The Top 5 Tax Changes Under the Healthcare Reform Law

Tax Notes Today

In this article, Garrett Fenton and Anne Batter discuss the top five healthcare- and compensation-related tax provisions in the health care reform legislation (the Patient Protection and Affordable Care Act (PPACA), as amended) that tax professionals -- especially those in-house -- should be aware of in the short term, namely:

  1. New insurance market reforms, many of which are effective for plan years beginning on or after September 23, 2010.  Employers that fail to comply with these reforms will be subject to an excise tax.
  2. The application to insured group health plans of standards similar to the Code section 105(h) rules that currently prohibit self-insured plans from discriminating in favor of highly compensated individuals. 
  3. New reporting rules that will soon require employers to report on Form W-2 the ‘‘aggregate cost of applicable employer-sponsored coverage’’ provided to each employee for each year. 
  4. The imposition of a new per-enrollee fee on health insurers and self-insured group health plan sponsors. 
  5. An increase in the employee portion of the Medicare FICA tax for employees who make more than a specified income threshold.

Tax professionals will need to monitor continuing developments in these areas to avoid the imposition of excise taxes and penalties, when possible, and to make proper W-2 filings and excise tax return filings to start the statute of limitations on any potential excise taxes (or to pay any excise taxes that may actually be owed).

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