Final Healthcare Reform Act Signed into Law
On March 30th, President Obama signed into law the Health Care and Education Reconciliation Act of 2010 (the “Reconciliation Act”). This Act is the final piece of legislation relating to healthcare reform and modifies some items contained in the Patient Protection and Affordable Care Act (the "Healthcare Act”) signed into law last week. It also includes some additional items previously unmentioned, as detailed below.
Unearned Income Medicare Contribution – Beginning in 2013, the Reconciliation Act levies a 3.8% surtax on the lesser of net investment income or income in excess of a defined threshold amount. The thresholds are $250,000 for a joint or surviving spouse return, $125,000 for married individuals filing separately, and $200,000 for all others. For estates and trusts, the 3.8% surtax is on the lesser of undistributed net investment income or income in excess of the highest estate or trust tax bracket.
Individual Health Insurance Requirement – Penalties for the lack of coverage continue to be phased in starting in 2014, but the penalty itself decreased slightly from the ones noted in the Healthcare Act. By 2016, penalties will reach the greater of $695 per uninsured adult or 2.5% of household income, with a cap of $2,085 per family.
Penalties on Large Employers – After 2013, penalties will be assessed on largeemployers (those with at least 50 full-time employees) that do not offer affordable health coverage and have any employees who qualify for tax credits because they purchased insurance on an exchange. The Reconciliation Act modifies the penalty amount to be $2,000 for every full-time employee over a 30-employee threshold, regardless of how many employees actually receive a tax credit.
Dependent Coverage – Effective upon the President’s signature, the general exclusion for reimbursements for medical care expenses under an employer-provided plan extends to any child of the employee age 26 and under as of the end of the tax year.
Excise Tax on High-Cost Employer-Sponsored Plans – For tax years after 2017, a 40% nondeductible excise tax will be levied on insurance companies and plan administrators for any health coverage plan to the extent that the annual premium exceeds $10,200 for single coverage and $27,500 for family coverage.
Health-Related Accounts & Reimbursements – The Reconciliation Act postpones the changes related to flexible saving account limits. The amount of salary reduction that can be deducted under a flexible saving account is decreased to $2,500 beginning in tax years after 2012.
Photo used under creative commons license by Speaker Pelosi.
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