Well Workplace Level 4 Certification

Understanding how to help employers establish and mange their wellness program takes education. That is why I have let WELCOA teach me extensively about wellness programs.  Level IV was about “How to Demonstrate a Return-On-Investment”.   I have now completed all four levels 1, 2, 3 and 4 and feel ready to help our clients.

Remember that 70% of health claims are “lifestyle driven”, so firms that establish “results-oriented” wellness plans that provide employees financial incentives for results, means thousands saved in lower health claims and improved on the job productivity.

California Tax Change AB36 Passed Due to PPACA

California Assembly Bill (AB) 36 was enacted on April 7, 2011. This bill conforms California personal income tax law with federal income tax law by adopting a specified provision of the Affordable Care Act signed into law by the President in March 2010. (The Affordable Care Act refers to Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010.) AB 36 is effective immediately, and generally applies to the same taxable periods as federal law.  The Patient Protection and Affordable Care Act requires benefit plans that provide coverage for family members to cover adult children of the employee, to age 26 whether or not they qualify as dependents for tax purposes.  The Health Care and Education Reconciliation Act of 2010 extends the general exclusion for reimbursements for medical care expenses under an employer-provided accident or health plan to any child of an employee who has not attained age 27 as of the end of the taxable year.

Impact on Income Tax – The Affordable Care Act amends federal income tax laws to exclude the value of an eligible adult child’s medical coverage from the taxable income of the parent-employee, even if the child is not a dependent. The law also allows self-employed individuals a deduction for health insurance premiums for an adult child under age 27, even if the child is not a dependent.

New California law – California personal income tax law, as amended by AB 36, conforms to the 2010 federal income tax rules which exclude the value of the medical coverage provided to nondependent adult children from California gross income and allow a deduction to self-employed individuals for health insurance premiums for nondependent adult children under age 27.

  • Any amount paid by an employee for such additional coverage is excluded from California taxable wages.
  • Self-employed individuals may deduct the health insurance premium paid for an adult child under age 27.

How to File

Form 540 – On an original tax return

If the employer issued Form W-2 including the amount of medical coverage for your nondependent adult children in your California wages, contact your employer to have them issue you Form W-2C excluding the amount from your California wages. Use form FTB 3525 as a substitute for federal Form W-2C if your employer does not issue you a Form W-2C.

Self-employed individuals may deduct the health insurance premium paid for nondependent adult children under age 27. No California adjustment is needed.

Form 540X – On a previously-filed tax return

If you have already filed Form 540 with Form W-2 that included the amount of medical coverage for your nondependent adult children in your California wages, contact your employer to have them issue you Form W-2C excluding the amount from your California wages. Use form FTB 3525 as a substitute for federal Form W-2C if your employer does not issue you a Form W-2C. File Form 540X to report the reduction in your California wages.

For self-employed individuals who reported a California adjustment excluding the health insurance premium paid for nondependent adult children, file Form 540X to report the allowed deduction for California.

Please note we are not tax professionals.  Please refer to your tax advisor for information on how this may relate to your tax filing.

Part D Prescription Drug Plan Premiums to Increase for Wealthy Seniors

As reported yesterday,  Medicare Part B premiums are tied to a seniior’s income history.  The most affluent seniors have been paying higher income threshold Medicare Part B premiums (doctor visits and outpatient services) since 2007. The surcharge was put in place by the Medicare Modernization Act of 2003

 This premium increase also  extends the income threshold formulas to Part D prescription drug enrollees for the first time. This will affect just 5% of Medicare enrollees this year, although that figure will rise to 14% by 2019 according to the Kaiser Family Foundation.

High-income seniors who pay both Part B and Part D premiums could see their combined premiums rise anywhere from $300 to $700 per month by the end of the decade, according to Juliette Cubanski, associate director of Kaiser’s Medicare Policy Project.

The new income thresholds also affect people who choose a Medicare Advantage plan (Part C), which often covers prescription drugs. Advantage enrollees typically pay the monthly Part B premium plus a supplemental premium to the Medicare Advantage plan; now, these premiums are being adjusted to factor in the higher-income amounts for Part B and Part D coverage, where applicable.

The policy aims to help offset the cost of health-care reform by reducing taxpayer subsidies on Medicare services for seniors who don’t really need the help.  Kaiser estimates that the higher premiums will save taxpayers $25 billion for Part B from 2010 to 2019, and $10.7 billion for Part D.

These changes will provide important new benefits to retirees that should at least take the edge off the higher expenses over time.

The Medicare D prescription drug doughnut hole will be closed. That’s the coverage gap that starts when a beneficiary’s annual drug spending hits $2,830, and resumes at the catastrophic level ($4,550). This year, pharmaceutical companies are providing a discount of 50% on brand-name drugs to low- and middle-income beneficiaries who find themselves in the gap. Then, the doughnut hole itself will shrink a bit every year, ultimately disappearing entirely in 2020.

These will also be important improvements to traditional Medicare aimed at boosting preventive care. Medicare patients now receive an annual wellness visit–with no co-payment or deductible–that includes a comprehensive health risk assessment and a long-term personalized prevention plan. Deductibles and co-payments also were eliminated for most preventive care services.

Form w-2 Reporting Requirements for Large Group Employers

Beginning in 2013, employer groups with more than 250 employees will need to report on Forms W-2 the cost of the group health coverage that they provide to their employees.  This will not apply to the following for the time being:

  • employers issuing fewer than 250 Forms W-2 in the previous year;
  • multiemployer plans;
  • health reimbursement arrangements;
  • stand-alone dental and vision plans (in other words, dental and vision plans that are not otherwise integrated or incorporated into comprehensive medical plans);
  • self-insured plans that are not subject to COBRA or similar Federal requirements; and
  • employers furnishing Forms W-2 mid-year to employees who terminate during that year.

For a fully-insured plan, the premium charged is the cost of coverage.  For a self-insured plan, the cost of coverage is the COBRA applicable premium.  In calculating this cost, the employer must be sure to comply with the requirements for calculating the COBRA premium provided in the COBRA statute.  If the employer subsidizes the cost of COBRA so that the premium charged to qualified beneficiaries is less than the COBRA applicable premium, the employer may determine the reportable cost based upon a reasonable good faith estimate of the COBRA applicable premium, if such reasonable good faith estimate is used as the basis for determining the subsidized COBRA premium.

 To prepare for this reporting obligation, employers should begin working with their payroll administrators to make sure that their systems are updated by the end of 2011, so that they can track the cost of any coverage provided in 2012 and report it on the Forms W-2 that will be issued in January 2013.

2011 Part B Premium Amounts for Persons with Higher Income Levels

Most Medicare beneficiaries continue to pay the same $96.40 or $110.50 Part B premium amount in 2011. Beneficiaries who currently have the Social Security Administration (SSA) withhold their Part B premium and have incomes of $85,000 or less ($170,000 or less for joint filers) did not have an increase in their Part B premium for 2011.  For all others, the standard Medicare Part B monthly premium is $115.40 in 2011, which is a 4.4% increase over the 2010 premium. The Medicare Part B premium increased in 2011 due to increases in Part B costs.  

If your income is above $85,000 (single) or $170,000 (married couple), then your Medicare Part B premium may be higher than $115.40 per month.  Social Security will use the income reported two years ago on your IRS income tax return to determine your premium (if unavailable, SSA will use income from three years ago).  For example, the income reported on your 2009 tax return will be used to determine your monthly Part B premium in 2011. If your income has decreased since 2009, you can ask that the income from a more recent tax year be used to determine your premium, but you must meet certain criteria.

The chart below shows the Part B monthly premium amounts based on income. These amounts change each year. There may be a late-enrollment penalty.

Table 1: Part B Monthly Premium
   Beneficiaries who file an individual tax return with income   Beneficiaries who file a joint tax return with income
Your 2011 Part B Monthly Premium Is If Your Yearly Income Is
$96.40 if beneficiary had SSA withhold in 2009 

$110.50 if beneficiary was new in 2010 and had SSA withhold

$115.40 for all others

 $85,000 or less $170,000 or less
 $161.50

(increased by $46.10 due to IRMAA)

 $85,001-$107,000 $170,001-$214,000
 $230.70

(increased by $115.30 due to IRMAA)

 $107,001-$160,000 $214,001-$320,000
 $299.90

(increased by $184.50 due to IRMAA)

 $160,001-$214,000 $320,001-$428,000
 $369.10

(increased by $253.70 due to IRMAA)

 Above $214,000 Above $428,000
Table 2: Part B Monthly Premium
Beneficiaries who are married, but file a separate tax return from their spouse and lived with his or her spouse at some time during the taxable year
Your 2010 Monthly Premium is Beneficiaries who are married but file a separate tax return from his or her spouse
 $96.40 if beneficiary had SSA withhold in 2009

$110.50 if beneficiary was new in 2010 and had SSA withhold

$115.40 for all others

 $85,000 or less
 $299.90

(increased by $184.50 due to IRMAA)

 $85,001-$129,000
 $369.10

(increased by $253.70 due to IRMAA)

Above $129,000

If you are having trouble paying your premiums, you should call your State Medical Assistance (Medicaid) office to see if you qualify for some help. Some states refer to the Medicaid office as the Public Aid office, the Public Assistance office, or the State Medical Assistance office.

INCOME RELATED MONTHLY ADJUSTMENT AMOUNT (IRMAA)

The Internal Revenue Service supplies your tax filing status, your adjusted gross income, and your tax-exempt interest income to the Social Security Administration to determine if you have an income related monthly adjustment amount (IRMAA). The Social Security Administration will add your adjusted gross income together with your tax-exempt interest income to get an amount called the modified adjusted gross income (MAGI).

The income-related monthly adjustment amount is effective from January 1 through December 31 each calendar year. The Social Security Administration will refigure your Medicare Part B premium amount again next year when the Internal Revenue Service updates the information.

For more information, please refer to the Medicare website at www.medicare.gov.