Viewing posts from: June 2014

Supreme Court Justices: Can't Make Employers Cover Contraception

Posted June 30, 2014 by PHaynes

By Mark Sherman, Associated Press  birth-control-otc-article

WASHINGTON (AP) – The Supreme Court ruled Monday that some corporations can hold religious objections that allow them to opt out of the new health law requirement that they cover contraceptives for women.

The justices’ 5-4 decision is the first time that the high court has ruled that profit-seeking businesses can hold religious views under federal law. And it means the Obama administration must search for a different way of providing free contraception to women who are covered under objecting companies’ health insurance plans.

Contraception is among a range of preventive services that must be provided at no extra charge under the health care law that President Barack Obama signed in 2010 and the Supreme Court upheld two years later.

Two years ago, Chief Justice John Roberts cast the pivotal vote that saved the health care law in the midst of Obama’s campaign for re-election. On Monday, dealing with a small sliver of the law, Roberts sided with the four justices who would have struck down the law in its entirety.

Justice Samuel Alito wrote the majority opinion. The court’s four liberal justices dissented.

The court stressed that its ruling applies only to corporations, like the Hobby Lobby chain of arts-and-craft stores, that are under the control of just a few people in which there is no essential difference between the business and its owners.

Alito also said the decision is limited to contraceptives under the health care law. “Our decision should not be understood to hold that an insurance-coverage mandate must necessarily fall if it conflicts with an employer’s religious beliefs,” Alito said.

He suggested two ways the administration could ensure women get the contraception they want. It could simply pay for pregnancy prevention, he said.

Or it could provide the same kind of accommodation it has made available to religious-oriented, not-for-profit corporations. Those groups can tell the government that providing the coverage violates their religious beliefs. At that point, the groups’ insurers or a third-party administrator takes on the responsibility of paying for the birth control.

The accommodation is the subject of separate legal challenges, but the court said Monday that the profit-seeking companies could not assert religious claims in such a situation.

In a dissent she read aloud from the bench, Justice Ruth Bader Ginsburg called the decision “potentially sweeping” because it minimizes the government’s interest in uniform compliance with laws affecting the workplace. “And it discounts the disadvantages religion-based opt outs impose on others, in particular, employees who do not share their employer’s religious beliefs,” Ginsburg said.

The administration said a victory for the companies would prevent women who work for them from making decisions about birth control based on what’s best for their health, not whether they can afford it. The government’s supporters pointed to research showing that nearly one-third of women would change their contraceptive if cost were not an issue; a very effective means of birth control, the intrauterine device, can cost up to $1,000.

The contraceptives at issue before the court were the emergency contraceptives Plan B and ella, and two IUDs.

Nearly 50 businesses have sued over covering contraceptives. Some, like those involved in the Supreme Court case, are willing to cover most methods of contraception, as long as they can exclude drugs or devices that the government says may work after an egg has been fertilized. Other companies object to paying for any form of birth control.

There are separate lawsuits challenging the contraception provision from religiously affiliated hospitals, colleges and charities.

A survey by the Kaiser Family Foundation found 85 percent of large American employers already had offered such coverage before the health care law required it.

It is unclear how many women potentially are affected by the high court ruling. Hobby Lobby is by far the largest employer of any company that has gone to court to fight the birth control provision.

Oklahoma City-based Hobby Lobby has more than 15,000 full-time employees in more than 600 crafts stores in 41 states. The Greens are evangelical Christians who also own Mardel, a Christian bookstore chain.

The other company is Conestoga Wood Specialties Corp. of East Earl, Pa., owned by a Mennonite family and employing 950 people in making wood cabinets.

Links: 

CMS Releases Re-Enrollment Rule for 2015 Coverage & Other Important Updates

Posted June 30, 2014 by ABlume

Late Thursday afternoon the Centers for Medicare and Medicaid Services (CMS) released a proposed rule on re-enrollment in individual and small group exchange plans for 2015. Under the proposed rule, most people who have already enrolled in exchange coverage in the individual market, even subsidized coverage, will not have to fill out a new application or go back through Healthcare.gov in 2015. Agent and broker NPN numbers will be passed through with the re-enrollment.
If a consumer did not give the marketplace permission to access their tax records automatically in the last open enrollment period, their subsidy this year could be impacted. If that information is not updated, those consumers could lose their subsidy. If a consumer did grant the exchange access, the marketplace will contact the IRS for the information needed for subsidy determinations. Some however, will have to go back into the marketplace and renew their coverage if, for example, their income changed, they got married or they want to switch their health insurance plan.

Auto-Enrollment Repeal Bill Filed in the Senate
We’re not just dealing with exchange re-enrollment here in D.C., there has also been some new activity on auto-enrollment. The health reform law’s auto-enrollment requirement for employers with 200 or more employees is still on hold until the Department of Labor issues implementing regulations, but many employers would just like to see the whole requirement go away. That’s why Senator Johnny Isakson (R-GA) introduced a bill in the Senate, S. 2546, this week to repeal it.

Musical Carrier Chairs
With the 2014 open enrollment period behind us, many are looking ahead to 2015, including the insurance carriers. Last year, we all watched as the federal government and states struggled to build exchanges, then, as the exchanges seemingly began to come together, we looked to the carriers to see who would actually sell in the new marketplaces. As it turned out, many were hesitant to enter into the new exchanges, resulting in several, single carrier heavy marketplaces. Now, as we look ahead to 2015, some carriers are choosing to step out of certain exchanges while others are throwing their products into the market. Needless to say, 2015 will be an interesting year, especially with the new re-enrollment regulations what were released just this week. If most consumers are expected to re-enroll in their current plans, how well will the carriers just entering the exchange marketplace do now?
One large carrier, Wellmark, that offers Blue Cross and Blue Shield plans in Iowa and South Dakota, has decided that they have had enough of the federal exchange. They announced earlier this week that they intend to pull out of the Iowa and South Dakota exchanges in 2015, citing continued challenges with Healthcare.gov. The carrier also released data that shows how health reform compliance is impacting the pricing of their products. In Iowa, Wellmark has 130,000 members enrolled in grandfathered coverage that doesn’t meet PPACA standards.

90-Day Waiting Period Limitation Final Rule Released
Late last week, the Department of the Treasury released a final rule on the 90-day waiting period limitation. The final rule, applicable to all group health plans, including self-funded plans, issued for plan years beginning on or after January 1, 2015, clarified that the maximum allowed length of any reasonable and bona-fide employment-based orientation person cannot exceed 90 days.
The 90 days includes all calendar days, including weekends, holidays and any employee orientation training beginning on the enrollment date. The “waiting period” is further defined as the amount of time that must pass before coverage for an employee or dependent that is otherwise eligible to enroll under the term of a group health plan becomes effective. It further states that being otherwise eligible to enroll in a plan means having met the plan’s substantive eligibility conditions. The plan may still impose substantive eligibility criteria, but it may not impose conditions for the sake of passing time.

Legal Brief
If following health policy-related lawsuits is one of your things, then this week was a good one. (Yes, we are aware that very few people count court-watching amongst their hobbies, but that’s why you keep reading the Washington Update–we take care of the nerdiest things for you.) Anyhoo, not only did House Speaker John Boehner announce he would be pursuing a lawsuit against President Barack Obama for misusing executive powers relative to the health reform law among other topics, but the Supreme Court also struck down President Obama’s National Labor Relations Board (NLRB) recess appointments. That Supreme Court ruling may not seem like it has any health policy implications, but remember controversial former Centers for Medicare and Medicaid Services (CMS) Administrator Don Berwick was a recess appointee. Plus we learned that the high court’s decision on the Hobby Lobby case challenging the contraceptive mandate for private businesses will be announced this coming Monday.
As for the Supreme Court action, the decision gives the Senate broad power to thwart future recess appointments, but did not go as far as some proponents may have hoped. The court ruled 9-0 that since the Senate wasn’t actually in recess when the president made his three NLRB “recess” appointments, none are actually constitutional. However, the four most conservative justices would have gone further arguing that really recess appointments should not occur during short Senate recesses. Instead they wrote in a partial dissent that recess appointments should only be valid when they occur between the Senate’s yearly break. The appointments decision was really only the prelude for us SCOTUS blog devotees. On Monday we will learn the fate of the contraceptive mandate, which could have far-reaching implications on the health reform law’s regulation of private businesses.

Same-Sex Couples to Get More Benefits

Posted June 23, 2014 by ABlume

from The Wall Street Journal

WASHINGTON—The Obama administration announced Friday the extension of more benefits and obligations to same-sex married couples, including plans to allow workers nationwide to take leave from their jobs to care for same-sex spouses.

The White House also is expected to press Congress to pass legislation needed to change some provisions, such as Social Security benefits, to apply to same-sex married couples.

The announcement comes after a nearly yearlong review of federal regulations following the Supreme Court’s 2013 ruling striking down the Defense of Marriage Act, which denied federal benefits to legally married gay couples.

Gay-rights groups had cheered the decision, and President Barack Obama called it a step toward ensuring that basic principles apply to everyone.

The president last year directed Attorney General Eric Holder to work with the cabinet to review all relevant statutes.

On Friday, the administration explained how an array of federal benefits applies to same-sex married couples, having concluded it can act to extend benefits to same-sex married couples with existing law at several federal agencies.

The Labor Department’s proposed rule would change the Family and Medical Leave Act regulatory definition of “spouse” so that an eligible employee in a legal same-sex marriage will be able to take FMLA leave for his or her spouse or family member, regardless of the state in which the employee resides. The current regulatory definition of “spouse” applies only to same-sex spouses who reside in a state that recognizes same-sex marriage.

“Under the proposed revisions, the FMLA will be applied to all families equally, enabling individuals in same-sex marriages to fully exercise their rights and fulfill their responsibilities to their families,” Labor Secretary Thomas Perez said in a statement.

During the past year, Justice Department attorneys have consulted with the general counsels of federal agencies to see whether legal barriers remain to extending benefits to same-sex spouses.

In a memo to the president, Mr. Holder will report that they found such impediments in the statutes governing only two agencies: the Social Security Administration and the Department of Veterans Affairs, an administration official said Thursday.

While same-sex spouses can receive full benefits from those agencies if they live in states that recognize their marriages, those who reside in “nonrecognition” states are eligible only for a few.

“We knew that the two that would be the most vexing are the VA and the Social Security Administration, because there is language embedded in the statutes that founded them specific references to marriage being defined by where the person dwells, rather than being silent,” the official said.

The Supreme Court decision affected more than 1,000 provisions of federal laws and many regulations that pertain to married couples. While the implementation of the court ruling will mean more federal benefits for married gay couples, legislation still will be required to change some provisions under current law.

The administration official said proposed legislation, including the Social Security and Marriage Equality Act, could fix the provisions that preclude same-sex married couples from receiving some federal benefits.

Still, the administration found “workarounds” for some benefits, an administration official said.

Government attorneys found a “legally-supportable basis for allowing same-sex spouses to be buried alongside their spouses in VA cemeteries,” this official said, as well as to receive death benefits and life insurance when a spouse dies.

The Social Security Administration, meanwhile, will use what discretion it has to process applications in a way that favors same-sex couples.

For example, if applicants live in a “recognition” state at any time during the process, the agency will treat them as eligible. But if they move from a recognition state to a nonrecognition one, Social Security won’t re-examine their eligibility.

Moreover, federal lawyers concluded that inheritance laws in three nonrecognition states, Colorado, Nevada and Wisconsin, are broad enough to cover “committed partners.”

If the state allows such a partner to inherit private property, he or she also will be eligible to receive Social Security death benefits, the official said. Same-sex spouses, however, won’t be able to inherit pensions, the official said.

Upcoming HHS Webinar from EBSA

Posted June 19, 2014 by ABlume

The Department of Labor’s Employee Benefits Security Administration wants to let you know about an upcoming HHS webinar:

Registration is now open for “The Transitional Reinsurance Program:  An Overview of Policy and Operations for Reinsurance Contributions” webinar to be held on June 25, 2014 from 2:00 p.m. – 3:00 p.m. ET.

This webinar will provide an overview of the Transitional Reinsurance Program with a focus on reinsurance contributions, including general information regarding who is involved in submitting reinsurance contributions, how reinsurance contribution amounts are calculated, and the reinsurance contribution submission process.  The intended audience for this webinar is health insurance issuers, self-insured group health plans, third party administrators, and administrative services-only contractors.

Additionally, on May 22, 2014, HHS published an FAQ about submission of the reinsurance contributions for the Transitional Reinsurance Program.  This FAQ is located at:

http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/Reinsurance-contributions-process-FAQ-5-22-14.pdf.

Please register for this webinar and for additional information on https://www.regtap.info/.  Registration for this webinar will be on a first-come, first-serve basis, limited to three (3) participants per organization.

Questions can be submitted on https://www.regtap.info/ using “Submit an Inquiry” and note the “Reinsurance” Program in your question text.

Massachusetts repeals play-or-pay health care rules

Posted June 13, 2014 by ABlume

from businessinsurance.com

A Massachusetts health reform law board Thursday formally repealed regulations to a landmark state statute that required employers to either offer health care coverage to their employees or pay a fine.

The unanimous vote by the board of directors of the Massachusetts Health Connector, which regulates key provisions of the state’s 2006 health reform law, brings to a final end a provision in that law that required employers with at least 11 full-time employees to either offer coverage or pay an annual $295-per-employee fine.

The catalyst for the board action was legislation Massachusetts lawmakers passed last year that formally repealed the mandate, known as the Employer Fair Share Contribution program.

“Given the repeal of the underlying statutes, the Health Connector’s accompanying regulations no longer have legal force. For these reasons, we are proposing to repeal the regulations to minimize any confusion about their legal effect,” stated a background paper prepared for Health Connector directors prior to the vote.

Massachusetts Gov. Deval Patrick had sought repeal of the mandate, saying that it was no longer necessary to have such a requirement because of the subsequent passage of federal health care reform legislation.

Under the Patient Protection and Affordable Care Act and subsequent regulations, the federal employer mandate will go into effect in two stages.

Next year, employers with at least 100 full-time employees will have to offer coverage to at least 70% of their full-time employees or pay an annual $2,000-per-employee penalty. In calculating the penalty, an employer can exclude 80 of its full-time employees in 2015.

Then in 2016, the mandate will apply to employers with at least 50 full-time employees, with the 80-employee exclusion in calculating the penalty for not offering coverage permanently dropping to 30 employees.

Section 125 plan rules also repealed

Aside from repealing the Fair Share contribution, the Massachusetts board also voted to repeal rules that required employers to provide access to so-called Section 125 plans to employees who work at least 64 hours a month.

In a Section 125 plan, employees pay for health care premiums with pretax dollars.

The requirement was intended to address situations in which employees not eligible for group coverage could use those pretax contributions to buy individual policies through Massachusetts’ health insurance exchange.

However, guidance issued in 2013 by the U.S. Department of Labor and the Internal Revenue Service made clear that the health care reform law, effective in 2014, bars employers from offering Section 125 plans to employees to purchase non-group health insurance without an employer contribution.

In certain ways, the broader Massachusetts law was a model for the subsequent federal health care reform law, such as making state premium subsidies available to the lower-income uninsured to purchase coverage through a state health insurance exchange.

Its 2006 law is a key reason Massachusetts has had over the last few years the lowest uninsured rate — 4.1%, in 2012, according to the U.S. Census Bureau — of any U.S. state.

Small Business Health Care Tax Credit Questions and Answers: Determining FTEs and Average Annual Wages

Posted June 6, 2014 by ABlume

from irs.gov

Q. What is an FTE?

A. A full-time equivalent employee (FTE). See the “How is the number of FTEs determined?” question for more information on how to calculate the number of FTEs.

Q. Who is an employee for purposes of determining FTEs and average annual wages?

A. In general, all employees of the eligible small employer are taken into account when determining FTEs and average annual FTE wages, including employees who terminated employment during the tax year, employees covered under a collective bargaining agreement, and employees who are not enrolled in health care coverage. The following individuals are not considered employees for purposes of the credit: owners of the small business, such as sole proprietors, partners, shareholders owning more than 2% of an S corporation or more than 5% of a C corporation; spouses of these owners; and family members of these owners, which include a child, grandchild, sibling or step-sibling, parent or ancestor of a parent, a step-parent, niece or nephew, aunt or uncle, son-in-law or daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law. A spouse of any of these family members should also not be counted as an employee.

Q. Can I be counted as an employee if I own my small business?

A. No. See “Who is an employee for purposes of determining FTEs and average wages” for information on who may be counted in the FTE and average annual wage calculation.

Q. What about family members of the small business owner?

A. Family members who work for the small employer are not counted as employees in calculating the credit. See “Who is an employee for purposes of determining FTEs and average wages” for information on who may be counted in the FTE and average annual wage calculation.

Q. I am the president of a business that qualifies for the Small Business Health Care Tax Credit.  My son and daughter both work full time for the business.  Do I include their hours when computing my full time equivalent employees for the purposes of this credit?  Can I include their health insurance premiums when calculating the tax credit?  Do I include their wages when computing the average wage I pay my employees?

A. No.  As provided in the law providing the tax credit for small businesses, the owners of a small business and their family members are generally not considered employees of the business for purposes of the Small Business Health Care Tax Credit, even if they are considered employees of the business for other purposes.  In particular, the following individuals are not considered employees for purposes of the credit: owners of the small business, such as sole proprietors, partners, shareholders owning more than 2% of an S corporation or more than 5% of a C corporation; and family members of these owners, including an owner’s spouse, child, grandchild, sibling or step-sibling, parent or ancestor of a parent, a step-parent, niece or nephew, aunt or uncle, son-in-law or daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law. In addition, a spouse of any of these family members does not count as an employee.  As a result, for purposes of the credit, these individuals’ hours are not counted in determining the employer’s full-time equivalent employee, their wages are not counted in computing the employer’s average wages, and health insurance premiums paid on their behalf may not be counted.

Other than owners and their family members, all employees of the eligible small employer are taken into account for purposes of the credit (including when determining FTEs and average annual FTE wages), including employees who terminated employment during the tax year, employees covered under a collective bargaining agreement, and employees who are not enrolled in health care coverage.

Q. Do seasonal workers count in FTEs and average annual wages?

A. Generally, no. Seasonal workers are workers who perform labor or services on a seasonal basis, including retail workers employed exclusively during holiday seasons. Seasonal workers are not employees for purposes of the credit unless the seasonal worker provides services to the employer on more than 120 days during the taxable year, however, premiums paid on behalf of a seasonal worker are counted in determining the amount of the credit.

Q. Do part-time workers count in FTEs and average annual wages?

A. Yes, part-time workers are counted in FTEs and average annual wages. If an employee works part-time throughout most of the year, he or she is not a seasonal worker and the employer must count the employee’s hours of service during the year in its FTE and average annual wage calculation.

Q. Are leased employees counted in FTEs and average annual wages?

A. Yes, leased employees (as defined in section 414(n)) are counted in the FTE and average annual wage calculation. A leased employee is a person who is not an employee of the service recipient and who provides services to the service recipient pursuant to an agreement with the leasing organization.

Q.  Are ministers included in a church’s FTE calculation?

A. The answer depends on whether, under the common law test for determining worker status, the minister is considered an employee of the church or self-employed. If the minister is an employee, the minister is taken into account in determining an employer’s FTEs, and premiums paid on behalf of the minister can be taken into account in computing the credit. If the minister is self-employed, the minister is not included in the employer’s FTE calculation and premiums paid on behalf of the minister are not taken into account.

Q. Are ministers’ compensation taken into account in the average annual wage calculation?

A. No. Compensation paid to a minister performing services in the exercise of his or her ministry is not subject to FICA tax and is not wages as defined in section 3121(a). It is not taken into account in the average annual wage calculation.

Q.  What are the permissible ways to count hours of service?

A. An employee’s hours of service for a year include hours for which the employee is paid, or entitled to payment, for the performance of duties for the employer during the employer’s tax year. Hours of service also include hours for which the employee is paid for vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence. Hours of service do not include the hours of seasonal employees who work for 120 or fewer days during the taxable year, nor do they include hours worked for a year in excess of 2,080 by a single employee.

There are three methods for calculating the total number of hours of service for a single employee for the taxable year: actual hours worked; days-worked equivalency; and weeks-worked equivalency. Employers do not need to use the same method for all employees and may apply different methods for different classifications of employees if the classifications are reasonable and consistently applied. For example, an employer may use the actual hours worked method for all hourly employees and the weeks-worked equivalency method for all salaried employees.

(1) Actual Hours Worked: An employer may determine actual hours of service from records of hours worked and hours for which payment is made or due, including hours for paid leave. For example, if payroll records indicate an employee worked 2,000 hours and was paid for an additional 80 hours on account of vacation, holiday and illness, the employee must be credited with 2,080 hours of service (2,000 hours worked + 80 hours for which payment was made or due).

(2) Days-Worked Equivalency: An employer may use a days-worked equivalency whereby the employee is credited with 8 hours of service for each day the employee would be required to be credited with at least one hour of service, including hours for paid leave. For example, if an employer uses the days-worked equivalency for an employee who works from 8:00a.m.–12:00p.m. every day for 200 days, the employee must be credited with 1,600 hours of service (8 hours for each day the employee would otherwise be credited with at least one hour of service x 200 days).

(3) Weeks-Worked Equivalency: An employer may use a weeks-worked equivalency whereby the employee is credited with 40 hours of service for each week for which payment is made or due including weeks of paid leave. For example, if an employee worked 49 weeks, took two weeks of vacation with pay, and took one week of leave without pay, the employee must be credited with 2,040 hours of service (51 weeks x 40 hours per week).

Q. How is the number of FTEs determined?

A. Add up the total hours of service for which the employer pays wages to employees during the year (but not more than 2,080 hours for any employee), and divide that amount by 2,080. If the result is not a whole number, round to the next lowest whole number. (If the result is less than one, round up to one FTE.) In some circumstances, an employer with 25 or more employees may qualify for the credit if some of its employees work less than full-time. For example, an employer with 48 employees that are each half-time has 24 FTEs and, therefore may qualify for the credit. See the “Who is an employee for purposes of determining FTEs and average annual wages?” and the “What are the permissible ways to count hours of service?” questions on this page for information on how to compute an employee’s hours of service and determining which employees are counted.

Example: For the 2014 taxable year, an employer pays five employees wages for 2,080 hours each, three employees wages for 1,040 hours each, and one employee wages for 2,300 hours. The employer uses a method that counts hours actually worked. The employer’s FTEs would be calculated as follows:

10,400 hours for the five employees paid for 2,080 hours (5 x 2,080)
3,120 hours for the three employees paid for 1,040 hours (3 x 1,040)
2,080 hours for the one employee paid for 2,300 hours (lesser of 2,300 and 2,080)

The total hours counted is 15,600 hours. The employer has seven FTEs (15,600 divided by 2,080 = 7.5, rounded to the next lowest whole number).

Q. How is an employer’s average annual wages determined?

A. All wages paid to employees (including overtime pay) are taken into account in computing an eligible small employer’s average annual wages. Add up the total wages paid by the employer during the taxable year to its employees (see the “Who is an Employee for Purposes of Determining FTEs and Average Annual Wages” question on this page), and divide that number by the number of FTEs for the year. The result is then rounded down to the nearest $1,000 (if not otherwise a multiple of $1,000). Include only wages paid for hours of service (see the “What are the Permissible Ways to Count Hours of Service?” question on this page). Use wages as defined for purposes of the Federal Insurance Contributions Act (FICA) (without regard to the social security wage base limitation).

Example: For the 2014 taxable year, an employer pays a total of $224,000 in wages to employees and has 10 FTEs. The employer’s average annual wages are $22,000 ($224,000 / 10 = $22,400, rounded down to the nearest $1,000).

Q. How are average annual wages and FTEs calculated when the employer has a short taxable year?

A. In accordance with general accounting principles, average annual wages and FTEs may be pro-rated or annualized in calculating the credit. For example, if a small employer has only been in business and paying premiums for 6 months during its first taxable year, it may pro-rate or annualize the employee hours worked and wages earned to reflect the 6 months the employer has been in operation.

Q. How is the credit reduced if the number of FTEs exceeds 10 or average annual wages exceed $25,000?

A. The credit phases out for eligible small employers if the number of FTEs exceeds 10, or if the average annual wages for FTEs exceed $25,000 (as adjusted for inflation beginning in 2014). If the number of FTEs exceeds 10, the reduction is determined by multiplying the otherwise applicable credit amount by a fraction, the numerator of which is the number of FTEs in excess of 10, and the denominator of which is 15. If average annual FTE wages exceed $25,000, the reduction is determined by multiplying the otherwise applicable credit amount by a fraction, the numerator of which is the amount by which average annual FTE wages exceed $25,000 and the denominator of which is $25,000. The credit will be reduced based on the sum of the two reductions. This may reduce the credit to zero for some employers with fewer than 25 FTEs and average annual FTE wages of $50,000 (as adjusted for inflation).

Example 1: For the 2014 taxable year, Employer has 12 FTEs and average annual wages of $30,000. Employer pays $96,000 in employee premiums, which does not exceed the average premium for the small group market in the employer’s rating area.

(1) Credit determined before any reduction: (50 percent x $96,000) = $48,000
(2) Credit reduction for FTEs in excess of 10: ($48,000 x 2/15) = $6,400
(3) Credit reduction for average annual wages in excess of $25,000: ($48,000 x $5,000/$25,000) = $9,600
(4) Total credit reduction: ($6,400 + $9,600) = $16,000
(5) Total 2014 tax credit: ($48,000 – $16,000) = $32,000

Example 2 (Tax-Exempt Eligible Small Employer): Same facts as Example 1, but Employer is a tax-exempt eligible small employer and the total amount of Employer’s payroll taxes equals $30,000 for calendar year 2014.

(1) Credit determined before any reduction: (35 percent x $96,000) = $33,600
(2) Credit reduction for FTEs in excess of 10: ($33,600 x 2/15) = $4,480
(3) Credit reduction for average annual wages in excess of $25,000: ($33,600 x $5,000/$25,000) = $6,720
(4) Total credit reduction: ($4,480 + $6,720 = $11,200)
(5)  Employer’s payroll taxes:  $30,000
(6) Total 2014 tax credit: ($33,600 – $11,200) = $22,400 (the lesser of $22,400 and $30,000).

Q. How is eligibility for the credit determined if the employer is a member of a controlled group or an affiliated service group?

A. Members of a controlled group (e.g., businesses with the same owners) or an affiliated service group (e.g., related businesses where one performs services for the other) are treated as a single employer for purposes of the credit. For example, all employees of the controlled group or affiliated service group, and all wages paid to employees by the controlled group or affiliated service group, are counted in determining whether any member of the controlled group or affiliated service group is a qualified employer. Rules for determining whether an employer is a member of a controlled group or an affiliated service group are provided under sections 414(b), (c), (m) and (o) of the Code.

Example: A taxpayer owns 100% of a sole proprietorship and files a Schedule C. The taxpayer also owns at least 80% of the voting power or value of the shares of an S Corporation. Even if the sole proprietorship and the S Corporation individually meet the requirements for the small business health care tax credit, section 414 of the Code and related regulations provide that there is common control under section 1563(a) of the code and when there is common control, the taxpayer must calculate their credit including the employees, their wages and premiums paid for all entities as one entity.

Two More States Extend Marriage Rights to Same-Sex Couples; State Bans Continue to Fall

Posted June 2, 2014 by PHaynes

wedding-rings-300x225

19 states and the District of Columbia now permit same-sex couples to marry. Through various court rulings, states that previously banned same-sex marriages now must recognize them (from other states) and permit its citizens to marry too. PA and OR became the 18th and 19th states to recognize these marriages when both states declined to appeal federal district court rulings (that their state prohibitions on these marriages were unconstitutional).

Elsewhere, a federal court in Idaho and a state court in Arkansas came to the some conclusions. In Ohio, a federal court ruled that the state must recognize same-sex marriages from other states. While that isn’t the same as the right to marry (OH citizens could not legally marry in OH), can that decision be far behind? While the rulings in these cases have not yet taken effect (they are generally stayed (put on hold) until all appeals have been exhausted), the trend is certainly moving towards recognizes marriages from other states and even giving the outright right to marry. That means all the rights and privileges of marriage (benefits, beneficiaries, joint-tax-returns, etc.) would be available to them on the state level as they already are on the federal level (you’ll recall that after the Windsor decision, we saw a flurry of activity from the DOL & IRS embracing the “state of celebration rule” for all same-sex marriages).

Currently there are between 80 and 100 marriage cases pending nationwide and the possibility that 6 will be before the US Courts of Appeal this year (the courts directly below the US Supreme Court).

Links to the Rulings/Opinions/Orders:

Links to Crawford Advisor’s Post-Windsor guidance:

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