CONSTRUCTION Accounting ARTICLE - An Overview of the Patient Protection and Affordable Care ActTarget Audience: Construction Industry Professionals, General Contractors, Construction Accountants While the initial hoopla about the Patient Protection and Affordable Care Act (PPACA) has begun to fade, rumors and misinformation still run rampant. The staggered implementation and sheer size of the health care reform law, paired with the fact that the details of some provisions aren’t hammered out yet, have many business owners scratching their heads. For now, it’s important to be aware of a few key provisions of the act that could affect your construction company. To provide or not to providePerhaps one of the most pressing questions on contractors’ minds is, “Do I have to provide my employees with health insurance and, if so, by when?” PPACA doesn’t require employers to provide health care coverage. But, starting in 2014, if you have 50 or more full-time employees (defined as employees who on average work at least 30 hours per week), you may be fined if:
(Subsidies are granted based on income levels and percentage of income spent on health insurance premiums.) The fine for not covering sufficient premium costs is the lesser of $3,000 per full-time subsidized employee or $2,000 per full-time employee, minus the first 30 full-time employees. The fine for not offering minimum essential coverage is $2,000 per full-time employee, again minus the first 30 full-time employees. Your benefits advisor can help you better understand the distinction. Also important: Part-time employees’ hours will be totaled to equal one or more full-time employees. So if, for example, two part-time laborers each work 15 hours per week, they’ll be considered one full-time employee for the purposes of PPACA. Smaller employersStarting in 2010, companies with fewer than 25 full-time employees — whose annual wages average less than $50,000 — are eligible for tax credits if they provide health insurance. To qualify, you must contribute at least 50% of employees’ premiums or a benchmark premium. Eligible companies can receive a tax credit of up to 35% of the cost of their premium payments through 2013. The credit phases out gradually for those with more than 10 full-time employees and average annual wages of $25,000 or more. In 2014, if you meet the above criteria, you may qualify for a tax credit of up to 50% of the money you contribute toward your employees’ insurance through the planned state-based health insurance marketplaces, known as Small Business Health Options Program (SHOP) Exchanges. 2 more provisions to noteWhen reviewing your construction company’s health care program, a couple of other PPACA provisions you may want to take note of include: 1. A PPACA-mandated $5 billion Early Retiree Reinsurance Program. It’s designed to close the gap for retirees who are at least 55, but who are still unable to qualify for Medicare. This program will reimburse eligible companies up to 80% of the money they spend on retirees’ insurance premiums. It’s important to note, however, that PPACA doesn’t require employers to provide health insurance to retirees, nor does it penalize employers that don’t provide retiree coverage. 2. Changes to your tax-related filings. You must report employees’ health benefits on their W-2 forms starting with forms for the 2011 tax year. And you may have to send 1099 forms to corporations with which you have conducted business transactions totaling $600 or more, starting with transactions occurring after Dec. 31, 2011. This PPACA provision, which goes beyond health care, has been controversial and may be relaxed or repealed before it goes into effect. Check with your tax advisor for the latest information. Vast and complexIn a safety-conscious industry such as construction, health care is an important issue. And though PPACA brought reform, it hardly brought simplicity. The law’s provisions are vast and complex, and many clarifications and changes likely will be made. For now, keep the points we’ve covered here in mind and work with your CPA and benefits advisor to ensure you’re informed about and compliant with the law. Coverage of dependent children must go onDoes your construction company provide health care benefits to the dependents of your employees? If so, there’s an important provision of the Patient Protection and Affordable Care Act (PPACA) that you should know about. The provision in question requires plans that provide coverage to employees’ dependent children to now continue making that coverage available until the child turns age 26. You must provide this coverage no later than plan years beginning on or after Sept. 23, 2010. And you may continue providing the coverage for workers’ children past age 26, but you don’t have to under the law. PPACA defines “child” as the son, daughter, stepson or stepdaughter of an employee, including those both legally adopted and lawfully placed with the employee for adoption. Foster children placed by an authorized placement agency or by court order are also eligible. The IRS specifically addressed the tax treatment of this provision for employees in its Notice 2010-38. This guidance pointed out that Sections 105 and 106 of the Internal Revenue Code already excluded coverage under an employer-provided accident or health plan (as well as employer-provided reimbursements for the medical care of the employee, employee’s spouse or dependents) from an employee’s taxable gross income. PPACA extended this tax benefit to coverage for an employee’s child who hasn’t reached age 27 as of the end of the employee’s taxable year. Find out how our expertise in construction accounting can add value to your business. Email us or call us at 1 (888) 875-9770. related linksConstruction Newsletters & Articles |
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