Practice Alert: Roundup Of Tax Changes for Businesses and Health Plans Taking Effect in 2015

Practice Alert: Roundup Of Tax Changes for Businesses and Health Plans Taking Effect in 2015

Polk & Associates CPA

Article from Federal Taxes Weekly Alert, 01/08/2015-Volume 61, No. 2

Practice Alert: Roundup of tax changes for businesses and health plans taking effect in 2015

 

There are many important tax changes taking effect in 2015. They are the result of the Tax

Increase Prevention Act of 2014 (TIPA) as well as other tax legislation, or are triggered by effective

dates in regs, rulings and other guidance. Also, a number of important final regs go into effect in

2015.This article highlights key non-inflation-indexed 2015 tax changes affecting businesses and

health plans.

Numerous other tax changes will go into effect by default because a long

list of business and individual tax breaks (the so-called “extender provisions”), which were

extended for a year only by TIPA, expire at the end of 2014.  Employer shared responsibility

payment under the Affordable Care Act (ACA). In general, beginning Jan. 1, 2015, employers with

at least 100 full-time and full-time equivalent employees

must offer affordable health coverage that provides minimum value to their full-time employees

and their dependents, or they will be subject to an employer shared responsibility payment. Under

the employer shared responsibility rules, if a covered employer does not offer affordable health

coverage that provides a minimum level of coverage to their full-time employees (and their

dependents), it may be subject to an employer shared responsibility payment if at least one of its

full-time employees receives a premium tax credit for purchasing individual coverage on one of the

new Affordable Insurance Exchanges, also called Health Insurance Marketplaces.

The employer responsibility provisions will not apply until 2016 to employers with at least 50 but

fewer than 100 full-time employees if the employer provides an appropriate certification described

in regs. Employers that are subject to the employer responsibility provisions in 2015 must offer

coverage to at least 70% of full-time employees as one of the conditions for avoiding an assessable

payment; that percentage will increase to 95% in 2016.

Final regs on the ACA’s 90-day waiting period limit for employer health coverage. For plan

years beginning on or after Jan. 1, 2014, the ACA provides that an employer group health plan or

group health insurance issuer offering employer group health insurance cannot have any waiting

period (for employee coverage) that exceeds 90 days. Final regs that apply to group health plans

and group health insurance

issuers for plan years beginning on or after Jan. 1, 2015, clarify the 90-day rule; they provide that:

(1) h no group health plan or group health insurance issuer may impose a waiting period that

exceeds 90 days after an employee is otherwise eligible for coverage; and (2) all calendar days are

counted beginning on the enrollment date, including weekends and holidays.

Under the final regs, a requirement to successfully complete a reasonable and bona fide

employment-based orientation period may be imposed as a condition of eligibility for coverage

under the plan. The final regs do not specify the circumstances under which the duration of an

orientation period would be considered reasonable or bona fide. However, under new proposed

regs, one month would be the maximum length of any orientation period.

For plan years beginning in 2014, compliance with either previously issued proposed regs or the

new final regs would constitute compliance with the ACA’s 90-day waiting period limitation.

Exclusion of dividends from controlled foreign corporations from the definition of personal

holding company income. For tax years ending on or after Dec. 19, 2014 (date of enactment), TIPA

excludes dividends received from a foreign subsidiary from personal holding company income,

though the dividends will remain subject to corporate income tax.

Expatriate health plans excluded from the ACA. For plans issued or renewed on or after July 1,

2015, the Consolidated and Further Continuing Appropriations Act of 2015 (the Act) provides that,

with limited exceptions, “expatriate health plans” are exempt from various ACA provisions.

Expatriate health plans are group health plans and similar plans, that meet various requirements,

one of which is that substantially all of the primary enrollees in the plan are “qualified expatriates.”

Revised definition of controlled group for purposes of branded prescription drug fee. Sec.

9008 of the ACA provides that each “covered entity” (i.e., any manufacturer or importer with gross

receipts from branded prescription drug sales) with aggregate branded prescription drug sales of

over $5 million to any specified government program or pursuant to coverage under any such

program must pay an annual nondeductible fee for calendar years beginning after Dec. 31, 2010.

The calculation of the annual fee is a two-step process; IRS makes a preliminary calculation and

then, a year later, makes a final calculation.  The term “covered entity” includes a controlled group.

Beginning on Jan. 1, 2015, the term controlled group means a group of two or more persons,

including at least one person that is a covered entity, that are treated as a single employer under

Code Sec. 52(a) , Code Sec. 52(b) , Code Sec. 414(m) , or Code Sec. 414(o) .

Through Dec. 31, 2014, the term “controlled group” means a group of at least two covered entities

that are treated as a single employer under Code Sec. 52(a) , Code Sec. 52(b) , Code Sec. 414(m) ,

or Code Sec. 414(o) .

Plans lacking hospitalization coverage don’t provide minimum value; online MV calculator

can’t be relied on. The Code Sec. 36B premium tax credit is designed to make health insurance

affordable to individuals with modest incomes who are not eligible for other qualifying coverage,

such as Medicare, or “affordable” employer-sponsored health insurance plans that provide MV

(minimum value). Under Code Sec. 36B(c)(2)(C)(ii) , a plan fails to provide MV if the plan’s share

of the total allowed costs of benefits provided under the plan is less than 60% of the costs. Under

Code Sec. 4980H , an

applicable large employer may be liable for an assessable payment if one or more full-time

employees receives a premium tax credit.

One way to determine whether a plan provides MV is to use a MV calculator (available at

http://cciio.cms.gov/resources/regulations/index.html), which determines if a plan provides MV

based on information about the plan’s benefits, coverage of services, and cost-sharing terms.

IRS has warned that employer-sponsored health plans failing to provide substantial coverage for

in-patient hospitalization services or physician services do not provide MV for purposes of the

Code

Sec. 36B premium tax credit. Forthcoming regs, which are intended to be finalized during 2015 and

applicable upon finalization, will provide that an employer can’t use the MV Calculator (or any

actuarial certification or valuation) to demonstrate that a Non-Hospital/Non-Physician Services

Plan provides MV.

IRS has warned employers to consider the consequences of the inability to rely solely on the MV

Calculator (or, alternatively, on any actuarial certification or valuation) to demonstrate that a

Non-Hospital/Non-Physician Services Plan provides MV for any portion of any tax year ending on or

after Jan. 1, 2015 that follows finalization of such regs, and says that employers generally should

not adopt such a plan for the 2015 plan year.

If an employer has entered into a binding written commitment to adopt, or has begun enrolling

employees in, a Non-Hospital/Non-Physician Services Plan before Nov. 4, 2014 based on the

employer’s reliance on the MV Calculator (a Pre-Nov. 4, 2014 Non-Hospital/Non-Physician Services

Plan), HHS and IRS anticipate that final regs, when issued, will not apply for purposes of Code Sec.

4980H (i.e., the employer shared responsibility payment) with respect to the plan before the end

of the plan year (as in effect under the terms of the plan on Nov. 3, 2014) if that plan year begins

no later than Mar. 1, 2015.

However, pending issuance of final regs, an employee will not be required to treat a

Non-Hospital/Non-Physician Services Plan as providing MV for purposes of an employee’s eligibility

for a premium tax credit under Code Sec. 36B , regardless of whether the plan is a Pre-Nov. 4,

2014

Non-Hospital/Non-Physician Services Plan.

Higher standard mileage allowance rate. The optional mileage allowance for owned or leased autos

(including vans, pickups or panel trucks) increases by 1.5¢ to 57.5¢ per mile for business travel

after 2014. This rate can also be used by employers to provide tax-free reimbursements to

employees 2015. who supply their own autos for business use, under an accountable plan, and to

value personal use of certain

low-cost employer-provided vehicles. However, the rate for using a car to get medical care or in

connection with a move that qualifies for the moving expense decreases by 0.5¢ to 23¢ per mile

after 2014.

New regs on retail inventory method go into effect. A final reg on the retail inventory accounting

method restates and clarifies the computation of ending inventory values and provides a special

rule for taxpayers that receive margin protection payments or certain vendor allowances. The final

reg applies to tax years beginning after Dec. 31, 2014.

Article Source: 2015 Thomson Reuters/Tax & Accounting

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