Health Care Reform Legislation – What are the immediate impacts to businesses?
I think that the recently passed Health Care Reform Act may be the most profound legislation of our lifetime. The Act contains numerous provisions that will affect you and your employees. Several of the provisions are now in effect or will be in effect this year.
The following are changes taking effect in 2010 that you and your business should be aware of and acting on now:
Dependents under age 26 – For plan years beginning on or after September 23, 2010, if your plan provides coverage for dependent children, the coverage must be allowed to continue until the dependent reaches age 26. This should be communicated to employees. Also, your plan documents need to be amended.
Dependents under age 27 – Effective March 30, 2010, pre-tax benefits are allowed for an employee’s child who does not reach the age of 27 during the calendar year. The term employee’s child is defined as a son, daughter, stepson, stepdaughter or foster child. The child does not have to be their dependent for tax purposes. Medical expenses of the employee’s child under age 27 are eligible for reimbursement from an FSA or HRA. However, the employee’s child must be the employee’s tax dependent to be reimbursed for medical expenses through an HSA. Employees should be alerted to the change and your plan documents need to be amended by December 31, 2010. This change will also qualify as a permitted election change for an employee, thus allowing the employee to make a mid-year change to their elective pre-tax withholdings.
Small employer health insurance credit – For tax years beginning after December 31st, 2009, employers with 10 or fewer employees with average annual wages of $25,000 or less are eligible for a tax credit. This credit is phased out for employers who have between 11 and 25 employees and is further phased out for employers who have average annual wages between $25,000 and $50,000. Thus, if your business has more than 25 full-time employees and/or your average wages are in excess of $50,000, you will not qualify for the credit. Partners of a partnership, greater than 2% owners of an S corporation and 5% or greater owners of a C corporation are excluded from the two tests.
Pre-existing Condition Limitations – For plan years beginning after September 23, 2010, no pre-existing condition limitations are allowed for children under the age of 19. (In 2014, this will be extended to all persons)
Please be advised, the changes listed above may require an amendment to your plan document and any changes should be communicated to your employees during open enrollment.
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