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Affordable Care Act Could Bring Additional Challenges for Employers in 2017

August 12, 2016

Andrew S. Lattimer, CPA, MST

As hard as it may be to believe, the Affordable Care Act (ACA, also known to many as Obamacare) is now more than six years old. It was signed into law amid cheers and protests from competing sides, and in that time has survived dozens of efforts by Congress to repeal it. Through all of that it still exists and requires businesses with more than 50 people to provide health insurance for employees. While the results of the November election could have an impact on its long-term viability, it is safe to say that qualifying businesses would be wise to plan to continue adhering to the law into 2017.

This is important for businesses to know right now, because 2017 could bring increased challenges regarding compliance with the ACA.

Most importantly, continued rising costs for both medication and healthcare could mean higher premium costs for health insurance plans in 2017—in some instances certain plans offered through the ACA-created health insurance exchanges could see double-digit premium increases. This will obviously have an impact on employers and employees alike, as both could be required to pay more next year.

Additionally, employers need to be aware of an indexing adjustment to the ACA premium credit and individual mandate in 2017. Inflation adjusted percentages are used to determine whether an individual is eligible for affordable employer-sponsored minimum essential coverage—and, conversely, ineligible for the premium tax credit to help afford health insurance purchased through an exchange—as well as to determine whether an individual is eligible for an exemption from the individual shared responsibility payment because of a lack of affordable minimum essential coverage. For 2017, taxpayers are not treated as eligible for employer-sponsored minimum essential coverage if their required contribution exceeds 9.69% of their household income for plan years beginning in 2017 (up from 9.66% for 2016), and an individual is exempt from the requirement to maintain minimum essential coverage if the required contribution for coverage for the month exceeds 8.16% of the individual's household income in 2017 (up from 8.13% for 2016). Both are increases employers will need to factor into their planning for 2017.

On the potentially positive side, opportunities for tax credits remain for qualifying employers in 2017. Businesses are eligible for the Small Business Health Care Tax Credit if they cover at least 50% of employee premium costs, have fewer than 25 full time employees with average annual wages of less than $52,000 for 2015 and 2016, and if coverage is purchased through the Small Business Health Options Program Marketplace. All should be examined by employers for possible tax savings in the coming year.

Lastly, employers need to remain mindful of reporting requirements mandated by the ACA, which will continue in 2017. All employers that provide self-insured health insurance must file informational returns with the IRS and furnish statements to employees, and the issuer of a health insurance policy must also file informational returns with the IRS and furnish statements to employees.

For companies that fall under the requirements for the ACA, strict compliance will remain paramount in 2017, and with that compliance could come some additional costs as well as some possible benefits. The key is to get ready for it now—the challenges 2017 brings to businesses regarding the ACA will be much less daunting if managed well in advance, rather than at the end of 2016.

How BlumShapiro Can Help

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Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein. Such content, comments, or advice may be based on tax statues, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities. This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law.


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