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IRS Guidance on the Small Employer Healthcare Tax Credit

The Patient Protection and Affordable Care Act (PPACA), as amended by the Health Care and Education Reconciliation Act (the Reconciliation Act), provides a tax credit to certain small employers who provide healthcare coverage to their employees, effective with tax years beginning in 2010.

Employee Benefit Trends

During tough economic times, many employers are looking for ways to capitalize on their benefits programs, and improve employee productivity, health and wellness – all while controlling costs. Programs that help address these issues can be very strategic tools for employers.

Reform Changes to Health Accounts

The Healthcare Reform law, which consists of the Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act of 2010 (HCERA), makes some significant changes to accounts such as health flexible spending accounts (health FSAs) and health savings accounts (HSAs).

COBRA Premium Subsidy Expires

The American Recovery and Reinvestment Act of 2009 (ARRA) provided a temporary subsidy for the cost of COBRA continuation health insurance coverage for certain individuals who were involuntarily terminated from employment. Initially available to individuals whose employment was involuntarily terminated between Sept. 1, 2008, and Dec. 31, 2009, the COBRA premium subsidy was extended several times. Most recently, the Continuing Extension Act of 2010 extended the eligibility period through May 31, 2010.

A number of proposals to further extend the subsidy have been considered but none have been passed. The recent Unemployment Compensation Extension Act of 2010, signed by the president on July 22, 2010, did not extend the COBRA premium subsidy.

New Form W-2 Reporting Requirements

In an effort to allow employers ample time to make necessary alterations to payroll systems, the IRS has announced that the Patient Protection and Affordable Care Act (PPACA) or Healthcare Reform requirement to report aggregate cost of coverage under a group-sponsored health plan on form W-2 will be deferred. Employer reporting for the tax year 2011 will now be optional. Further guidance and revised implementation requirements are expected to be released later this year.

Please be sure to consult with your accountant for further tax information.

Contact Michelle Walters if you have any questions.