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Health Tax Credit May Return For COBRA

5/28/2015

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A year and a half after Congress let a federal law expire that provided rich federal health insurance premium subsidies to workers who lost their jobs due to foreign competition or were enrolled in pension plans that failed, lawmakers are moving to renew the tax break.

Last week as part of a broader trade bill, H.R. 1314, the Senate agreed to renew the Health Coverage Tax Credit through the end of 2019. The subsidy expired at the end of 2013.

Until its expiration, the HCTC paid 72.5% of health care premiums for eligible beneficiaries: individuals who lost their jobs due to foreign competition, and retirees age 55 through 64 whose pension plans were taken over by the Pension Benefit Guaranty Corp.

Those subsidies could be used to offset premium payments for a variety of health care plans, such as COBRA coverage, and special trusts — known as voluntary employee beneficiary associations — that were organized for employees who lost their jobs in a variety of industries, including steel and auto parts, after their employers failed and went of business.

But Congress let the HCTC subsidies lapse at the end of 2013. Lawmakers saw less need for the subsidies with the 2014 start of health care reform law-created public exchanges and federal subsidies to eligible individuals to offset premiums they paid for exchange coverage.

But observers noted that the HCTC subsidies were, in many cases, more generous than the subsidies created by the Affordable Care Act.

Indeed, a 2013 Government Accountability Office report that found that the majority of individuals who had been receiving the HCTC would pay more for coverage in the public exchanges.

Under the Patient Protection and Affordable Care Act, premium subsidies, whose amounts decline with income, are available to eligible individuals earning up to 400% of the federal poverty level, which is set at $11,770 for an individual in 2015. By contrast, the full HCTC 72.5% premium subsidy had been available to eligible individuals regardless of their income.

“Two-thirds of the people who received the HCTC would receive either no subsidies or smaller subsidies under the Affordable Care Act,” said Alan Reuther, former legislative director for the United Automobile Workers union and now a consultant in Washington, referring to the appeal of the HCTC.

“For certain individuals, qualifying for the generous HCTC can be a better deal than purchasing through the public exchanges where they may or may not be subsidized and where they may be able to obtain coverage through a plan outside of the federal/state exchange,” added Frank McArdle, an independent benefits consultant in Bethesda, Maryland.

The House of Representatives is expected next week to begin consideration of the trade bill to which the renewal of the HCTC is attached.

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The Gravel Road of Reconciliation

5/8/2015

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Picture
Most of us cannot tell the difference between the Formula 1 car above and the Indy Cars that race on Memorial Day in Indiana.  All of us can see that the track above is not ready for this type of car and it is also a sure thing that lap times on gravel would really be slow compared to the now finished track just outside of Austin Texas.

That is my point.  

Over 80% of our clients never reconcile their monthly carrier bills for benefit insurances.  The reason is that the client is using a system that is much like the gravel track above.  It takes forever to do and with the interruptions of e-mails and urgent phone calls, it just gets put off for another month.  Then it is three times harder to do.  The next month it becomes a project that feels like it will take days to complete. 

We have one client that has 7 voided carrier invoices over two months and now they have overpaid their carrier bill by more than $2,000 and have no clue how to claim the credit.  Another client over paid their bill by over $8,000 because three people were not termed off the carrier bill until nearly 5 months after the last date of employment.   What messes these are!

So, how can these folks move from a gravel road to a smooth paved track that will allow reconciliation to be done in 15 minutes each month.

First, acknowledge that it takes three items to reconcile.  The payroll deductions report, the carrier bill and the COBRA activity report.  Make a spreadsheet that has the carrier bill on it ... listed by last name of the participants.  Then a column that shows the payroll deductions, the employer share of the premium and one more column for COBRA.  Move the information for the same month around until it just makes sense to you.  When you get it on there and formatted correctly, it is magic. It will be plain to see any errors.  

The spreadsheet also gives you a Note capability so you can flag pending items and credits or debits.  The carrier bills are always two months behind.  That is why they need to be the first item entered.  The carrier bill has to be paid as presented so tracking the pending credits and debits will be easy month to month.

Last thing.  Only touch this once each month.  Get all the info together, update the spreadsheet by copying last month's into a new worksheet and get the entries updated.  You will soon feel like Staples ... "That was easy!"


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    Frank Surface

    MoneyWise Solutions, Inc.
    Principal

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