Healthcare Reform is Here

The Patient Protection and Affordable Care Act (PPACA) has left our legislators, employers and the general public in a fog of confusion. As then-Speaker of the House, Nancy Pelosi (D) attempted to elucidate, "We have to pass the bill in order to know what is in the bill."

Now that PPACA is the law of the land, insurance carriers and the various states are creating their insurance exchanges and product offerings in order to be compliant with the provisions of the law.

For the majority of employers in our northern Michigan region, which usually employ fewer than 50 employees, here are a few things to keep in mind:

– First, many small employers may be making uninformed decisions regarding health care reform. Employers often do not know many of the complexities contained in the Act. If you are an employer with fewer than 50 full time equivalents (FTEs), there is no penalty at all under the Employer Responsibility "Pay or Play" provisions of PPACA.

– Second, beginning last month, employers must report amounts spent on certain health plan items. This requirement applies to the 2012 tax year. However, employers who issued fewer than 250 W-2s for the tax year 2011 are excused from mandatory reporting. That being said, some employers may choose to test their payroll systems and report such amounts. Reportable items include but are not limited to major medical insurance plans; health FSA values for the year in excess of the employee's cafeteria plan; salary reductions; and hospital indemnity or specific illness plans paid on an after-tax basis.

– Third, PPACA has stipulated a new limit of $2,500 on health Flexible Spending Accounts. The IRS has issued Notice 2012-40 to clarify how this cap will work. For plans that include the 21⁄2 month grace period, the amounts carried over during the grace period do not count towards the cap. Employers have until the end of 2014 to amend their plan documents. However, the cap will still apply effective Jan. 1, 2013. If both spouses each have an FSA, each can fund his/her health FSA to the full amount of the cap. The IRS has also stated in IRS 2012-40 that it is considering changing the "use it or lose it" rule to provide relief to employees. This should help lower or eliminate the risk of loss of any unused account dollars.

If you have any questions regarding PPACA and how it affects your organization, please feel free to contact Jim McDonnell or Laverna Witkop at the Ford Insurance Agency at 231-941-0450. Both Jim and Laverna are career insurance agents with more than 54 years of combined experience.