27 Aug Affordable Care Act Final Regulations Regarding Minimum Essential Coverage Maintenance
The IRS released final regulations regarding minimum essential coverage maintenance required under the Affordable Care Act for individual taxpayers under IRC 5000A governing the shared responsibility payment.
The document is 75 pages long and I’ll be reviewing it over the next couple of days but I’ve pulled five examples directly below to help taxpayers try to understand what they are up against here in terms of dollar out of pocket costs for failing to carry minimum coverage. In each example the taxpayer operates on a calendar year basis and all members of the taxpayer’s shared responsibility family are ineligible for any of the exemptions described in §1.5000A-3.
“Example 1. Unmarried taxpayer without minimum essential coverage. (i) In 2016, Taxpayer G is an unmarried individual with no dependents. G does not have minimum essential coverage for any month in 2016. G’s household income is $120,000. G’s applicable filing threshold is $12,000. The annual national average
bronze plan premium for G is $5,000. (ii) For each month in 2016, under paragraph (b)(2)(ii) of this section, G’s applicable dollar amount is $695. Under paragraph (b)(2) of this section, G’s flat dollar amount is $695 (the lesser of $695 and $2,085 ($695 x 3)). Under paragraph (b)(3) of this section, G’s excess income amount is $2,700 (($120,000 – $12,000) x 0.025). Therefore, under paragraph (b)(1) of this section, the monthly penalty amount is $225 (the greater of $58 ($695/12) or $225 ($2,700/12)). (iii) The sum of the monthly penalty amounts is $2,700 ($225 x 12). The sum of the monthly national average bronze plan premiums is $5,000 ($5,000/12 x 12). Therefore, under paragraph (a) of this section, the shared responsibility payment imposed on G for 2016 is $2,700 (the lesser of $2,700 or $5,000).
Example 2. Part-year coverage. The facts are the same as in Example 1, except G has minimum essential coverage for January through June. The sum of the monthly penalty amounts is $1,350 ($225 x 6). The sum of the monthly national average bronze
plan premiums is $2,500 ($5,000/12 x 6). Therefore, under paragraph (a) of this section, the shared responsibility payment imposed on G for 2016 is $1,350 (the lesser of $1,350 or $2,500).
Example 3. Family without minimum essential coverage. (i) In 2016, Taxpayers H and J are married and file a joint return. H and J have three children: K, age 21, L, age 15, and M, age 10. No member of the family has minimum essential coverage for any month in 2016. H and J’s household income is $250,000. H and J’s applicable filing threshold is $24,000. The annual national average bronze plan premium for a family of 5 (3 adults, 2 children) is $15,000. (ii) For each month in 2016, under paragraphs (b)(2)(ii) and (b)(2)(iii) of this section, the applicable dollar amount is $2,780 (($695 x 3 adults) + (($695/2) x 2
children)). Under paragraph (b)(2)(i) of this section, the flat dollar amount is $2,085 (the lesser of $2,780 and $2,085 ($695 x 3)). Under paragraph (b)(3) of this section, the excess income amount is $5,650 (($250,000 – $24,000) x 0.025). Therefore, under
paragraph (b)(1) of this section, the monthly penalty amount is $470.83 (the greater of $173.75 ($2,085/12) or $470.83 ($5,650/12)). (iii) The sum of the monthly penalty amounts is $5,650 ($470.83 x 12). The sum of the monthly national average bronze plan premiums is $15,000 ($15,000/12 x 12). Therefore, under paragraph (a) of this section, the shared responsibility payment imposed on H and J for 2016 is $5,650 (the lesser of $5,650 or $15,000).
Example 4. Change in shared responsibility family during the year. (i) The facts are the same as in Example 3, except J has minimum essential coverage for January through June. The annual national average bronze plan premium for a family of 4 (2 adults, 2 children) is $10,000. (ii) For the period January through June 2016, under paragraphs (b)(2)(ii) and (b)(2)(iii) of this section the applicable dollar amount is $2,085 (($695 x 2 adults) +
(($695/2) x 2 children)). Under paragraph (b)(2)(i) of this section, the flat dollar amount is $2,085 (the lesser of $2,085 or $2,085 ($695 x 3)). (iii) For the period July through December 2016, the applicable dollar amount is $2,780 (($695 x 3 adults) + (($695/2) x 2 children)). Under paragraph (b)(2) of this section, the flat dollar amount is $2,085 (the lesser of $2,780 or $2,085 ($695 x 3)). Under paragraph (b)(3) of this section, the excess income amount is $5,650 (($250,000 – $24,000) x 0.025). Therefore, under paragraph (b)(1) of this section, for January
through June the monthly penalty amount is $470.83 (the greater of $173.75. ($2,085/12) or $470.83 ($5,650/12)). The monthly penalty amount for July through December is $470.83 (the greater of $173.75 ($2,085/12) or $470.83 ($5,650/12)). (iv) The sum of the monthly penalty amounts is $5,650 ($470.83 x 12). The sum of the monthly national average bronze plan premiums is $12,500 ((($10,000/12) x 6) + (($15,000/12) x 6))). Therefore, under paragraph (a) of this section, the shared responsibility payment imposed on H and J for 2016 is $5,650 (the lesser of $5,650 or $12,500).
Example 5. Eighteenth birthday during the year. (i) In 2016 Taxpayers S and T are married and file a joint return. S and T have one child, U, who turns 18 years old on June 28. S, T, and U do not enroll in, and as a result are not eligible to receive benefits
under, affordable employer-sponsored coverage offered by T’s employer for 2016. S and T’s household income is $60,000. S and T’s applicable filing threshold is $24,000. The annual national average bronze plan premium for a family of 3 (2 adults, 1 child) is $11,000. (ii) For the period January through June 2016, under paragraphs (b)(2)(ii) and (b)(2)(iii) of this section, the applicable dollar amount is $1,737.50 (($695 x 2 adults) + ($695/2) x 1 child)). Under paragraph (b)(2) of this section, the flat dollar amount is $1,737.50 (the lesser of $1,737.50 or $2,085 ($695 x 3)). (iii) For the period July through December 2016, the applicable dollar amount is $2,085 ($695 x 3). Under paragraph (b)(2) of this section, the flat dollar amount is $2,085 (the lesser of $2,085 or $2,085 ($695 x 3)). Under paragraph (b)(3) of this
section, the excess income amount is $900 (($60,000 – $24,000) x 0.025). Therefore, under paragraph (b)(1) of this section, for January through June the monthly penalty amount is $144.79 (the greater of $144.79 ($1,737.50/12) or $75 ($900/12)). The
monthly penalty amount for July through December is $173.75 (the greater of $173.75 ($2,085/12) or $75 ($900/12)). (iv) The sum of the monthly penalty amounts is $1,911.24 (($144.79 x 6) + ($173.75 x 6)). The sum of the monthly national average bronze plan premiums is $11,000 ($11,000/12 x 12). Therefore, under paragraph (a) of this section, the shared responsibility payment imposed on H and J for 2016 is $1,911.24 (the lesser of $1,911.24 or $11,000).”