Please be advised of recent decisions Kaiser Permanente has made about implementing the provision of the new health care reform law calling for extension of coverage of dependents up to age 26.
To help young adults avoid a gap in coverage, as soon as we can implement system changes -- and no later than June 1, 2010 -- Kaiser Permanente will permit dependents in commercial (non-Medicare) coverage to remain on their family coverage until they turn 26, regardless of their student status. This change will not affect your group’s premium rates during the current contract year.
This policy applies only to dependents who are Kaiser Permanente members on or after June 1, 2010. Groups can opt out of this policy change and wait until they are required to cover dependents to age 26 per the provision, if they wish -- though, remember, this early-implementation policy has no rate impact.
As required by the health reform law, all Group Agreements that renew on or after September 23, 2010, will permit eligible dependents to enroll or to remain enrolled until they turn 26.
Friday, April 23, 2010
Anthem Overage Dependent Action
Here is an email sent from Anthem regarding how they will handle the dependent age status change:
Each year in June, many young people ¾ because of their age, student status or other factors ¾ become ineligible as dependents on their parents' insurance policies. Health care reform legislation, signed into law last month, will extend dependent coverage to age 26 for plan years beginning September 23, 2010. While this is great news, it also means that many members would face a coverage gap during the months before this provision is fully implemented.
To help these members, we're working, in collaboration with the U.S. Department of Health and Human Services and state regulators, to allow young men and women to remain on their parents' group and individual health policies even before this health care reform provision takes effect. Beginning June 1, we will continue to provide health benefits to those dependents that would otherwise lose coverage because of their age, student status or other factors during the gap period between June 1, 2010, and the September 23, 2010, effective date. This extension of coverage will not be retroactive, however, for those who have dependents who aged out prior to June 1, 2010. Those individuals will be able to add their dependents back onto their policies with the new plan year beginning on or after September 23 in accordance with the new law.
Each year in June, many young people ¾ because of their age, student status or other factors ¾ become ineligible as dependents on their parents' insurance policies. Health care reform legislation, signed into law last month, will extend dependent coverage to age 26 for plan years beginning September 23, 2010. While this is great news, it also means that many members would face a coverage gap during the months before this provision is fully implemented.
To help these members, we're working, in collaboration with the U.S. Department of Health and Human Services and state regulators, to allow young men and women to remain on their parents' group and individual health policies even before this health care reform provision takes effect. Beginning June 1, we will continue to provide health benefits to those dependents that would otherwise lose coverage because of their age, student status or other factors during the gap period between June 1, 2010, and the September 23, 2010, effective date. This extension of coverage will not be retroactive, however, for those who have dependents who aged out prior to June 1, 2010. Those individuals will be able to add their dependents back onto their policies with the new plan year beginning on or after September 23 in accordance with the new law.
Monday, April 19, 2010
COBRA Subsidy Extension
WASHINGTON—President Obama late Thursday night signed H.R. 4851, the Continuing Extension Act of 2010. Final passage in the House (289-112) and Senate (59-38) guaranteed several extensions to government programs, including Consolidated Omnibus Budget Reconciliation Act (COBRA) health care insurance benefits and emergency unemployment benefits.
Under H.R. 4851, the 65%, 15-month premium subsidy for laid-off workers is extended to those involuntarily terminated from April 1, 2010 through May 31, 2010.
Without the extension, employees laid off after March 31, 2010 would have been ineligible for the subsidy.
Meanwhile, the Senate Wednesday will continue consideration of legislation, H.R. 4213, that would extend the premium subsidy to employees laid off through Dec. 31, 2010.
Under H.R. 4851, the 65%, 15-month premium subsidy for laid-off workers is extended to those involuntarily terminated from April 1, 2010 through May 31, 2010.
Without the extension, employees laid off after March 31, 2010 would have been ineligible for the subsidy.
Meanwhile, the Senate Wednesday will continue consideration of legislation, H.R. 4213, that would extend the premium subsidy to employees laid off through Dec. 31, 2010.
Tuesday, April 13, 2010
Top 10 HSA Questions Regarding New Health Law
How does the new health law impact my HSA? This blog answers the top 10 questions.
1. Does the new law eliminate HSAs? No, the new health law does not eliminate HSAs and you can continue to use your HSA as you have - at least until the end of 2010.
2. What are the specific changes to HSAs in the new law? Starting in 2011, the 10% penalty for non-eligible (non-medical) distributions is increased to 20% and you can no longer use your HSA for over-the-counter drugs.
3. Can I continue to contribute the same amount to my HSA? The new law does not change the HSA contribution limits. However, new rules on the definition of what is a Qualified Health Plan could change your eligibility to contribute to an HSA in 2014 or later.
4. Can I still use my HSA for over-the-counter drugs? Yes, for the rest of 2010. No, starting January 1, 2011, over-the-counter drugs are no longer considered eligible medical expenses. This is your last year to buy aspirin, non-prescription cold medicine, contact lense cleaner and other over-the-counter items tax-free and penalty-free with your HSA.
5. I heard that FSAs are now limited to $2,500, does that rule apply to HSAs? No. The new law will limit Flexible Spending Accounts (FSAs) contributions to $2,500 starting in 2013, but that new law does not apply to HSAs.
6. Did the penalty increase for HSAs? Yes, the 10% penalty for using your HSA for non-eligible medical expenses will increase to 20% in 2011.
7. Will the law change my HSA in the future? Other than items discussed, the new law does not directly change HSAs. Indirectly, however, the new law may eliminate the ability to make contributions in the future. Starting in 2014, the new law requires Americans to buy Qualified Health Insurance that offers an Essential Health Benefits Package. Your current High Deductible Health Plan (HDHP) required to be eligible to make a contribution to your HSA may not qualify as a Qualified Health Plan. In other words, you may have to buy different insurance coverage in order to avoid taxes and penalties. Regulatory agency rulings and interpretations will provide more information on this point over the coming months.
8. What happens to my HSA balance in the case where I can no longer contribute new money? You can continue to use any amounts in your HSA for eligible medical expenses or save it for later even if you are no longer eligible to contribute more to your HSA. This is important to know in case you do change insurance plans to a non-HSA eligible plan to comply with the new law. The HSA remains one of the best tax favored options available. One good strategy is to accumulate assets now in the HSA to prepare for whatever happens.
9. Should I change anything based on the new law? The new law is a foundational change to our health care and insurance system and mostly likely will impact everyone. For now; however, the combination of a High Deductible Health Plan and HSA remain very competitive and a good choice for many businesses and consumers.
10. How do I keep up on the changes as they take place? Watch for our blog. We will post additional information as we learn more.
1. Does the new law eliminate HSAs? No, the new health law does not eliminate HSAs and you can continue to use your HSA as you have - at least until the end of 2010.
2. What are the specific changes to HSAs in the new law? Starting in 2011, the 10% penalty for non-eligible (non-medical) distributions is increased to 20% and you can no longer use your HSA for over-the-counter drugs.
3. Can I continue to contribute the same amount to my HSA? The new law does not change the HSA contribution limits. However, new rules on the definition of what is a Qualified Health Plan could change your eligibility to contribute to an HSA in 2014 or later.
4. Can I still use my HSA for over-the-counter drugs? Yes, for the rest of 2010. No, starting January 1, 2011, over-the-counter drugs are no longer considered eligible medical expenses. This is your last year to buy aspirin, non-prescription cold medicine, contact lense cleaner and other over-the-counter items tax-free and penalty-free with your HSA.
5. I heard that FSAs are now limited to $2,500, does that rule apply to HSAs? No. The new law will limit Flexible Spending Accounts (FSAs) contributions to $2,500 starting in 2013, but that new law does not apply to HSAs.
6. Did the penalty increase for HSAs? Yes, the 10% penalty for using your HSA for non-eligible medical expenses will increase to 20% in 2011.
7. Will the law change my HSA in the future? Other than items discussed, the new law does not directly change HSAs. Indirectly, however, the new law may eliminate the ability to make contributions in the future. Starting in 2014, the new law requires Americans to buy Qualified Health Insurance that offers an Essential Health Benefits Package. Your current High Deductible Health Plan (HDHP) required to be eligible to make a contribution to your HSA may not qualify as a Qualified Health Plan. In other words, you may have to buy different insurance coverage in order to avoid taxes and penalties. Regulatory agency rulings and interpretations will provide more information on this point over the coming months.
8. What happens to my HSA balance in the case where I can no longer contribute new money? You can continue to use any amounts in your HSA for eligible medical expenses or save it for later even if you are no longer eligible to contribute more to your HSA. This is important to know in case you do change insurance plans to a non-HSA eligible plan to comply with the new law. The HSA remains one of the best tax favored options available. One good strategy is to accumulate assets now in the HSA to prepare for whatever happens.
9. Should I change anything based on the new law? The new law is a foundational change to our health care and insurance system and mostly likely will impact everyone. For now; however, the combination of a High Deductible Health Plan and HSA remain very competitive and a good choice for many businesses and consumers.
10. How do I keep up on the changes as they take place? Watch for our blog. We will post additional information as we learn more.
Thursday, April 8, 2010
Dependent Health Plan Coverage Extended to Age 26
We have had many calls regarding the raising of the age of a dependent for health care coverage to age 26. At this point, we are being told that this increase in coverage will not take effect until September 1st. We will let you know more as we get more information.
Monday, April 5, 2010
Small Business Health Care Tax Credit: Frequently Asked Questions
The new health reform law gives a tax credit to certain small employers that provide health care coverage to their employees, effective with tax years beginning in 2010. The following questions and answers provide information on the credit as it applies for 2010-2013, including information on transition relief for 2010. An enhanced version of the credit will be effective beginning in 2014. The new law, the Patient Protection and Affordable Care Act, was passed by Congress and was signed by President Obama on March 23, 2010.
Employers Eligible for the Credit
1. Which employers are eligible for the small employer health care tax credit?
A. Small employers that provide health care coverage to their employees and that meet certain requirements(“qualified employers”) generally are eligible for a Federal income tax credit for health insurance premiums they pay for certain employees. In order to be a qualified employer, (1) the employer must have fewer than 25 full-time equivalent employees (“FTEs”) for the tax year, (2) the average annual wages of its employees for the year must be less than $50,000 per FTE, and (3) the employer must pay the premiums under a “qualifying arrangement” described in Q/A-3. See Q/A-9 through 15 for further information on calculating FTEs and average annual wages and see Q/A-22 for information on anticipated transition relief for tax years beginning in 2010 with respect to the requirements for a qualifying arrangement.
2. Can a tax-exempt organization be a qualified employer?
A. Yes. The same definition of qualified employer applies to an organization described in Code section 501(c) that is exempt from tax under Code section 501(a). However, special rules apply in calculating the credit for a tax-exempt qualified employer. See Q/A-6.
Calculation of the Credit
3. What expenses are counted in calculating the credit?
A. Only premiums paid by the employer under an arrangement meeting certain requirements (a “qualifying arrangement”) are counted in calculating the credit. Under a qualifying arrangement, the employer pays premiums for each employee enrolled in health care coverage offered by the employer in an amount equal to a uniform percentage (not less than 50 percent) of the premium cost of the coverage. See Q/A-22 for information on transition relief for tax
years beginning in 2010 with respect to the requirements for a qualifying arrangement.
If an employer pays only a portion of the premiums for the coverage provided to employees under the arrangement (with employees paying the rest), the amount of premiums counted in calculating the credit is only the portion paid by the employer. For example, if an employer pays 80 percent of the premiums for employees’ coverage (with employees
paying the other 20 percent), the 80 percent premium amount paid by the employer counts in calculating the credit. For purposes of the credit (including the 50-percent requirement), any premium paid pursuant to a salary reduction arrangement under a section 125 cafeteria plan is not treated as paid by the employer.
In addition, the amount of an employer’s premium payments that counts for purposes of the credit is capped by the premium payments the employer would have made under the same arrangement if the average premium for the small group market in the State (or an area within the State) in which the employer offers coverage were substituted for the actual premium. If the employer pays only a portion of the premium for the coverage provided to employees (for
example, under the terms of the plan the employer pays 80 percent of the premiums and the employees pay the other 20 percent), the premium amount that counts for purposes of the credit is the same portion (80 percent in the example) of the premiums that would have been paid for the coverage if the average premium for the small group market in the State were substituted for the actual premium.
4. What is the average premium for the small group market in a State (or an area within the State)?
A. The average premium for the small group market in a State (or an area within the State) will be determined by the Department of Health and Human Services (HHS) and published by the IRS. Publication of the average premium for the small group market on a State-by-State basis is expected to be posted on the IRS website by the end of April.
5. What is the maximum credit for a qualified employer (other than a tax-exempt employer)?
A. For tax years beginning in 2010 through 2013, the maximum credit is 35 percent of the employer’s premium expenses that count towards the credit, as described in Q/A-3.
Example. For the 2010 tax year, a qualified employer has 9 FTEs with average annual wages of $23,000 per FTE. The employer pays $72,000 in health care premiums for those employees (which does not exceed the average premium for the small group market in the employer's State) and otherwise meets the requirements for the credit. The credit for 2010 equals $25,200 (35% x $72,000).
6. What is the maximum credit for a tax-exempt qualified employer?
A. For tax years beginning in 2010 through 2013, the maximum credit for a tax-exempt qualified employer is 25 percent of the employer’s premium expenses that count towards the credit, as described in Q/A-3. However, the amount of the credit cannot exceed the total amount of income and Medicare (i.e., Hospital Insurance) tax the employer is required to withhold from employees’ wages for the year and the employer share of Medicare tax on
employees’ wages.
Example. For the 2010 tax year, a qualified tax-exempt employer has 10 FTEs with average annual wages of $21,000 per FTE. The employer pays $80,000 in health care premiums for those employees (which does not exceed the average premium for the small group market in the employer's State) and otherwise meets the requirements for the credit. The total amount of the employer’s income tax and Medicare tax withholding plus the employer’s share of the Medicare tax equals $30,000 in 2010.
The credit is calculated as follows:
(1) Initial amount of credit determined before any reduction: (25% x $80,000) = $20,000
(2) Employer’s withholding and Medicare taxes: $30,000
(3) Total 2010 tax credit is $20,000 (the lesser of $20,000 and $30,000).
7. How is the credit reduced if the number of FTEs exceeds 10 or average annual wages exceed $25,000?
A. If the number of FTEs exceeds 10 or if average annual wages exceed $25,000, the amount of the credit is reduced as follows (but not below zero). If the number of FTEs exceeds 10, the reduction is determined by multiplying the otherwise applicable credit amount by a fraction, the numerator of which is the number of FTEs in excess of 10 and the denominator of which is 15. If average annual wages exceed $25,000, the reduction is determined by multiplying the otherwise applicable credit amount by a fraction, the numerator of which is the amount by which average annual wages exceed $25,000 and the denominator of which is $25,000. In both cases, the result of the calculation is subtracted from the otherwise applicable credit to determine the credit to which the employer is entitled. For an employer with both more than 10 FTEs and average annual wages exceeding $25,000, the reduction is the sum of the amount of the two reductions. This sum may reduce the credit to zero for some employers with fewer than 25 FTEs and average annual wages of less than $50,000.
Example. For the 2010 tax year, a qualified employer has 12 FTEs and average annual wages of $30,000. The employer pays $96,000 in health care premiums for those employees (which does not exceed the average premium for the small group market in the employer's State) and otherwise meets the requirements for the credit.
The credit is calculated as follows:
(1) Initial amount of credit determined before any reduction: (35% x $96,000) = $33,600
(2) Credit reduction for FTEs in excess of 10: ($33,600 x 2/15) = $4,480
(3) Credit reduction for average annual wages in excess of $25,000: ($33,600 x $5,000/$25,000) = $6,720
(4) Total credit reduction: ($4,480 + $6,720) = $11,200
(5) Total 2010 tax credit: ($33,600 – $11,200) = $22,400
8. Can premiums paid by the employer in 2010, but before the new health reform legislation was enacted, be counted in calculating the credit?
A. Yes. In computing the credit for a tax year beginning in 2010, employers may count all premiums described in Q/A-3 for that tax year.
Determining FTEs and Average Annual Wages
9. How is the number of FTEs determined for purposes of the credit?
A. The number of an employer’s FTEs is determined by dividing (1) the total hours for which the employer pays wages to employees during the year (but not more than 2,080 hours for any employee) by (2) 2,080. The result, if not a whole number, is then rounded to the next lowest whole number. See Q/A-12 through 14 for information on which employees are not counted for purposes of determining FTEs.
Example. For the 2010 tax year, an employer pays 5 employees wages for 2,080 hours each, 3 employees wages for 1,040 hours each, and 1 employee wages for 2,300 hours.
The employer’s FTEs would be calculated as follows:
(1) Total hours not exceeding 2,080 per employee is the sum of:
a. 10,400 hours for the 5 employees paid for 2,080 hours each (5 x 2,080)
b. 3,120 hours for the 3 employees paid for 1,040 hours each (3 x 1,040)
c. 2,080 hours for the 1 employee paid for 2,300 hours (lesser of 2,300 and 2,080)
These add up to 15,600 hours
(2) FTEs: 7 (15,600 divided by 2,080 = 7.5, rounded to the next lowest whole number)
10. How is the amount of average annual wages determined?
A. The amount of average annual wages is determined by first dividing (1) the total wages paid by the employer to employees during the employer’s tax year by (2) the number of the employer’s FTEs for the year. The result is then rounded down to the nearest $1,000 (if not otherwise a multiple of $1,000). For this purpose, wages means wages as defined for FICA purposes (without regard to the wage base limitation). See Q/A-12 through 14 for information on which employees are not counted as employees for purposes of determining the amount of average annual wages.
Example. For the 2010 tax year, an employer pays $224,000 in wages and has 10 FTEs.
The employer’s average annual wages would be: $22,000 ($224,000 divided by 10 = $22,400, rounded down to the nearest $1,000).
11. Can an employer with 25 or more employees qualify for the credit if some of its employees are part-time?
A. Yes. Because the limitation on the number of employees is based on FTEs, an employer with 25 or more employees could qualify for the credit if some of its employees work part-time. For example, an employer with 46 halftime employees (meaning they are paid wages for 1,040 hours) has 23 FTEs and therefore may qualify for the credit.
12. Are seasonal workers counted in determining the number of FTEs and the amount of average annual wages?
A. Generally, no. Seasonal workers are disregarded in determining FTEs and average annual wages unless the seasonal worker works for the employer on more than 120 days during the tax year.
13. If an owner of a business also provides services to it, does the owner count as an employee?
A. Generally, no. A sole proprietor, a partner in a partnership, a shareholder owning more than two percent of an S corporation, and any owner of more than five percent of other businesses are not considered employees for purposes of the credit. Thus, the wages or hours of these business owners and partners are not counted in determining either the number of FTEs or the amount of average annual wages, and premiums paid on their behalf are not counted in
determining the amount of the credit.
14. Do family members of a business owner who work for the business count as employees?
A. Generally, no. A family member of any of the business owners or partners listed in Q/A-13, or a member of such a business owner’s or partner’s household, is not considered an employee for purposes of the credit. Thus, neither their wages nor their hours are counted in determining the number of FTEs or the amount of average annual wages, and premiums paid on their behalf are not counted in determining the amount of the credit. For this purpose, a family member is defined as a child (or descendant of a child); a sibling or step-sibling; a parent (or ancestor of a parent); a step-parent; a niece or nephew; an aunt or uncle; or a son-in-law, daughter- in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law.
15. How is eligibility for the credit determined if the employer is a member of a controlled group or an affiliated service group?
A. Members of a controlled group (e.g., businesses with the same owners) or an affiliated service group (e.g., related businesses of which one performs services for the other) are treated as a single employer for purposes of the credit. Thus, for example, all employees of the controlled group or affiliated service group, and all wages paid to employees by the controlled group or affiliated service group, are counted in determining whether any member of the controlled
group or affiliated service group is a qualified employer. Rules for determining whether an employer is a member of a controlled group or an affiliated service group are provided under Code section 414(b), (c), (m), and (o).
How to Claim the Credit
16. How does an employer claim the credit?
A. The credit is claimed on the employer’s annual income tax return. For a tax-exempt employer, the IRS will provide further information on how to claim the credit.
17. Can an employer (other than a tax-exempt employer) claim the credit if it has no taxable income for the year?
A. Generally, no. Except in the case of a tax-exempt employer, the credit for a year offsets only an employer’s actual income tax liability (or alternative minimum tax liability) for the year. However, as a general business credit, an unused credit amount can generally be carried back one year and carried forward 20 years. Because an unused credit amount cannot be carried back to a year before the effective date of the credit, though, an unused credit amount for
2010 can only be carried forward.
18. Can a tax-exempt employer claim the credit if it has no taxable income for the year?
A. Yes. For a tax-exempt employer, the credit is a refundable credit, so that even if the employer has no taxable income, the employer may receive a refund (so long as it does not exceed the income tax withholding and Medicare tax liability, as discussed in Q/A-6).
19. Can the credit be reflected in determining estimated tax payments for a year?
A. Yes. The credit can be reflected in determining estimated tax payments for the year to which the credit applies in accordance with regular estimated tax rules.
20. Does taking the credit affect an employer’s deduction for health insurance premiums?
A. Yes. In determining the employer’s deduction for health insurance premiums, the amount of premiums that can be deducted is reduced by the amount of the credit.
21. May an employer reduce employment tax payments (i.e., withheld income tax, social security tax, and Medicare tax) during the year in anticipation of the credit?
A. No. The credit applies against income tax, not employment taxes.
Anticipated Transition Relief for Tax Years Beginning in 2010
22. Is it expected that any transition relief will be provided for tax years beginning in 2010 to make it easier for taxpayers to meet the requirements for a qualifying arrangement?
A. Yes. The IRS and Treasury intend to issue guidance that will provide that, for tax years beginning in 2010, the following transition relief applies with respect to the requirements for a qualifying arrangement described in Q/A-3:
(a) An employer that pays at least 50% of the premium for each employee enrolled in coverage offered to employees by the employer will not fail to maintain a qualifying arrangement merely because the employer does not pay a uniform percentage of the premium for each such employee. Accordingly, if the employer otherwise satisfies the requirements for the credit described above, it will qualify for the credit even though the percentage of the premium it pays is not uniform for all such employees.
(b) The requirement that the employer pay at least 50% of the premium for an employee applies to the premium for single (employee-only) coverage for the employee. Therefore, if the employee is receiving single coverage, the employer satisfies the 50% requirement with respect to the employee if it pays at least 50% of the premium for that coverage. If the employee is receiving coverage that is more expensive than single coverage (such as family or selfplus-one coverage), the employer satisfies the 50% requirement with respect to the employee if the employer pays an amount of the premium for such coverage that is no less than 50% of the premium for single coverage for that employee (even if it is less than 50% of the premium for the coverage the employee is actually receiving).
Employers Eligible for the Credit
1. Which employers are eligible for the small employer health care tax credit?
A. Small employers that provide health care coverage to their employees and that meet certain requirements(“qualified employers”) generally are eligible for a Federal income tax credit for health insurance premiums they pay for certain employees. In order to be a qualified employer, (1) the employer must have fewer than 25 full-time equivalent employees (“FTEs”) for the tax year, (2) the average annual wages of its employees for the year must be less than $50,000 per FTE, and (3) the employer must pay the premiums under a “qualifying arrangement” described in Q/A-3. See Q/A-9 through 15 for further information on calculating FTEs and average annual wages and see Q/A-22 for information on anticipated transition relief for tax years beginning in 2010 with respect to the requirements for a qualifying arrangement.
2. Can a tax-exempt organization be a qualified employer?
A. Yes. The same definition of qualified employer applies to an organization described in Code section 501(c) that is exempt from tax under Code section 501(a). However, special rules apply in calculating the credit for a tax-exempt qualified employer. See Q/A-6.
Calculation of the Credit
3. What expenses are counted in calculating the credit?
A. Only premiums paid by the employer under an arrangement meeting certain requirements (a “qualifying arrangement”) are counted in calculating the credit. Under a qualifying arrangement, the employer pays premiums for each employee enrolled in health care coverage offered by the employer in an amount equal to a uniform percentage (not less than 50 percent) of the premium cost of the coverage. See Q/A-22 for information on transition relief for tax
years beginning in 2010 with respect to the requirements for a qualifying arrangement.
If an employer pays only a portion of the premiums for the coverage provided to employees under the arrangement (with employees paying the rest), the amount of premiums counted in calculating the credit is only the portion paid by the employer. For example, if an employer pays 80 percent of the premiums for employees’ coverage (with employees
paying the other 20 percent), the 80 percent premium amount paid by the employer counts in calculating the credit. For purposes of the credit (including the 50-percent requirement), any premium paid pursuant to a salary reduction arrangement under a section 125 cafeteria plan is not treated as paid by the employer.
In addition, the amount of an employer’s premium payments that counts for purposes of the credit is capped by the premium payments the employer would have made under the same arrangement if the average premium for the small group market in the State (or an area within the State) in which the employer offers coverage were substituted for the actual premium. If the employer pays only a portion of the premium for the coverage provided to employees (for
example, under the terms of the plan the employer pays 80 percent of the premiums and the employees pay the other 20 percent), the premium amount that counts for purposes of the credit is the same portion (80 percent in the example) of the premiums that would have been paid for the coverage if the average premium for the small group market in the State were substituted for the actual premium.
4. What is the average premium for the small group market in a State (or an area within the State)?
A. The average premium for the small group market in a State (or an area within the State) will be determined by the Department of Health and Human Services (HHS) and published by the IRS. Publication of the average premium for the small group market on a State-by-State basis is expected to be posted on the IRS website by the end of April.
5. What is the maximum credit for a qualified employer (other than a tax-exempt employer)?
A. For tax years beginning in 2010 through 2013, the maximum credit is 35 percent of the employer’s premium expenses that count towards the credit, as described in Q/A-3.
Example. For the 2010 tax year, a qualified employer has 9 FTEs with average annual wages of $23,000 per FTE. The employer pays $72,000 in health care premiums for those employees (which does not exceed the average premium for the small group market in the employer's State) and otherwise meets the requirements for the credit. The credit for 2010 equals $25,200 (35% x $72,000).
6. What is the maximum credit for a tax-exempt qualified employer?
A. For tax years beginning in 2010 through 2013, the maximum credit for a tax-exempt qualified employer is 25 percent of the employer’s premium expenses that count towards the credit, as described in Q/A-3. However, the amount of the credit cannot exceed the total amount of income and Medicare (i.e., Hospital Insurance) tax the employer is required to withhold from employees’ wages for the year and the employer share of Medicare tax on
employees’ wages.
Example. For the 2010 tax year, a qualified tax-exempt employer has 10 FTEs with average annual wages of $21,000 per FTE. The employer pays $80,000 in health care premiums for those employees (which does not exceed the average premium for the small group market in the employer's State) and otherwise meets the requirements for the credit. The total amount of the employer’s income tax and Medicare tax withholding plus the employer’s share of the Medicare tax equals $30,000 in 2010.
The credit is calculated as follows:
(1) Initial amount of credit determined before any reduction: (25% x $80,000) = $20,000
(2) Employer’s withholding and Medicare taxes: $30,000
(3) Total 2010 tax credit is $20,000 (the lesser of $20,000 and $30,000).
7. How is the credit reduced if the number of FTEs exceeds 10 or average annual wages exceed $25,000?
A. If the number of FTEs exceeds 10 or if average annual wages exceed $25,000, the amount of the credit is reduced as follows (but not below zero). If the number of FTEs exceeds 10, the reduction is determined by multiplying the otherwise applicable credit amount by a fraction, the numerator of which is the number of FTEs in excess of 10 and the denominator of which is 15. If average annual wages exceed $25,000, the reduction is determined by multiplying the otherwise applicable credit amount by a fraction, the numerator of which is the amount by which average annual wages exceed $25,000 and the denominator of which is $25,000. In both cases, the result of the calculation is subtracted from the otherwise applicable credit to determine the credit to which the employer is entitled. For an employer with both more than 10 FTEs and average annual wages exceeding $25,000, the reduction is the sum of the amount of the two reductions. This sum may reduce the credit to zero for some employers with fewer than 25 FTEs and average annual wages of less than $50,000.
Example. For the 2010 tax year, a qualified employer has 12 FTEs and average annual wages of $30,000. The employer pays $96,000 in health care premiums for those employees (which does not exceed the average premium for the small group market in the employer's State) and otherwise meets the requirements for the credit.
The credit is calculated as follows:
(1) Initial amount of credit determined before any reduction: (35% x $96,000) = $33,600
(2) Credit reduction for FTEs in excess of 10: ($33,600 x 2/15) = $4,480
(3) Credit reduction for average annual wages in excess of $25,000: ($33,600 x $5,000/$25,000) = $6,720
(4) Total credit reduction: ($4,480 + $6,720) = $11,200
(5) Total 2010 tax credit: ($33,600 – $11,200) = $22,400
8. Can premiums paid by the employer in 2010, but before the new health reform legislation was enacted, be counted in calculating the credit?
A. Yes. In computing the credit for a tax year beginning in 2010, employers may count all premiums described in Q/A-3 for that tax year.
Determining FTEs and Average Annual Wages
9. How is the number of FTEs determined for purposes of the credit?
A. The number of an employer’s FTEs is determined by dividing (1) the total hours for which the employer pays wages to employees during the year (but not more than 2,080 hours for any employee) by (2) 2,080. The result, if not a whole number, is then rounded to the next lowest whole number. See Q/A-12 through 14 for information on which employees are not counted for purposes of determining FTEs.
Example. For the 2010 tax year, an employer pays 5 employees wages for 2,080 hours each, 3 employees wages for 1,040 hours each, and 1 employee wages for 2,300 hours.
The employer’s FTEs would be calculated as follows:
(1) Total hours not exceeding 2,080 per employee is the sum of:
a. 10,400 hours for the 5 employees paid for 2,080 hours each (5 x 2,080)
b. 3,120 hours for the 3 employees paid for 1,040 hours each (3 x 1,040)
c. 2,080 hours for the 1 employee paid for 2,300 hours (lesser of 2,300 and 2,080)
These add up to 15,600 hours
(2) FTEs: 7 (15,600 divided by 2,080 = 7.5, rounded to the next lowest whole number)
10. How is the amount of average annual wages determined?
A. The amount of average annual wages is determined by first dividing (1) the total wages paid by the employer to employees during the employer’s tax year by (2) the number of the employer’s FTEs for the year. The result is then rounded down to the nearest $1,000 (if not otherwise a multiple of $1,000). For this purpose, wages means wages as defined for FICA purposes (without regard to the wage base limitation). See Q/A-12 through 14 for information on which employees are not counted as employees for purposes of determining the amount of average annual wages.
Example. For the 2010 tax year, an employer pays $224,000 in wages and has 10 FTEs.
The employer’s average annual wages would be: $22,000 ($224,000 divided by 10 = $22,400, rounded down to the nearest $1,000).
11. Can an employer with 25 or more employees qualify for the credit if some of its employees are part-time?
A. Yes. Because the limitation on the number of employees is based on FTEs, an employer with 25 or more employees could qualify for the credit if some of its employees work part-time. For example, an employer with 46 halftime employees (meaning they are paid wages for 1,040 hours) has 23 FTEs and therefore may qualify for the credit.
12. Are seasonal workers counted in determining the number of FTEs and the amount of average annual wages?
A. Generally, no. Seasonal workers are disregarded in determining FTEs and average annual wages unless the seasonal worker works for the employer on more than 120 days during the tax year.
13. If an owner of a business also provides services to it, does the owner count as an employee?
A. Generally, no. A sole proprietor, a partner in a partnership, a shareholder owning more than two percent of an S corporation, and any owner of more than five percent of other businesses are not considered employees for purposes of the credit. Thus, the wages or hours of these business owners and partners are not counted in determining either the number of FTEs or the amount of average annual wages, and premiums paid on their behalf are not counted in
determining the amount of the credit.
14. Do family members of a business owner who work for the business count as employees?
A. Generally, no. A family member of any of the business owners or partners listed in Q/A-13, or a member of such a business owner’s or partner’s household, is not considered an employee for purposes of the credit. Thus, neither their wages nor their hours are counted in determining the number of FTEs or the amount of average annual wages, and premiums paid on their behalf are not counted in determining the amount of the credit. For this purpose, a family member is defined as a child (or descendant of a child); a sibling or step-sibling; a parent (or ancestor of a parent); a step-parent; a niece or nephew; an aunt or uncle; or a son-in-law, daughter- in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law.
15. How is eligibility for the credit determined if the employer is a member of a controlled group or an affiliated service group?
A. Members of a controlled group (e.g., businesses with the same owners) or an affiliated service group (e.g., related businesses of which one performs services for the other) are treated as a single employer for purposes of the credit. Thus, for example, all employees of the controlled group or affiliated service group, and all wages paid to employees by the controlled group or affiliated service group, are counted in determining whether any member of the controlled
group or affiliated service group is a qualified employer. Rules for determining whether an employer is a member of a controlled group or an affiliated service group are provided under Code section 414(b), (c), (m), and (o).
How to Claim the Credit
16. How does an employer claim the credit?
A. The credit is claimed on the employer’s annual income tax return. For a tax-exempt employer, the IRS will provide further information on how to claim the credit.
17. Can an employer (other than a tax-exempt employer) claim the credit if it has no taxable income for the year?
A. Generally, no. Except in the case of a tax-exempt employer, the credit for a year offsets only an employer’s actual income tax liability (or alternative minimum tax liability) for the year. However, as a general business credit, an unused credit amount can generally be carried back one year and carried forward 20 years. Because an unused credit amount cannot be carried back to a year before the effective date of the credit, though, an unused credit amount for
2010 can only be carried forward.
18. Can a tax-exempt employer claim the credit if it has no taxable income for the year?
A. Yes. For a tax-exempt employer, the credit is a refundable credit, so that even if the employer has no taxable income, the employer may receive a refund (so long as it does not exceed the income tax withholding and Medicare tax liability, as discussed in Q/A-6).
19. Can the credit be reflected in determining estimated tax payments for a year?
A. Yes. The credit can be reflected in determining estimated tax payments for the year to which the credit applies in accordance with regular estimated tax rules.
20. Does taking the credit affect an employer’s deduction for health insurance premiums?
A. Yes. In determining the employer’s deduction for health insurance premiums, the amount of premiums that can be deducted is reduced by the amount of the credit.
21. May an employer reduce employment tax payments (i.e., withheld income tax, social security tax, and Medicare tax) during the year in anticipation of the credit?
A. No. The credit applies against income tax, not employment taxes.
Anticipated Transition Relief for Tax Years Beginning in 2010
22. Is it expected that any transition relief will be provided for tax years beginning in 2010 to make it easier for taxpayers to meet the requirements for a qualifying arrangement?
A. Yes. The IRS and Treasury intend to issue guidance that will provide that, for tax years beginning in 2010, the following transition relief applies with respect to the requirements for a qualifying arrangement described in Q/A-3:
(a) An employer that pays at least 50% of the premium for each employee enrolled in coverage offered to employees by the employer will not fail to maintain a qualifying arrangement merely because the employer does not pay a uniform percentage of the premium for each such employee. Accordingly, if the employer otherwise satisfies the requirements for the credit described above, it will qualify for the credit even though the percentage of the premium it pays is not uniform for all such employees.
(b) The requirement that the employer pay at least 50% of the premium for an employee applies to the premium for single (employee-only) coverage for the employee. Therefore, if the employee is receiving single coverage, the employer satisfies the 50% requirement with respect to the employee if it pays at least 50% of the premium for that coverage. If the employee is receiving coverage that is more expensive than single coverage (such as family or selfplus-one coverage), the employer satisfies the 50% requirement with respect to the employee if the employer pays an amount of the premium for such coverage that is no less than 50% of the premium for single coverage for that employee (even if it is less than 50% of the premium for the coverage the employee is actually receiving).
Tuesday, March 30, 2010
Anthem Blue Cross Changes
Anthem Blue Cross sent us an email regarding changes and I wanted to get the information passed on.
Talking Points:
Talking Points:
- Anthem Blue Cross’ priority remains meeting the health care benefit needs of more than 33 million members and ensuring they have access to affordable, high-quality care. As such, we will continue to put these members and our customers first.
- At the same time, affordability is more important than ever before, and we remain concerned the bill signed into law by the president does not address long-term cost containment measures that will make the system sustainable.
- The reconciliation process has started and may be finalized by the end of the week. Anthem has teams of individuals reviewing and analyzing the impact of the legislation and any near-term requirements to ensure we are prepared to implement all required changes in accordance with the law.
- The legislation has far-reaching implications, which will be phased in over several years beginning in the coming months. We will continue to communicate with you about these changes throughout the implementation period.
- While the Department of Health and Human Services and others work through the regulations and provide guidance related to this legislation, we will continue to remain engaged and provide input to help ensure the thoughts and needs of our members and customers are taken into account.
Questions and Answers:
What does this mean for Anthem?
- Anthem’s priority remains meeting the health care benefit needs of more than 33 million members, and ensuring they have access to affordable, high-quality care. As such, we will continue to put these members and our customers first.
- At the same time, affordability is more important than ever before, and we remain concerned the bill signed into law by the president does not address long-term cost containment measures that will make the system sustainable.
- The reconciliation process has started and may be finalized by the end of the week. Anthem has teams of individuals reviewing and analyzing the impact of the legislation and any near-term requirements to ensure we are prepared to implement all required changes in accordance with the law.
- The legislation has far-reaching implications which will be phased in over several years. We will continue to communicate with you about these changes throughout the implementation period.
Will there be changes to my benefits or my network?
- While the president has signed the legislation into law, the reconciliation process is not complete and many provisions require federal agencies to issue more detailed regulations, so there may be additional changes to the requirements and provisions of the legislation.
- Based on the current law and the current reconciliation proposals, we do not anticipate members will see immediate changes to their benefits. The requirements in this legislation will be phased in beginning later this year and continue over the next several years.
- This legislation does not impact our current physician or hospital networks. However we do believe members may see an impact to their benefits and their premiums as the legislation is implemented.
How will be premiums be affected?
- At this point we do not know what the impact will be on our members’ premiums as changes continue to be made to the legislation and the impact will vary depending on the type of product they have.
Do I need to do anything?
- At this time there is not anything for you as a member/customer/employer to do.
- We take our commitment to customers and members very seriously. We want to make sure you, our customers and members, understand what this legislation means for your coverage and your benefits.
- We have a team dedicated to reviewing and implementing the various requirements in the legislation and will provide additional information as quickly as possible to members and customers.
What changes will take effect immediately?
- Several near-term requirements will impact all contracts for new sales and renewals beginning in approximately six months. While there is a provision that “grandfathers” existing plans and allows members in these plans to keep their products, the new law requires us to add several new elements to all contracts, regardless of whether the plan is “grandfathered.” These include elements like:
*Allowing members to add dependents up to age 26 regardless of student status
*Eliminating lifetime limits on policies
It is important to note that our preliminary analysis of the “grandfathering” provision indicates that if a subscriber changes products after March 23, 2010, he or she will likely be subject to additional product requirements that are effective in the future.
For new sales and subscribers who change policies after approximately six months, we will be required to make additional changes, such as:
Removing any member cost sharing for “preventive” benefits, as defined by the legislation. - Other, more comprehensive insurance reforms will begin in 2014. Many of the more significant changes to the insurance marketplace — such as rating reforms, the individual and employer mandates, Medicaid expansions, the insurance exchanges and the insurance subsidies — are set to be effective on January 1, 2014.
- Many of the new laws require federal agencies to issue more detailed regulations that will guide implementation, and we will share more information when it is available.
How is Anthem preparing to implement the changes required this year?
- Anthem’s priority remains meeting the health care benefit needs of more than 33 million members and ensuring they have access to affordable, high-quality care. As such, we will continue to put these members and our customers first.
- At the same time, affordability is more important than ever before, and we remain concerned the bill signed into law by the president does not address long-term cost containment measures that will make the system sustainable.
- The reconciliation process has started and may be finalized by the end of the week. Anthem has teams of individuals reviewing and analyzing the impact of the legislation and any near-term requirements to ensure we are prepared to implement all required changes in accordance with the law.
- The legislation has far-reaching implications which will be phased in over several years. We will continue to communicate with you about these changes throughout the implementation period.
Thursday, March 4, 2010
COBRA Subsidy Extension- Again
On Tuesday, President Obama signed into law legislation that provides a 31-day federal extension of federal subsidies of COBRA health care premiums.
Under H.R. 4691, the 65% 15-month premium subsidy for laid off workers is extended to those involuntarily terminated from March 1 through March 31.
Without the extension, employees laid off after February 28 would have been ineligible for the subsidy.
The measure also will allow employees to receive the subsidy if they first lost group coverage due to a reduction in hours and then were terminated after enactment of the legislation, if certain conditions are met.
Meanwhile, the Senate Wednesday continued consideration of legislation, H.R. 4213, that would extend the premium subsidy to employees laid off through December 31, 2010.
Under H.R. 4691, the 65% 15-month premium subsidy for laid off workers is extended to those involuntarily terminated from March 1 through March 31.
Without the extension, employees laid off after February 28 would have been ineligible for the subsidy.
The measure also will allow employees to receive the subsidy if they first lost group coverage due to a reduction in hours and then were terminated after enactment of the legislation, if certain conditions are met.
Meanwhile, the Senate Wednesday continued consideration of legislation, H.R. 4213, that would extend the premium subsidy to employees laid off through December 31, 2010.
Wednesday, February 17, 2010
New FMLA Regulations Expand Military Caregivers' Coverage
The Family and Medical Leave Act of 1993 ("FMLA"), which applies to employer groups with 50 or more employees and all public agencies, has an indirect impact on health insurers and group health plans. FMLA requires employers to provide up to 12 weeks of unpaid leave to its employees to care for a loved one with a serious health condition, among other reasons.
In 2008, Congress enacted legislation, HR4986, to include qualified exigency leave and military caregiver leave to employees with family members on active duty in the Armed Forces (including the National Guard or Reserves).
Last year, Congress enacted new legislation, HR2647, which became effective on October 28, 2009. It applies to all FMLA leave requests submitted on or after that date. Specifically, HR2647 does the following:
· Expands the exigency leave entitlement to include family members of the regular Armed forces, who were not entitled to exigency leave under the prior law;
· Expands the military caregiver leave entitlement to include veterans, who were not covered under prior law; and
· Expands the military caregiver leave entitlement to include leave to care for a service member or veteran whose preexisting serious injury or illness was aggravated by active duty service.
No changes have been made to any of FMLA's health benefit provisions, including the requirements regarding continuation of health insurance benefits while on leave and reinstatement of coverage upon returning from leave. However, the expanded rights established in HR4968 and amended by HR2647 may result in more employees being eligible for FMLA leave. For that reason, these laws may indirectly affect the administration of group health plans.
Public information on FMLA and HR4986 legislation is available online at http://www.dol.gov/whd/fmla/finalrule.htm.
In 2008, Congress enacted legislation, HR4986, to include qualified exigency leave and military caregiver leave to employees with family members on active duty in the Armed Forces (including the National Guard or Reserves).
Last year, Congress enacted new legislation, HR2647, which became effective on October 28, 2009. It applies to all FMLA leave requests submitted on or after that date. Specifically, HR2647 does the following:
· Expands the exigency leave entitlement to include family members of the regular Armed forces, who were not entitled to exigency leave under the prior law;
· Expands the military caregiver leave entitlement to include veterans, who were not covered under prior law; and
· Expands the military caregiver leave entitlement to include leave to care for a service member or veteran whose preexisting serious injury or illness was aggravated by active duty service.
No changes have been made to any of FMLA's health benefit provisions, including the requirements regarding continuation of health insurance benefits while on leave and reinstatement of coverage upon returning from leave. However, the expanded rights established in HR4968 and amended by HR2647 may result in more employees being eligible for FMLA leave. For that reason, these laws may indirectly affect the administration of group health plans.
Public information on FMLA and HR4986 legislation is available online at http://www.dol.gov/whd/fmla/finalrule.htm.
HSA Tax Savings
It is tax time again. During tax time, we get many questions. See below for frequently asked questions. If you have any further questions, please consult your tax professional.
How much am I saving in taxes because of my HSA? Can you just give me a ballpark savings estimate?
The answer depends on your marginal federal tax rate, your state income tax rate, how much you contribute and other factors. Individuals can claim a 2009 tax deduction of up to $3,000 for individuals ($3,050 for 2010) and $5,950 for families ($6,150 for 2010) plus a $1,000 catch-up if you are between ages 55 and 65 (same for 2009 and 2010). If you assume a 28% federal income tax rate, a 6% state income tax rate and a person making the maximum contributions, the savings would be $2,023 for a family High Deductible Health Plan (HDHP) ($5,950 x 34%) or $1,020 for a single HDHP ($3,000 x 34%). In addition to the tax deduction, funds in an HSA grow tax free. Note: a few states, like CA, do not allow a state income tax break for HSAs.
How do I actually get the tax benefit?
HSA contributions are tax deductible as an "above-the-line" deduction found on line 25 of the 2009 IRS Form 1040. "Above-the-line" means that you get the benefit of the deduction even if you take the standard deduction and do not itemize. Unlike other deductions, no income limits apply so even high income people can take advantage of the HSA deduction. You must file Form 8889 as an attachment to your 1040. If you use tax preparation software, the software will take care of this form for you. IMPORTANT: see the next question for employer contributions and HSA payroll deferral.
What if my employer actually put the money in the HSA?
If your HSA contribution was made pre-tax by your employer or through a Section 125 payroll deferral plan (you deferred some of your pay pre-tax through the employer), you cannot deduct the HSA contribution on your tax return. You cannot deduct it because it was never included in your income. This is good news because you already got the tax benefit and it was pre-FICA and FUTA too. Look at Box 12 of your Form W-2, if there is a number there with a Code W, you are in this position. You are still required to complete IRS Form 8889 and include it as an attachment to your 1040.
Can I still contribute to my HSA for 2009?
Yes, individuals have until April 15th, 2010 to make their 2009 HSA contributions. For example, John has a $5,000 deductible family HDHP that he started January 1, 2009 but never got around to making an HSA contribution. He now (February 2010) wants to contribute $5,950 for 2009 and can do that. He can also contribute another $6,150 for 2010 (assuming he is still eligible) for a total HSA contribution of $12,100 potentially all made on the same day.
How do I find out how much I contributed last year?
Your statements show contributions and you can add the contribution amounts together to find your total. If you made contributions through your employer, the amount is reflected in Box 12 of the W-2.
How do taxes on HSA distributions work?
Distributions for eligible medical expenses are tax free. The IRS however, still requires some reporting. A 1099-SA is generated that shows the amount of any distribution you took from your HSA in 2009. This is sent to you and the IRS. You need to reflect that distribution on the 1040 and complete Form 8889. Form 8889 is required for both HSA contributions and distributions. If the distribution is for eligible medical expenses, it will not be taxable income.
Can I use the Form 1040EZ if I have an HSA?
You cannot use the 1040EZ if a had a contribution to your HSA or a distribution from your HSA in 2009. You are eligible for the 1040EZ if you have an HSA but did not make a contribution or receive a distribution in 2009.
How much am I saving in taxes because of my HSA? Can you just give me a ballpark savings estimate?
The answer depends on your marginal federal tax rate, your state income tax rate, how much you contribute and other factors. Individuals can claim a 2009 tax deduction of up to $3,000 for individuals ($3,050 for 2010) and $5,950 for families ($6,150 for 2010) plus a $1,000 catch-up if you are between ages 55 and 65 (same for 2009 and 2010). If you assume a 28% federal income tax rate, a 6% state income tax rate and a person making the maximum contributions, the savings would be $2,023 for a family High Deductible Health Plan (HDHP) ($5,950 x 34%) or $1,020 for a single HDHP ($3,000 x 34%). In addition to the tax deduction, funds in an HSA grow tax free. Note: a few states, like CA, do not allow a state income tax break for HSAs.
How do I actually get the tax benefit?
HSA contributions are tax deductible as an "above-the-line" deduction found on line 25 of the 2009 IRS Form 1040. "Above-the-line" means that you get the benefit of the deduction even if you take the standard deduction and do not itemize. Unlike other deductions, no income limits apply so even high income people can take advantage of the HSA deduction. You must file Form 8889 as an attachment to your 1040. If you use tax preparation software, the software will take care of this form for you. IMPORTANT: see the next question for employer contributions and HSA payroll deferral.
What if my employer actually put the money in the HSA?
If your HSA contribution was made pre-tax by your employer or through a Section 125 payroll deferral plan (you deferred some of your pay pre-tax through the employer), you cannot deduct the HSA contribution on your tax return. You cannot deduct it because it was never included in your income. This is good news because you already got the tax benefit and it was pre-FICA and FUTA too. Look at Box 12 of your Form W-2, if there is a number there with a Code W, you are in this position. You are still required to complete IRS Form 8889 and include it as an attachment to your 1040.
Can I still contribute to my HSA for 2009?
Yes, individuals have until April 15th, 2010 to make their 2009 HSA contributions. For example, John has a $5,000 deductible family HDHP that he started January 1, 2009 but never got around to making an HSA contribution. He now (February 2010) wants to contribute $5,950 for 2009 and can do that. He can also contribute another $6,150 for 2010 (assuming he is still eligible) for a total HSA contribution of $12,100 potentially all made on the same day.
How do I find out how much I contributed last year?
Your statements show contributions and you can add the contribution amounts together to find your total. If you made contributions through your employer, the amount is reflected in Box 12 of the W-2.
How do taxes on HSA distributions work?
Distributions for eligible medical expenses are tax free. The IRS however, still requires some reporting. A 1099-SA is generated that shows the amount of any distribution you took from your HSA in 2009. This is sent to you and the IRS. You need to reflect that distribution on the 1040 and complete Form 8889. Form 8889 is required for both HSA contributions and distributions. If the distribution is for eligible medical expenses, it will not be taxable income.
Can I use the Form 1040EZ if I have an HSA?
You cannot use the 1040EZ if a had a contribution to your HSA or a distribution from your HSA in 2009. You are eligible for the 1040EZ if you have an HSA but did not make a contribution or receive a distribution in 2009.
Wednesday, January 20, 2010
2010 Health Savings Account Maximums
The 2010 HSA limits are:
$3,050 for an individual
$6,150 for an employee + dependent(s)
$1,000 catch-up provision for 55+
$3,050 for an individual
$6,150 for an employee + dependent(s)
$1,000 catch-up provision for 55+
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