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PPACA Pay or Play?. Brett S. Morris , Fox Everett Inc. Pay or Play. Buy insurance or play the penalty?. Pay Tax vs. Provide Coverage?. Penalty applies to every full-time employee (after the first 30). If no coverage is offered - PowerPoint PPT Presentation
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PPACA Pay or Play?
Brett S. Morris, Fox Everett Inc.
1
Pay or Play
Buy insurance or play the penalty?
3
Pay Tax vs. Provide Coverage?
• Penalty applies to every full-time employee (after the first 30). If no coverage is offered
• Penalty is avoided by offering affordable coverage with minimum value, even if employee declines.
• Cost of coverage applies only to those who take it.
Example
Assumptions Percentage of EE's Covered 75% EE Share of EE Only Cost 25% EE Share of Dependent Cost 60%
Example – Cost of Health Plan
Group Plan ER & EE Total Annual Cost
Employee Only 3,900.00
Employee & Spouse 8,700.00
Employee & Child 8,300.00
Family 11,940.00
Assumptions Percentage of EE's Covered 75% EE Share of EE Only Cost 25% EE Share of Dependent Cost 60%
Example – Cost of Health Plan
Group Plan ER & EE Total Annual Cost
EE Part of Annual Cost
Employee Only 3,900.00 975.00
Employee & Spouse 8,700.00 3,855.00
Employee & Child 8,300.00 3,615.00
Family 11,940.00 5,799.00
Assumptions Percentage of EE's Covered 75% EE Share of EE Only Cost 25% EE Share of Dependent Cost 60%
Example – Cost of Health Plan
Group Plan ER & EE Total Annual Cost
EE Part of Annual Cost
ER Part of Annual Cost
Employee Only 3,900.00 975.00 2,925.00
Employee & Spouse 8,700.00 3,855.00 4,845.00
Employee & Child 8,300.00 3,615.00 4,685.00
Family 11,940.00 5,799.00 6,141.00
Assumptions Percentage of EE's Covered 75% EE Share of EE Only Cost 25% EE Share of Dependent Cost 60%
Example 1 – Cost of Health Plan
Group Plan ER Part of
Annual Cost EE # TotalsEmployee Only 2,925.00 164 479,700.00
Employee & Spouse 4,845.00 66 319,770.00
Employee & Child 4,685.00 47 220,195.00
Family 6,141.00 98 601,818.00
Total Pre-Tax Cost 375 1,621,483.00 Full Time Employees 500
Example 1 – Cost of Health Plan
Group Plan ER Part of
Annual Cost EE # TotalsEmployee Only 2,925.00 164 479,700.00
Employee & Spouse 4,845.00 66 319,770.00
Employee & Child 4,685.00 47 220,195.00
Family 6,141.00 98 601,818.00
Total Pre-Tax Cost 375 1,621,483.00 Full Time Employees 500
Value of Tax Deduction @ 35% (567,519.05)
Example 1 – Cost of Health Plan
Group Plan ER Part of
Annual Cost EE # TotalsEmployee Only 2,925.00 164 479,700.00
Employee & Spouse 4,845.00 66 319,770.00
Employee & Child 4,685.00 47 220,195.00
Family 6,141.00 98 601,818.00
Total Pre-Tax Cost 375 1,621,483.00 Full Time Employees 500
Value of Tax Deduction @ 35% (567,519.05)
§125 Plan Payroll Tax Savings (88,169.08)
Example 1 – Cost of Health Plan
Group Plan ER Part of
Annual Cost EE # TotalsEmployee Only 2,925.00 164 479,700.00
Employee & Spouse 4,845.00 66 319,770.00
Employee & Child 4,685.00 47 220,195.00
Family 6,141.00 98 601,818.00
Total Pre-Tax Cost 375 1,621,483.00 Full Time Employees 500
Value of Tax Deduction @ 35% (567,519.05)
§125 Plan Payroll Tax Savings (88,169.08)
After Tax Cost 965,794.87
Example 1 – Cost of No Plan
Group Plan ER Part of
Annual Cost EE # TotalsFree Rider
PenaltyEmployee Only 2,925.00 164 479,700.00
Employee & Spouse 4,845.00 66 319,770.00
Employee & Child 4,685.00 47 220,195.00
Family 6,141.00 98 601,818.00
Total Pre-Tax Cost 375 1,621,483.00 Full Time Employees 500 1,000,000.00
Value of Tax Deduction @ 35% (567,519.05)
§125 Plan Payroll Tax Savings (88,169.08)
After Tax Cost 965,794.87
Example 1 – Cost of No Plan
Group Plan ER Part of
Annual Cost EE # TotalsFree Rider
PenaltyEmployee Only 2,925.00 164 479,700.00
Employee & Spouse 4,845.00 66 319,770.00
Employee & Child 4,685.00 47 220,195.00
Family 6,141.00 98 601,818.00
Total Pre-Tax Cost 375 1,621,483.00 Full Time Employees 500 1,000,000.00First 30 Employees (60,000.00)
Value of Tax Deduction @ 35% (567,519.05)
§125 Plan Payroll Tax Savings (88,169.08)
After Tax Cost 965,794.87
Example 1 – Cost of No Plan
Group Plan ER Part of
Annual Cost EE # TotalsFree Rider
PenaltyEmployee Only 2,925.00 164 479,700.00
Employee & Spouse 4,845.00 66 319,770.00
Employee & Child 4,685.00 47 220,195.00
Family 6,141.00 98 601,818.00
Total Pre-Tax Cost 375 1,621,483.00 Full Time Employees 500 1,000,000.00First 30 Employees (60,000.00)
Value of Tax Deduction @ 35% (567,519.05) 0.00
§125 Plan Payroll Tax Savings (88,169.08) 0.00
After Tax Cost 965,794.87
Example 1 – Cost of No Plan
Group Plan ER Part of
Annual Cost EE # TotalsFree Rider
PenaltyEmployee Only 2,925.00 164 479,700.00
Employee & Spouse 4,845.00 66 319,770.00
Employee & Child 4,685.00 47 220,195.00
Family 6,141.00 98 601,818.00
Total Pre-Tax Cost 375 1,621,483.00 Full Time Employees 500 1,000,000.00First 30 Employees (60,000.00)
Value of Tax Deduction @ 35% (567,519.05) 0.00
§125 Plan Payroll Tax Savings (88,169.08) 0.00
After Tax Cost 965,794.87 940,000.00
Example 1 – Cost of No Plan
Group Plan ER Part of
Annual Cost EE # TotalsFree Rider
PenaltyEmployee Only 2,925.00 164 479,700.00
Employee & Spouse 4,845.00 66 319,770.00
Employee & Child 4,685.00 47 220,195.00
Family 6,141.00 98 601,818.00
Total Pre-Tax Cost 375 1,621,483.00 Full Time Employees 500 1,000,000.00First 30 Employees (60,000.00)
Value of Tax Deduction @ 35% (567,519.05) 0.00
§125 Plan Payroll Tax Savings (88,169.08) 0.00
After Tax Cost 965,794.87 940,000.00 Savings (25,794.87)
Example 1 – Effect on High Income EmployeeEmployee
Only
Annual EE Portion of Group Plan Cost 975.00
Example 1 – Effect on High Income EmployeeEmployee
Only
Annual EE Portion of Group Plan Cost 975.00
Net After-Tax EE Cost @ 40.65% Fed-State Tax % 578.66
Example 1 – Effect on High Income EmployeeEmployee
Only
Annual EE Portion of Group Plan Cost 975.00
Net After-Tax EE Cost @ 40.65% Fed-State Tax % 578.66
Estimated Annual Individual Policy Cost 5,850.00
Example 1 – Effect on High Income EmployeeEmployee
Only
Annual EE Portion of Group Plan Cost 975.00
Net After-Tax EE Cost @ 40.65% Fed-State Tax % 578.66
Estimated Annual Individual Policy Cost 5,850.00
Additional After-Tax Cost to EE 5,271.34
Example 1 – Effect on High Income EmployeeEmployee
Only
Annual EE Portion of Group Plan Cost 975.00
Net After-Tax EE Cost @ 40.65% Fed-State Tax % 578.66
Estimated Annual Individual Policy Cost 5,850.00
Additional After-Tax Cost to EE 5,271.34
Additional Cost to EE With Tax Gross-Up 8,881.78
Example 1 – Effect on High Income EmployeeEmployee
OnlyEmployee & Spouse
Employee & Child Family
Annual EE Portion of Group Plan Cost 975.00 3,855.00 3,615.00 5,799.00
Net After-Tax EE Cost @ 40.65% Fed-State Tax % 578.66 2,287.94 2,145.50 3,441.71
Estimated Annual Individual Policy Cost 5,850.00 10,800.00 9,000.00 13,800.00
Additional After-Tax Cost to EE 5,271.34 8,512.06 6,854.50 10,358.29
Additional Cost to EE With Tax Gross-Up 8,881.78 14,342.14 11,549.28 17,452.90
Example 1 – Effect on High Income EmployeeEmployee
OnlyEmployee & Spouse
Employee & Child Family Total
Annual EE Portion of Group Plan Cost 975.00 3,855.00 3,615.00 5,799.00
Net After-Tax EE Cost @ 40.65% Fed-State Tax % 578.66 2,287.94 2,145.50 3,441.71
Estimated Annual Individual Policy Cost 5,850.00 10,800.00 9,000.00 13,800.00
Additional After-Tax Cost to EE 5,271.34 8,512.06 6,854.50 10,358.29
Additional Cost to EE With Tax Gross-Up 8,881.78 14,342.14 11,549.28 17,452.90
EE's Earning over 400% of FPL 22 9 6 13 50
Example 1 – Effect on High Income EmployeeEmployee
OnlyEmployee & Spouse
Employee & Child Family Total
Annual EE Portion of Group Plan Cost 975.00 3,855.00 3,615.00 5,799.00
Net After-Tax EE Cost @ 40.65% Fed-State Tax % 578.66 2,287.94 2,145.50 3,441.71
Estimated Annual Individual Policy Cost 5,850.00 10,800.00 9,000.00 13,800.00
Additional After-Tax Cost to EE 5,271.34 8,512.06 6,854.50 10,358.29
Additional Cost to EE With Tax Gross-Up 8,881.78 14,342.14 11,549.28 17,452.90
EE's Earning over 400% of FPL 22 9 6 13 50
Total Added EE Cost with Gross-Up 195,399.20 129,079.22 69,295.68 226,887.64 620,661.74
Example 1 – Effect on High Income EmployeeEmployee
OnlyEmployee & Spouse
Employee & Child Family Total
Annual EE Portion of Group Plan Cost 975.00 3,855.00 3,615.00 5,799.00
Net After-Tax EE Cost @ 40.65% Fed-State Tax % 578.66 2,287.94 2,145.50 3,441.71
Estimated Annual Individual Policy Cost 5,850.00 10,800.00 9,000.00 13,800.00
Additional After-Tax Cost to EE 5,271.34 8,512.06 6,854.50 10,358.29
Additional Cost to EE With Tax Gross-Up 8,881.78 14,342.14 11,549.28 17,452.90
EE's Earning over 400% of FPL 22 9 6 13 50
Total Added EE Cost with Gross-Up 195,399.20 129,079.22 69,295.68 226,887.64 620,661.74
Savings Used to Cover Added EE Cost 8,120.84 5,364.57 2,879.95 9,429.51 25,794.87
Example 1 – Effect on High Income EmployeeEmployee
OnlyEmployee & Spouse
Employee & Child Family Total
Annual EE Portion of Group Plan Cost 975.00 3,855.00 3,615.00 5,799.00
Net After-Tax EE Cost @ 40.65% Fed-State Tax % 578.66 2,287.94 2,145.50 3,441.71
Estimated Annual Individual Policy Cost 5,850.00 10,800.00 9,000.00 13,800.00
Additional After-Tax Cost to EE 5,271.34 8,512.06 6,854.50 10,358.29
Additional Cost to EE With Tax Gross-Up 8,881.78 14,342.14 11,549.28 17,452.90
EE's Earning over 400% of FPL 22 9 6 13 50
Total Added EE Cost with Gross-Up 195,399.20 129,079.22 69,295.68 226,887.64 620,661.74
Savings Used to Cover Added EE Cost 8,120.84 5,364.57 2,879.95 9,429.51 25,794.87
Pay increase from Savings per person 369.13 596.06 479.99 725.35
Example 1 – Effect on High Income EmployeeEmployee
OnlyEmployee & Spouse
Employee & Child Family Total
Annual EE Portion of Group Plan Cost 975.00 3,855.00 3,615.00 5,799.00
Net After-Tax EE Cost @ 40.65% Fed-State Tax % 578.66 2,287.94 2,145.50 3,441.71
Estimated Annual Individual Policy Cost 5,850.00 10,800.00 9,000.00 13,800.00
Additional After-Tax Cost to EE 5,271.34 8,512.06 6,854.50 10,358.29
Additional Cost to EE With Tax Gross-Up 8,881.78 14,342.14 11,549.28 17,452.90
EE's Earning over 400% of FPL 22 9 6 13 50
Total Added EE Cost with Gross-Up 195,399.20 129,079.22 69,295.68 226,887.64 620,661.74
Savings Used to Cover Added EE Cost 8,120.84 5,364.57 2,879.95 9,429.51 25,794.87
Pay increase from Savings per person 369.13 596.06 479.99 725.35
Additional Cost to EE not covered by Savings 7,250.94 11,708.68 9,428.64 14,248.25
Example 1 – Cost of No PlanGroup Plan EE # Totals
Free Rider Penalty
Total Pre-Tax Cost 375 1,621,483.00 Full Time Employees 500 1,000,000.00First 30 Employees (60,000.00)
Value of Tax Deduction @ 35% (567,519.05) 0.00
§125 Plan Payroll Tax Savings (88,169.08) 0.00
After Tax Cost 965,794.87 940,000.00 Savings (25,794.87)
Example 1 – Cost of No PlanGroup Plan EE # Totals
Free Rider Penalty
Total Pre-Tax Cost 375 1,621,483.00 Full Time Employees 500 1,000,000.00First 30 Employees (60,000.00)
Value of Tax Deduction @ 35% (567,519.05) 0.00
§125 Plan Payroll Tax Savings (88,169.08) 0.00
After Tax Cost 965,794.87 940,000.00 Savings (25,794.87)Pay Increases for Employees Earning Over 400% of FPL 620,661.74
Example 1 – Cost of No PlanGroup Plan EE # Totals
Free Rider Penalty
Total Pre-Tax Cost 375 1,621,483.00 Full Time Employees 500 1,000,000.00First 30 Employees (60,000.00)
Value of Tax Deduction @ 35% (567,519.05) 0.00
§125 Plan Payroll Tax Savings (88,169.08) 0.00
After Tax Cost 965,794.87 940,000.00 Savings (25,794.87)Pay Increases for Employees Earning Over 400% of FPL 620,661.74
Added Employer Payroll Tax 47,480.62
Example 1 – Cost of No PlanGroup Plan EE # Totals
Free Rider Penalty
Total Pre-Tax Cost 375 1,621,483.00 Full Time Employees 500 1,000,000.00First 30 Employees (60,000.00)
Value of Tax Deduction @ 35% (567,519.05) 0.00
§125 Plan Payroll Tax Savings (88,169.08) 0.00
After Tax Cost 965,794.87 940,000.00 Savings (25,794.87)Pay Increases for Employees Earning Over 400% of FPL 620,661.74
Added Employer Payroll Tax 47,480.62
Value of Tax Deduction @ 35% (233,849.83)
Example 1 – Cost of No PlanGroup Plan EE # Totals
Free Rider Penalty
Total Pre-Tax Cost 375 1,621,483.00 Full Time Employees 500 1,000,000.00First 30 Employees (60,000.00)
Value of Tax Deduction @ 35% (567,519.05) 0.00
§125 Plan Payroll Tax Savings (88,169.08) 0.00
After Tax Cost 965,794.87 940,000.00 Savings (25,794.87)Pay Increases for Employees Earning Over 400% of FPL 620,661.74
Added Employer Payroll Tax 47,480.62
Value of Tax Deduction @ 35% (233,849.83)
Net Additional Cost 408,497.67
Example 1 – Cost of No PlanGroup Plan EE # Totals
Free Rider Penalty
Total Pre-Tax Cost 375 1,621,483.00 Full Time Employees 500 1,000,000.00First 30 Employees (60,000.00)Value of Tax Deduction @ 35% (567,519.05) 0.00 §125 Plan Payroll Tax Savings (88,169.08) 0.00 After Tax Cost 965,794.87 940,000.00 Savings (25,794.87)
Pay Increases for Employees Earning Over 400% of FPL 620,661.74
Added Employer Payroll Tax 47,480.62 Value of Tax Deduction @ 35% (233,849.83)Net Additional Cost 408,497.67 Total Cost 965,794.87 1,374,292.54
Consequences of Gross-Up Pay
• Additional employer payroll tax• Additional retirement plan costs
– Profit sharing– 401(k) match– Pension accruals
• Additional life insurance costs
Example 2 – Non-Profit Employer
Group Plan ER Part of
Annual Cost EE # TotalsFree Rider
PenaltyEmployee Only 2,925.00 164 479,700.00
Employee & Spouse 4,845.00 66 319,770.00
Employee & Child 4,685.00 47 220,195.00
Family 6,141.00 98 601,818.00
Total Pre-Tax Cost 375 1,621,483.00 Full Time Employees 500 1,000,000.00First 30 Employees (60,000.00)
Value of Tax Deduction @ 35% 0.00 0.00
§125 Plan Payroll Tax Savings (88,169.08) 0.00
After Tax Cost 1,533,313.92 940,000.00 Savings (593,613.92)
Example 2 – Non-Profit EmployerEmployee
OnlyEmployee & Spouse
Employee & Child Family Total
Annual EE Portion of Group Plan Cost 975.00 3,855.00 3,615.00 5,799.00
Net After-Tax EE Cost @ 40.65% Fed-State Tax % 578.66 2,287.94 2,145.50 3,441.71
Estimated Annual Individual Policy Cost 5,850.00 10,800.00 9,000.00 13,800.00
Additional After-Tax Cost to EE 5,271.34 8,512.06 6,854.50 10,358.29
Additional Cost to EE With Tax Gross-Up 8,881.78 14,342.14 11,549.28 17,452.90
EE's Earning over 400% of FPL 22 9 6 13 50
Total Added EE Cost with Gross-Up 195,399.20 129,079.22 69,295.68 226,887.64 620,661.74
Savings Used to Cover Added EE Cost 186,789.45 123,391.69 66,242.35 216,890.44 593,313.92
Pay increase from Savings per person 8,490.43 13,710.19 11,040.39 16,683.88
Additional Cost to EE not covered by Savings 391.35 631.95 508.89 769.02 2,301.20
Example 2 – Non-Profit EmployerGroup Plan EE # Totals
Free Rider Penalty
Total Pre-Tax Cost 375 1,621,483.00 Full Time Employees 500 1,000,000.00First 30 Employees (60,000.00)
Value of Tax Deduction @ 35% 0.00 0.00
§125 Plan Payroll Tax Savings (88,169.08) 0.00
After Tax Cost 1,533,313.92 940,000.00 Savings (593,613.92)Pay Increases for Employees Earning Over 400% of FPL 620,661.74
Added Employer Payroll Tax 47,480.62
Value of Tax Deduction @ 35% 0.00
Net Additional Cost 74,828.44 Total Cost 1,533,313.92 1,608,142.36
Example 3 – 100 Employees
Group Plan ER Part of
Annual Cost EE # TotalsFree Rider
PenaltyEmployee Only 2,925.00 25 73,125.00
Employee & Spouse 4,845.00 5 24,225.00
Employee & Child 4,685.00 15 70,275.00
Family 6,141.00 15 92,115.00
Total Pre-Tax Cost 60 259,740.00
Full Time Employees 100 200,000.00First 30 Employees (60,000.00)
Value of Tax Deduction @ 35% (90,909.00) 0.00
§125 Plan Payroll Tax Savings (14,141.79) 0.00
After Tax Cost 154,689.21 140,000.00 Savings (14,689.21)
Example 3 – 100 EmployeesEmployee
OnlyEmployee & Spouse
Employee & Child Family Total
Annual EE Portion of Group Plan Cost 975.00 3,855.00 3,615.00 5,799.00
Net After-Tax EE Cost @ 40.65% Fed-State Tax % 578.66 2,287.94 2,145.50 3,441.71
Estimated Annual Individual Policy Cost 5,850.00 10,800.00 9,000.00 13,800.00
Additional After-Tax Cost to EE 5,271.34 8,512.06 6,854.50 10,358.29
Additional Cost to EE With Tax Gross-Up 8,881.78 14,342.14 11,549.28 17,452.90
EE's Earning over 400% of FPL 4 2 1 3 10
Total Added EE Cost with Gross-Up 35,527.13 28,684.27 11,549.28 52,358.69 128,119.36
Savings Used to Cover Added EE Cost 4,073.28 3,288.72 1,324.15 6,003.06 14,689.21
Pay increase from Savings per person 1,018.32 1,644.36 1,324.15 2,001.02
Additional Cost to EE not covered by Savings 7,863.46 12,697.77 10,225.13 15,451.88 46,238.24
Example 3 – 100 Employees
Group Plan EE # TotalsFree Rider
PenaltyTotal Pre-Tax Cost 60 259,740.00 Full Time Employees 100 200,000.00First 30 Employees (60,000.00)Value of Tax Deduction @ 35% (90,909.00) 0.00 §125 Plan Payroll Tax Savings (14,141.79) 0.00After Tax Cost 154,689.21 140,000.00 Savings (14,689.21)
Pay Increases for Employees Earning Over 400% of FPL 128,119.36
Added Employer Payroll Tax 9,801.13 Value of Tax Deduction @ 35% (48,272.17)Net Additional Cost 74,959.11 Total Cost 154,689.21 229,648.32
Example 4 – 60 Employees
Group Plan ER Part of
Annual Cost EE # TotalsFree Rider
PenaltyEmployee Only 2,925.00 16 46,800.00
Employee & Spouse 4,845.00 6 29,070.00
Employee & Child 4,685.00 5 23,425.00
Family 6,141.00 9 55,269.00
Total Pre-Tax Cost 36 154,564.00
Full Time Employees 60 120,000.00 First 30 Employees (60,000.00)
Value of Tax Deduction @ 35% (54,097.40) 0.00
§125 Plan Payroll Tax Savings (8,338.19) 0.00
After Tax Cost 92,128.41 60,000.00 Savings (32,128.41)
Example 4 – 60 EmployeesEmployee
OnlyEmployee & Spouse
Employee & Child Family Total
Annual EE Portion of Group Plan Cost 975.00 3,855.00 3,615.00 5,799.00
Net After-Tax EE Cost @ 40.65% Fed-State Tax % 578.66 2,287.94 2,145.50 3,441.71
Estimated Annual Individual Policy Cost 5,850.00 10,800.00 9,000.00 13,800.00
Additional After-Tax Cost to EE 5,271.34 8,512.06 6,854.50 10,358.29
Additional Cost to EE With Tax Gross-Up 8,881.78 14,342.14 11,549.28 17,452.90
EE's Earning over 400% of FPL 3 1 1 2 6
Total Added EE Cost with Gross-Up 26,645.35 14,342.14 11,549.28 34,905.79 87,442.55
Savings Used to Cover Added EE Cost 9,790.11 5,269.63 4,243.47 12,825.19 32,128.41
Pay increase from Savings per person 3,263.37 5,269.63 4,243.47 6,412.60
Additional Cost to EE not covered by Savings 5,618.41 9,072.50 7,305.81 11,040.30 33,037.02
Example 4 – 60 Employees
Group Plan EE # TotalsFree Rider
PenaltyTotal Pre-Tax Cost 36 154,564.00 Full Time Employees 60 120,000.00 First 30 Employees (60,000.00)Value of Tax Deduction @ 35% (54,097.40) 0.00 §125 Plan Payroll Tax Savings (8,338.19) 0.00After Tax Cost 92,128.41 60,000.00 Savings (32,128.41)
Pay Increases for Employees Earning Over 400% of FPL 87,442.55
Added Employer Payroll Tax 6,689.36 Value of Tax Deduction @ 35% (32,946.17)Net Additional Cost 29,057.33 Total Cost 92,128.41 121,185.74
Strategies
45
• Multiple Plan Options– Bronze Plan– Higher tiered option
• Test the waters with a noncompliant plan– Tin Plan
• Individuals may owe individual penalty– Affordability test
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