When Coloradans go to the polls this November, they’ll face a decision on an issue that could have a greater effect on their everyday lives than anything else on the ballot. No, not the presidential election, but Amendment 69, or ColoradoCare a government-run, single-payer health care system fueled by $25 billion in new taxes in the first year alone.

To put this massive amount into perspective, consider that the state’s entire spending is $27 billion, so this one program would essentially double the Colorado budget.

Amendment 69 means new income taxes for everyone

While there are many unanswered questions about how this immense new program would work, the proposed legislation is clear on who’ll pay for it:

Employers would pay a new 6.67 percent payroll tax.

Workers would pay another 3.33 percent payroll tax.

Many businesses would pay both sides of the tax, for a total of 10 percent.

This double whammy would apply to more than 235,000 Colorado companies structured as “pass-through” entities – sole proprietors, partnerships, S corporations, LLCs, LLPs, many trusts, and more.

On top of that, there’s a 10 percent tax on non-payroll sources of income, such as business interests, rentals, capital gains, even taxable retirement benefits like Social Security and pensions.

The $25 billion-per-year price tag tops the list of reasons to vote NO on Amendment 69, not to mention the new 10 percent tax burden on your clients, the affect it will have on the health insurance industry and the impact ColoradoCare will have on the overall Colorado economy.

It’s our responsibility to take action – visit Colorado For Coloradans for more information.

In December 2015, the Internal Revenue Service (IRS) issued a final rule that clarifies various topics relating to the Patient Protection and Affordable Care Act (ACA) and premium tax credit eligibility provisions. The rule finalizes regulations that were proposed years earlier.

Child Income

The final rule clarified language relating to the calculation of a taxpayer’s household income, which includes the modified gross adjusted income of the taxpayer and the members of their family who are required to file an income tax return. The final rule provides that when a parent makes an election, household income includes the child’s gross income on the parent’s return. Premium tax credit eligibility is based on the child’s modified adjusted gross income (MAGI), which might not be the same as the amount reported as gross income.

Wellness Incentives

When calculating affordability of employer coverage when wellness incentives or penalties are offered through a wellness program, the final regulations state that employers must assume each employee fails to satisfy the requirements of the wellness program, unless it is a non-discriminatory wellness program related to tobacco use. For nondiscriminatory tobacco use incentives, the affordability calculation can assume all employees earn the incentive or are not charged the penalty.

HRA Contributions and Flex Credits

Mirroring guidance from IRS Notice 2015-87, the final rule clarifies that health reimbursement arrangement (HRA) contributions by an employer that may be used to pay premiums for an eligible employer sponsored plan are counted toward the employee’s required contribution, subsequently reducing the amount required for their contribution.

Similarly, an employer’s flex contributions to a cafeteria plan can reduce the amount of the employee portion of the premium so long as the employee may not opt to receive the amount as a taxable benefit, the flex credit may be used to pay for the minimum essential coverage (MEC), and the employee may use the amount only to pay for medical care. If the flex contribution can be used to pay for non-health care benefits (such as dependent care), it could not be used to reduce the amount of the employee premium for affordability purposes. Furthermore, if an employee is provided with a flex contribution that may be used for health expenses, but may be used for non-health benefits, and is designed so an employee who elects the employer health plan must forego any of the flex plan’s non-health benefits, those flex benefits may not be used to reduce the employee’s premium for affordability purposes.

Continuation Coverage

The final rule also provides guidance on continuation coverage post-employment. Individuals who are offered coverage post-employment (through COBRA or retiree coverage) will not be disqualified from a premium tax credit eligibility unless they enroll in the coverage. If an individual who is still an employee is offered COBRA coverage (typically due to a reduction in hours) that is affordable and minimum value, he or she will not be eligible for premium tax credits.

Mid-month Enrollment

Children who are enrolled mid-month due to birth, adoption, placement by court order, or placement for adoption or foster care, will be treated as being enrolled from the first day of the month for purposes of premium tax credit eligibility.

MORE TALK ON an excise tax for high-cost coverage that would come to be referred to as the Cadillac tax. Although the tax isn’t slated to be imposed until 2018, we get a lot of questions about it. So here’s a look at where we are now and how far we have to go before the tax is actually imposed on anyone.

Basically, the Cadillac tax is a 40 percent tax on the amount by which the monthly cost of an employee’s employer-sponsored health coverage exceeds a certain threshold. With that basic premise come many other questions:

What Is the Threshold? The threshold amount for 2018 is $10,200 for self-only coverage and $27,500 for other-than-self-only coverage (e.g., self + spouse, self + children, family).

What Goes into That Cost Calculation? At this time, the value of the plan is expected to include the cost of medical coverage in addition to coverage provided through reimbursement arrangements. So, in essence, cost equals the medical premium amount plus FSA, HSA and HRA coverage. Also keep in mind that coverage for long-term care and for HIPAA-excepted benefits isn’t included.

Who Pays the Tax? The tax is imposed on “coverage providers.” For insured plans, the insurer is the coverage provider, and the insurer is responsible for paying the tax. Keep in mind that the insurer will likely pass that cost onto the employer/group health plan. For self-insured plans and HSAs, the employer is the coverage provider and is responsible for the tax. For all other types of coverage, the coverage provider is the “person that administers the plan.”

Are There Special Considerations? Yes. The annual limits are increased by $1,650 and $3,450, respectively, for employees who are in high-risk professions – such as law enforcement officers, paramedics, construction workers, miners and longshoremen – and for 55-year-old individuals who are not Medicare eligible and are receiving employer-sponsored retiree health coverage. Additionally, for multi-employer plans, the $27,500 family threshold will be used for all insureds regardless of the tier of coverage.

Although the tax isn’t to be imposed for another two and a half years, some employers are already considering what changes may need to be made to avoid the tax — hence the question of whether or not “greatness will go out of style” when it comes to Cadillac-level benefit plans. However, we caution employers not to jump ahead of themselves by making changes based on the Cadillac tax. (Admittedly, this is probably the only time that compliance will ever tell employers to hold off on considering compliance, but follow me here.)

The first reason we say to hold off on making changes based on the Cadillac tax is that the IRS has issued very little guidance. There hasn’t been a final regulation or even a proposed regulation on the Cadillac tax. All we’ve seen in the way of guidance is IRS Notice 2015-16, which was really just a request for comments in anticipation of a proposed rule. Although the IRS revealed some “possible” future regulations, they really only addressed two aspects of the tax: possibly allowing employers to calculate cost based on the number of participants in the family instead of based on two tiers (self-only and anything-other-than-self-only) and possibly changing the threshold values ($10,200 and $27,500) to base figures with index factors added.

However, the notice doesn’t settle anything. The IRS solicited comments that were due in May, after which they’ll publish a proposed regulation. That proposed regulation will then be open to a comment period and hearing before a final regulation can be passed. It’s clear that we’re still in the early stages of the regulations on the Cadillac tax.

Second, a lot could happen politically before 2018. Although we don’t generally give compliance advice based on the political climate, it’s important to note that we could have a different composition of Congress and will definitely have a different president between now and 2018. Considering the fact that there’s still a lot of debate surrounding this tax, the 2018 version of the Cadillac tax – if it even still exists – may be virtually unrecognizable from the provision we have today. As such, it may not be the best idea for employers to completely change their benefits before we know more.

Obviously, a discussion about the basics of the Cadillac tax will be important for clients who sponsor self-insured plans.

However, other than that, we’re waiting to receive additional guidance, which we’ll definitely pass on as we get closer to the effective date of the provision. Once that guidance is received, we’ll be able to better assist in providing advice to employers on appropriate plan design changes.