The Additional Medicare Tax went into effect on January 1, 2013. The 0.9% Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation and self-employment income that exceeds a threshold amount based on the individual’s filing status. The threshold amounts are $250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately and $200,000 for all other taxpayers. An employer is responsible for withholding the Additional Medicare Tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year. For more information see Tax Topic 560, Additional Medicare Tax and our questions and answers.
For tax years 2012 and subsequent, the credit is nonrefundable, with a maximum amount (dollar limitation) of $14,300 per child for 2019. For more information see Tax Topic No. 607, Adoption Credit and Adoption Assistance Programs.
On June 10, 2016, the Treasury Department and Internal Revenue Service, the Department of Health and Human Services, and the Department of Labor (the Departments) issued proposed regulations PDF that implement the Expatriate Health Coverage Clarification Act of 2014 (EHCCA). The EHCCA generally provides that most ACA provisions do not apply to expatriate health plans covering individuals traveling to or from the United States. More specifically, the EHCCA provides that the requirements of the ACA do not apply to expatriate health plans, expatriate health insurance issuers for coverage under expatriate health plans, and employers in their capacity as plan sponsors of expatriate health plans, except that:
The EHCCA proposed regulations provide that the market reform provisions enacted as part of the ACA generally do not apply to expatriate health plans, any employer solely in its capacity as a plan sponsor of an expatriate health plan, and any expatriate health insurance issuer with respect to coverage under an expatriate health plan. Further, the EHCCA proposed regulations define the benefit and administrative requirements for expatriate health issuers, expatriate health plans, and qualified expatriates, and provide clarification regarding the applicability of certain fee and reporting requirements.
Health coverage for an employee's children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various workplace and retiree health plans. These changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return.
The individual shared responsibility provision calls for each individual to have minimum essential coverage for each month, qualify for an exemption or make a payment when filing his or her federal income tax return. Under the Tax Cuts and Jobs Act, the amount of the individual shared responsibility payment is reduced to zero for months beginning after December 31, 2018. For additional information on the individual shared responsibility provision, see our ISRP page and questions and answers.
Beginning January 1, 2013, you can claim deductions for medical expenses not covered by your health insurance when they reach 10 percent of your adjusted gross income. This change affects your 2013 tax return that you will file in 2014. There is a temporary exemption from January 1, 2013, to December 31, 2016, for individuals age 65 and older and their spouses. For additional information, see our questions and answers.
The Affordable Care Act provides a one-time $250 rebate in 2010 to assist Medicare Part D recipients who have reached their Medicare drug plan’s coverage gap. This payment is not taxable. This payment is not made by the IRS. More information can be found at www.medicare.gov.
The Net Investment Income Tax went into effect on January 1, 2013. The 3.8 percent Net Investment Income Tax applies to individuals, estates and trusts that have certain investment income above certain threshold amounts. For additional information on the Net Investment Income Tax, see Tax Topic No. 559, Net Investment Income Tax and our questions and answers.
Starting in 2014, individuals and families can take the premium tax credit to help them afford health insurance coverage purchased through an Affordable Insurance Exchange (also known as a Health Insurance Marketplace). The premium tax credit is refundable so taxpayers who have little or no income tax liability can still benefit. The credit also can be paid in advance to a taxpayer’s insurance company to help cover the cost of premiums.
The Affordable Care Act establishes that certain employers must offer health coverage to their full-time employees or a shared responsibility payment may apply. On Feb. 10, 2014, the Department of the Treasury and the IRS issued final regulations PDF on the Employer Shared Responsibility provisions. For additional information on the Employer Shared Responsibility provisions and the proposed regulations, see our questions and answers. On July 9, 2013, the Department of the Treasury and the IRS announced transition relief from the Employer Shared Responsibility provisions for 2014. For more information, please see Notice 2013-45 PDF . For additional transition relief generally applicable to 2015, see the preamble to the final regulations. On Sept. 18, 2014, the Department of the Treasury and the IRS issued Notice 2014-49 PDF , which provides guidance on how to apply the look-back measurement method in situations in which the measurement period applicable to an employee changes. On December 16, 2015, the Treasury Department and IRS issued Notice 2015-87 PDF which provides further guidance on the application of various provisions of the ACA to employer-provided health coverage. Specifically, the notice provides guidance on: (1) certain aspects of the employer shared responsibility provisions (ESRP), including clarifying the identification of employee contributions when employers offer health reimbursement arrangements (HRAs), flex credits, opt-out payments, or fringe benefits payments required under the McNamara-O’Hara Service Contract Act or other similar laws; (2) the application of the adjusted 9.5 percent affordability threshold under the Premium Tax Credit rules to the section ESRP safe harbor provisions; (3) the employer status of certain entities for section ESRP purposes; (4) certain aspects of the application of the ESRP rules to government entities; (5) the information reporting provisions for applicable large employers; (6) the application of the rules for health savings accounts (HSAs) to persons eligible for benefits administered by the Department of Veterans Affairs; and (7) the application of the COBRA continuation coverage rules to unused amounts in a health flexible spending arrangement (health FSA) carried over and available in later years, and conditions that may be put on the use of carryover amounts.
On December 16, 2015, the Department of Treasury and IRS issued Notice 2015-87 PDF which provides further guidance on the application of the market reforms that apply to group health plans under the ACA to various types of employer health care arrangements. This notice supplements the guidance provided in Notice 2013-54, Notice 2015-17 PDF and the final regulations PDF implementing the market reform provisions of the ACA.
The Affordable Care Act’s market reforms apply to group health plans. On September 13, 2013, the IRS issued Notice 2013-54 PDF , which explains how the Affordable Care Act’s market reforms apply to certain types of group health plans, including health reimbursement arrangements (HRAs), health flexible spending arrangements (health FSAs) and certain other employer healthcare arrangements, including arrangements under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy. The notice also provides guidance on employee assistance programs or EAPs and on section 125(f)(3), which prohibits the use of pre-tax employee contributions to cafeteria plans to purchase coverage on an Affordable Insurance Exchange (also known as a Health Insurance Marketplace). The notice applies for plan years beginning on and after January 1, 2014, but taxpayers may apply the guidance provided in the notice for all prior periods. On February 18, 2015, the IRS issued Notice 2015-17 PDF which provides transition relief from the excise tax under section 4980D with respect to failures to satisfy the market reforms by certain small employers reimbursing premiums for individual insurance policies, S corporations reimbursing premiums for 2-percent shareholders, and certain health care arrangements for employees with health coverage under Medicare and TRICARE.
DOL has issued a notice in substantially identical form to Notice 2013-54, DOL Technical Release 2013-03. On January 24, 2013, DOL and HHS issued FAQs that address the application of the Affordable Care Act to HRAs. On November 6, 2014, DOL issued additional FAQs PDF that address the application of the Affordable Care Act to HRAs and other payment arrangements.
On March 29, 2023, DOL, HHS and Treasury issued Frequently asked questions, Part 58 and Part 59 to clarify how the COVID-19 coverage and payment requirements under the Families First Coronavirus Response Act (FFCRA), the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) will change when the Public Health Emergency (PHE) ends. Specifically, under section 6001 of the FFCRA and section 3202 of the CARES Act, plans and issuers are not required to provide coverage for items and services related to diagnostic testing for COVID-19 that are furnished after the end of the PHE, and if they provide such coverage, they may impose cost-sharing requirements, prior authorization, or other medical management requirements for such items and services.
Additional information is also available regarding consequences to the employer if the employer does not establish a health insurance plan for its own employees, but reimburses those employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace).
On January 9, 2014, DOL and HHS issued FAQs that addressed, among other things, future rules relating to excepted benefits.
On December 16, 2015, the Treasury Department and IRS issued Notice 2015-87 PDF which provides further guidance on the application of various provisions of the ACA to employer-provided health coverage. Notice 2015-87 provides guidance on the application of the market reforms that apply to group health plans under the ACA to various types of employer health care arrangements. The notice includes guidance that covers: (1) health reimbursement arrangements (HRAs), including HRAs integrated with a group health plan, and similar employer-funded health care arrangements; and (2) group health plans under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy, such as a reimbursement arrangement described in Revenue Ruling 61-146, or an arrangement under which the employer uses its funds to directly pay the premium for an individual health insurance policy covering the employee (collectively, an employer payment plan). The notice supplements the guidance provided in Notice 2013-54 PDF ; FAQs about the Affordable Care Act Implementation (Part XXII) PDF issued by the Department of Labor on November 6, 2014; Notice 2015-17 PDF ; and final regulations PDF implementing the market reform provisions of the ACA published on November 18, 2015.
On June 13, 2019, IRS, DOL and HHS issued final rules PDF regarding health reimbursement arrangements and other account-based group health plans. Specifically, the final rules allow integrating HRAs and other account-based group health plans with individual health insurance coverage or Medicare, if certain conditions are satisfied (an individual coverage HRA). The final rules also set forth conditions under which certain HRAs and other account-based group health plans will be recognized as limited excepted benefits.
The Further Consolidated Appropriations Act, 2020 H.R. 1865 (Pub.L.116-94) was signed into law December 20, 2019. The act repealed Internal Revenue Code Section 4980I, the excise tax on high cost employer-sponsored health coverage.