IRS Health Care

New Jersey Tax Attorney:  Overview of the Affordable Care Act

The Affordable Care Act (ACA) was signed into law by President Obama on March 23, 2010.  This new law sets forth comprehensive health insurance reforms in an effort to provide all Americans with access to affordable, quality health insurance options.  One of the primary features of this law is the establishment of a Health Insurance Marketplace, which affords small businesses and individuals the opportunity to review, compare and purchase qualified benefit health plans.

According to the ACA, nearly all individuals will be required to secure health insurance or pay a penalty for failing to do so.  Additionally, businesses are subject to many new requirements, including a mandate to offer health care coverage to their full-time employees if they employ 50 or more staff members.   

The ACA legislation is long and very complex.  Since its enactment in 2010, the ACA has been subject to many revisions and modifications, including numerous delays in implementation.  Given these changes and overall complexity, many employers and individuals across the nation are confused as to what is actually required of them under the law and when these new obligations will go into effect.  

The legal professionals at Thorn Law Group have been carefully monitoring and analyzing changes to the ACA.  Each New Jersey tax attorney at our firm is committed to ensuring that our clients fully understand their expanded responsibilities under the ACA and we are prepared to work with businesses and individuals in New York, New Jersey, Pennsylvania and Connecticut to develop plans and approaches that meet the legal requirements of the ACA.  

Key Requirements for Large Employers

Under the ACA certain large employers will be subject to an “Employer Shared Responsibility Payment” in 2015.  The IRS explains that “large employers” include employers with at least “50 full-time employees or a combination of full-time and part-time employees that is equivalent to 50 full-time employees.”    

The Employer Shared Responsibility Provision requires large employers to offer affordable health insurance to their full-time employees that “provide a minimum level of coverage.”  If the employer fails to offer such coverage, the employer may have to make an Employer Shared Responsibility payment (tax penalty) in the event one or more of its full-time employees purchases individual coverage on the health insurance marketplace and receives a premium tax credit for doing so.  The amount of the payment owed is calculated by multiplying the employer’s number of full-time employees (minus up to 30) by $2,000 dollars.

The ACA also sets forth certain reporting requirement for large employers.  Beginning in 2015 large employers will have to report whether they offer health care coverage to their employees and the type of coverage offered.  These employers will also be required to set forth the cost of the health care coverage they provide to their employees on each employee’s annual W-2 form.

Key Requirements for Small Employers

Under the ACA, small employers (defined as employers with 50 or less full-time equivalent employees) are not subject to the “Employer Shared Responsibility Payment.”   These small employers are eligible to buy health care coverage through the Small Business Health Options Program (SHOP) marketplace.   

Certain small employers who elect to purchase insurance through the SHOP marketplace may qualify for a health care tax credit to help subsidize the cost of such insurance provided they meet specific criteria under the ACA.  Additionally, similar to large employers, small employers will need to set forth the cost of the health care coverage they provide to their employees under an employer-sponsored group health plan on their employees’ W-2 forms. 

Key Requirements for Individuals

Beginning in 2014, individuals will be required to obtain “minimum essential” health care coverage unless they fall within one of the ACA’s categories for exemption.  Individuals who fail to secure such coverage will owe a “shared responsibly payment” when they file their 2014 annual federal income tax return.  

In 2014 the amount of the shared responsibility payment (tax penalty) will be the greater of “1 percent of your household income that is above the tax return filing threshold for your filing status” or a flat payment up to a maximum of $285 dollars.  These payments will rise over the first three years of the Act’s implementation.   

In an effort to help individuals obtain health care coverage, the government will offer a premium tax credit to individuals who meet certain income limits and choose to secure their health insurance through the health insurance marketplace.  

Thorn Law Group is dedicated to helping businesses and individual taxpayers navigate the ACA’s complex legal requirements and responsibilities.  We are experienced tax law attorneys who are prepared to assist employers in the New York/New Jersey/Philadelphia region and across the nation develop benefit programs that comply with the ACA and other legal requirements.  

If you have questions about your obligations under the ACA or would like to discuss your situation with a New Jersey tax attorney at our firm, contact Kevin E. Thorn, Managing Partner of Thorn Law Group at 201-355-8202.