triple tax benefits from HSAs. More specifically, taxpayers may make contributions to HSAs with pre-tax dollars, allow those contributions to grow tax-free and withdraw funds tax-free for medical expenses, including out-of-pocket deductibles. Moreover, HSA balances roll over from year-to-year allowing taxpayers to build a sizable financial cushion to pay for the rising costs of medical care, prescriptions drugs and long-term care in retirement.

The U.S. House of Representatives recently and narrowly approved a new healthcare plan that calls for expanding the use of HSAs. Whether this Trumpcare plan passes the Senate or if the U.S. continues an existing of modified Obamacare system is unknown. However, it may be safe to assume that HSAs will be an important component in the U.S. healthcare system in the future.

About the Author: Adam Cohen, CPA, is an associate director in the Tax Services practice of Berkowitz Pollack Brant, where he works with closely held businesses and non-profit charities, hospitals and family foundations to maintain tax efficiency and comply with federal and state regulations.  He can be reached at the CPA firm’s Ft. Lauderdale office at (954) 712-7000 or via e-mail info@bpbcpa.com.

 

Presidential Order Does Not Affect Taxpayer’s Obamacare Compliance Requirements by Adam Cohen

Posted on February 24, 2017 by Adam Cohen

President Donald Trump’s Jan. 20, 2017, executive order directing federal agencies to minimize economic and regulatory burdens of the Affordable Care Act (ACA) has put into question how the IRS intends to process taxpayer returns for 2016.

 

Under the individual shared responsibility provisions of the ACA, taxpayers and each member of their families are required to have minimum essential healthcare insurance for all 12 months of the year, unless they qualify for a covered exemption. Failure to meet this requirement will result in a 2016 penalty of either 2.5 percent of a household’s modified adjusted gross income (MAGI) above the tax filing threshold, or a flat payment of $695 per adult and $347.50 per child under 18, up to a maximum of $2,085 per family.

 

To help process 2016 tax returns, the IRS this year instituted a practice of automatically rejecting tax returns in which taxpayers failed to check the “full-year coverage” box. However, in response to the President’s executive order, the IRS will continue to accept and process paper and electronic returns for the 2016 tax season, even when they do not indicate taxpayers’ health coverage.

 

For taxpayers, this processing change does not affect their requirement to comply with Obamacare or pay an Individual Shared Responsibility Payment for 2016. Similarly, individual taxpayers should ensure that they have health coverage, as required by the ACA, for every month of 2017, while businesses should have already taken steps to remain compliant with the law this year.

 

Because the new administration’s plans to repeal Obamacare may complicate taxpayer’s understanding of their requirements under the law, it is recommended that individuals and businesses consult with experienced tax accountants to remain compliant and avoid any unwelcome tax penalties.

 

About the Author: Adam Cohen, CPA, is an associate director in the Tax Services practice of Berkowitz Pollack Brant, where he works with closely held businesses and non-profit charities, hospitals and family foundations to maintain tax efficiency and comply with federal and state regulations. He can be reached at the CPA firm’s Ft. Lauderdale office at (954) 712-7000 or via e-mail info@bpbcpa.com.

 

 

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