Next Monthly Meeting
Tuesday, July 2, 2013
6:15 pm social time
6:45pm PFA business
Ramada Convention Center – Hutchinson, KS
Program: The Impact of Obamacare
David Powell will present the emerging issues of the ACA, the rising costs, changes in coverage, and the confusion it is causing. Mr. Powell has read and studied all of the 2,000 pages of the health care legislation and the sweeping changes that will affect every American citizen.
David Powell, CLU, ChFC, CFP, RHU
Can't wait for the meeting? These documents will get you started.
Part 1 of 5 I intend to provide the readers
with information that may prove valuable in your efforts to reduce or avoid all
together the penalty taxes under ObamaCare.
PPACA – signed into law in
March 2010 – is due to kick into nearly full force on January 1, 2014. Under the law and the stack of rules and
regulations issued since March 2010, nearly every citizen in the United States
is supposed to be covered by Health Insurance or face a penalty tax.
Nearly everyone agrees that
the intent of the law will not be met!
I believe, as do many others,
that the young – bullet proof – will
not purchase health insurance until they
actually need it.
The reasoning and logic is
simple. They don’t buy health insurance NOW, because they don’t believe they currently need it, so what makes the
bureaucrats in Washington realistically think that these same young people will
rush out to purchase health insurance when the price is 3-400% more expensive
in 2014 – AND THEY STILL BELIEVE THEY DON’T NEED IT?
With that in mind, I want to
first look toward the employers who
are considered “applicable large employers.” These are generally the 50+ full time
There are 2 sets of penalty
Taxes that these employers face.
- A tax of $2000 per employee for not providing
Minimum Essential Coverage.
- A $3000 tax if
Minimum Essential Coverage is provided
- to employees but:
- The coverage
provided is not affordable.
- The coverage
provided does not provide at least 60% of
- the actuarially estimated coverage of
claims for the year.
The first penalty Tax is the
This tax is $2000 per full
time employee if even 1 employee
“qualifies for a subsidy through the
To avoid this penalty is
extremely simple for large employees.
law specifically state that the applicable large employer
must “offer” Minimum
Essential Coverage to at least
95% of full time employees.
you “offer” coverage to every full time employee!!
don’t care what the coverage is, how “crappy” the
coverage is or what it
costs. You simply have to:
1. Offer the coverage – they don’t have to take
2. Make sure it
includes Minimum Essential Coverage.
IF you do both of these
things, it does not matter if all your employees go to the exchanges, they will
not qualify for any subsidy because you did not offer them Minimum Essential
Coverage! YOU AVOID THE MAJOR PENALTY
TAX OF $2000 PER EMPLOYEE!!!
Part 2 of 5 Before I finish the section on how large businesses
can avoid the taxes/penalties, I thought I would try to answer
some questions that have been posed.
For those who are working for larger employers mentioned the
question I am hearing a lot: “Why are so many employees being
forced to go to “part-time” status.”
Within the law, the authors chose to lower what most consider
full time to an average of ONLY 30 hours per week. Most of
us have always believed that full time was a 40 hour week.
The move to a 30 hour per week label as full-time was chosen
to force more employers to provide additional benefits – notably
group health insurance – to anyone only working 30 hours per week.
The expected affect was more people would be covered by the
employer’s group health plan.
The administration is truly stupid!!!
The owners, CEO’S and HR directors for the most part have
decided that two can play this game. So now we are seeing a
massive number of larger employers take those people to 29
or fewer hours per week. At that level, these people remain
in the category of those not eligible for the group health
insurance paid for, at least in part, by the employer.
So who has been hurt by the designers of ObamaCare? The
lower to middle class employee who are now working fewer
hours are the ones who are hurt. That extra 10 hours per
week in lost work also resulted in less take home pay. Many now find themselves needing to find and work second jobs BUT
STILL NOT getting the benefit of any employer helping to pay
the cost of their health insurance.
Many are also seeing paid vacations and other employer paid
perks disappear. This is again a result of the health care law.
The advertisement said, when it was being sold to the American
people, the cost of health insurance would drop by at least
$2500 per year for a family. Instead the cost has risen by more
than $4500 per family and the law does not fully kick in until 2014.
The projections by the IRS are that the costs will be from 50% to
400% higher than they were Last YEAR!
Profit margins in business don’t go up that fast! So employers
are forced to cut benefits, even to the full time employees,
let alone part timers.
Given a choice of paying benefits or going out of business,
there really isn’t a choice.
ObamaCare is NOT good for the people of the United States.
The law isn’t even fully implemented and we clearly see it
hurting the working American.
So who will it benefit – those with their hands out?
Actually that may not happen either as I will point out in
the next article.
Part 3 of 5 Who benefits from ObamaCare?
The big assumption is that those with their hands out will
receive the most from the new law. The law will probably
hurt them the most!
A majority of these people are on or will expect to get on
Medicaid. However, many of the states, including Kansas,
are NOT expanding their eligibility for Medicaid.
It is my belief that the states that are expanding eligibility
will suffer greatly when the promises made within the law
for Federal funding, disappear! Specifically, that the Federal
government will pay 100% of the cost of the expansion for
the 1st 3 years and 90% for the next 3 years will disappear,
perhaps within the 1st year. There simply isn’t any money
to fund that expansion.
But the foxes in the hen house took care of that problem
by including a “Maintenance of Effort” clause in that section.
This clause REQUIRES a state to continue to fund at the
same level should the Federal government fail to meet their
commitment. That’s another article all of its own.
So why are these people hurt the most? They are caught in
no man’s land. Too much income to qualify for Medicaid,
not enough to pay their share of the premiums even should
they qualify for a subsidy.
Many will not qualify for any subsidy they think they will get,
because they do not file a tax return. Subsidy determination
is dependent upon information contained in their tax returns.
If they did not file in 2013, there is nothing to show to
qualify for the 2014 subsidy.
In June of 2013, several news sources reported that more
than 64% of those eligible to purchase insurance through
the exchanges, will choose not to. A majority are the
same young “bullet proof” people who are not currently
buying health insurance. They don’t care about subsidies.
Who is the doctoral candidate that believes these young
people will step up and pay 300% or 400% more in 2014
than the price of health insurance today, when they don’t
buy it now?
But there will be people who do buy the insurance, get a
subsidy and pay a little amount as their share. YES there
will be. And they are going to have a major problem come
A majority will find that they are getting repayment notices
from the IRS. WHY? Because a “glitch” in the law says
that if your income increases during the year, as most hope
it will, then your subsidy amount will decrease. At the end
of the year, that qualifier will find they have received too
much subsidy and thus OWE A REFUND to the government.
ObamaCare is truly designed to keep the poor – poor.
If a person gets a raise, they lose. Who, then, is this law
helping? NO ONE!
Part 4 of 5 ObamaCare – How to Avoid the Taxes/Penalties.
To conclude the discussion on 50+ Businesses avoiding the
taxes/penalties let me repeat the first requirement. To
avoid the BIG tax penalty of $2000 per full time employee,
the “Applicable Lager Employer” must OFFER Minimum
Essential Coverage to at least 95% of full time employees.
Section 5000A of PPACA defines this in part as (f)(1)(B)
“EMPLOYER-SPONSORED PLAN – Coverage under an
eligible employer –sponsored plan.”
And SECTION (f)(2) “ELIGIBLE EMPLOYER-SPONSORED PLAN –
The term “eligible employer-sponsored plan” means, with
respect to any employee, a group health plan or group health
insurance coverage offered by an employer to the employee
which is – (B) any other plan or coverage offered in the small
or large group market within a State.”
SO any group health plan offered in Kansas will qualify.
The LITTLE tax penalty is $3000, but it only applies to those
employees who fall into the subsidized category.
If an employer has 100 full time employees offers MEC coverage
to all employee but 3 employees get subsidies, then the
employer penalty/tax would be $9000.
How do they qualify for a subsidy? 1. The coverage is NOT
affordable. 2. The coverage does NOT provide “Minimum
To AVOID the second penalty can also be accomplished.
1.Affordable: The test most will use as a safe harbor is
looking at Box 1 on an employee’s W-2. As long as the
employee’s share of the cost of the health insurance is less
than 9.5 of that amount, the law considers the coverage
AFFORDABLE. EX: 9.5% of $20,000 = $1900/yr. or $158.33
per month as the employee’s share of the single rate.
2.Minimum Value – This should not be a problem with almost
any fully insurance health plan in Kansas. For Self-funded plans, the employer needs to work with the insurance company or Broker to be sure this is met. A plan must cover, actuarially, at least 60% of the total allowed cost of benefits provided.
When the employer’s plan does both of these, then the employee WILL NOT QUALIFY, in most cases, for a subsidy, so the employer WILL NOT have to pay the LITTLE tax penalty on anyone!!
NEXT – How do Individuals who do not carry ANY insurance AVOID the taxes/penalties?
Part 5 of 5 ObamaCare – How to Avoid the Taxes/Penalties.
This article is devoted to INDIVIDUALS who wish to avoid the Taxes/Penalties of PPACA for failure to carry the minimum required Qualified Health Insurance. Excerpts of PPACA are included.
The following IS NOT TAX ADVICE. I am simply making you aware of what the law says. You decide what you want to do!
To begin with, under Section 1312 –
(d) EMPOWERING CONSUMER CHOICE.—
(1) CONTINUED OPERATION OF MARKET OUTSIDE
EXCHANGES.—Nothing in this title shall be construed to prohibit—
(A) a health insurance issuer from offering outside of an Exchange a health plan to a qualified individual or qualified employer; and
(B) a qualified individual from enrolling in, or a qualified employer from selecting for its employees, a health plan offered outside of an Exchange
So individuals can buy or not buy any plan inside or outside of an exchange.
‘‘(f) MINIMUM ESSENTIAL COVERAGE.—For purposes of this section—
“(C) PLANS IN THE INDIVIDUAL MARKET.—Coverage under a health plan offered in the individual market within a State.”
A plan sold in Kansas meets this requirement!
But If you don’t buy a qualified plan you face a penalty. With some exceptions, that is correct. The first year penalty is $95 or 1% of income whichever is greater.
How is the penalty collected? You send it in with your tax return. What if I don’t send it in?
2) SPECIAL RULES.—Notwithstanding any other provision of law—
‘‘(A) WAIVER OF CRIMINAL PENALTIES.—In the case of any failure by a taxpayer to timely pay any penalty imposed by this section, such taxpayer shall not be subject to any criminal prosecution or penalty with respect to such failure.
‘‘(B) LIMITATIONS ON LIENS AND LEVIES.—The Secretary shall not—
‘‘(i) file notice of lien with respect to any property of a taxpayer by reason of any failure to pay the penalty imposed by this section, or
‘‘(ii) levy on any such property with respect to such failure.’’.
I am not a lawyer, but as I read this, HHS nor the IRS has any enforceable way to collect if you don’t pay, except to withhold whatever may be owed from your tax refund.
Many people unknowingly give the treasury an interest free loan every year by having extra held out of their check so they can get a refund. That is your money you are getting back that you could have spent or save (and earned SOME interest on) during the year. Changing a W-4 so that the calculation shows no refund eliminates this interest free loan!
With that in mind, if there is NO REFUND, then there is nothing to withhold from!!
Some may say this is another GLITCH in PPACA.
If no taxes/penalties are collected, how do they pay for this law?
Use links to download the Word version of these documents.
February 1, 2013
The “AVOIDING OBAMACARE TAXES/PENALTIES “ series of articles is a collection of my OPINIONS AND CONCLUSIONS based upon reading PPACA – as published by the Federal Government as Public Law 111-148 and Public Law 111-152. Future issuance of additional rules and regulations from HHS and IRS as well as the Supreme Court, may clarify or change interpretations of the laws. In some of the articles I have include excerpts copied as they appear in the law for additional reinforcement of my conclusions. Please consult with your attorney and/or tax advisors for additional opinions on interpretations of these laws. Making INFORMED, educated decisions based upon varies points of view and research usually has the best outcome.
DAVID J POWELL, CLU, ChFC, CFP, RHU
August Monthly Meeting
Tuesday, August 6, 2013
Program: Common Core Curriculum
Joy Pullman Research Fellow of Education Policy at the Heartland Institute will present the initiative of Common Core Curriculum. It is a top-down, Federal program to create mandatory curricular standards in education in grades K-12. Common Care was created by US Dept of Education and was announced and enacted by the US Association of Governor’s group. It’s nation-wide except for the few states that have rejected it. Unfortunately, Kansas is not one of those.
People are Buying Guns and Ammunition for a Reason. Read this to find out why.