Bud Bowlin has been advising business owners about health insurance and benefits for more than 35 years. For his 70th birthday, we gave him his own advice column. Got a burning benefits question for Bud? Send it to AskBud@zenefits.com.
You know that feeling like you’re forgetting something? I just want to make sure, as we approach the end of 2015, that my company is set for success with our existing benefits plans and new ACA regulations in 2016. Would you happen to have any tips for me—and maybe some to share with my employees?
Preparing Ourselves Rightly for The Impending ACA
As 2015 draws to a close, it’s a good idea to review what you can still do this year (insofar as health benefits and compliance) to have a positive effect on the coming new year. This column is dedicated to all the proactive people, and all the things still within our capability of changing before the year is up.
Tips For Employees
Put money in your 401k. All of your contributions reduce your taxable income, thereby reducing the taxes you owe. Just as in 2014, you can contribute up to $18,000 to employer-based 401k plans. (Workers ages 50 and older can contribute up to $24,000.) If you’re not yet on track to max out your contributions by year-end, consider directing some extra dollars to your retirement plan during your last few pay periods—or, if you get a year-end bonus, use it to fatten your savings.
Spend down your FSA plan. You may be able to keep some money in your Flexible Spending Account, but no more than $500. In 2014, the Treasury Department and IRS changed the rules so employers can allow employees to carry over up to $500 from one year to the next. So, you may need to spend some money if you expect to end the year with more than $500 in your account. Remember: you can’t use FSA monies to pay for over-the-counter medicines—such as aspirin, ibuprofen or allergy meds—without a prescription. But that restriction doesn’t apply to other nonprescription medical items, such as crutches, contact-lens solution, or bandages. For a list of what is allowed by law, see IRS Publication 502. The same rules on eligible purchases apply to Health Savings Accounts (HSA).
Max out your HSA contribution. If you have an HSA account and matching High Deductible Health Plan, you can choose to save up to $3,350 for an individual and $6,650 for a family (HSA holders 55 and older get to save an extra $1,000 which means $4,350 for an individual and $7,650 for a family). These contributions are 100% tax deductible from your gross income. Time to remind yourself of the differences between an FSA and an HSA? We’ve got you covered.
Did you meet your deductibles this year? Deductibles, the amount you’re required to pay out of pocket before insurance covers all or part of your health care services, are becoming more prevalent and more expensive. If you’ve already met your annual deductible (or you’re close to it), you may be able to receive medical care at very little or no cost to you! Most health insurance policies calculate deductibles and maximum out-of-pocket expenses based on a calendar year. So, if you’ve already met your deductible this year and need elective procedures you’ve been putting off, schedule your appointment today, and let your insurance policy work for you!
Tips for Employers
Get an accurate headcount of your full-time employees. Because the ACA employer mandate and requirement to report about employer-provided health coverage becomes effective as of January 1, 2016, you must be ready to identify your full-time employees (under ACA rules) as of January 1st. This means, you must have established any measurement periods and measured employee work time by the end of this year. Congress passed a law this year changing the definition of what constitutes a “large” group, and left it to the states to change the small group definition. Only CA, CO, NY, VA, and VT have changed the definition of small group from 2-50 to 2-100 employees thus far.
Check Affordable Care Act changes. For large businesses, the ACA imposed many new requirements this year, including the employer shared responsibility provision (also known as the employer mandate). Small businesses, although generally exempt from this mandate, need to review how they deliver employee health insurance. Many small businesses have historically provided a health benefit to employees through a health reimbursement arrangement (HRA). Following passage of the ACA, the IRS described certain types of HRAs as employer payment plans—therefore subject to the ACA’s market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing. Failure to comply with these reforms triggers excise taxes under Code Sec. 4980D.
Check your tax credit eligibility. Small employers should review the Code Sec. 45R credit. If your business has fewer than 25 full-time equivalent employees, you may qualify for a special tax credit to help offset the costs of employee health insurance. You must pay average annual wages of no more than $50,000 per employee (indexed for inflation) and maintain a qualifying health care insurance arrangement.
Zenefits is here to make ACA compliance effortless, and I’m here for all your insurance benefits questions.
Got a question about benefits and insurance? Send it to AskBud@zenefits.com.
The answers on Ask Bud serve as basic guidelines and are for informational purposes only. Bud is a treasure trove of knowledge, but is unable to provide legal, tax, or fact-specific human resources advice. Once a question is submitted, Bud and Zenefits reserve the right to accept, reject, edit, modify, or otherwise change it. All content on the Zenefits website, including questions received and answers provided by Ask Bud, are Zenefits property.