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PPACA New Taxes for 2013

Posted in Plan Administration, Welfare Plans

As we close in on the end of 2012, I thought it was worth mentioning some new taxes (and some other tax changes) that go into effect in 2013 as a result of the provisions of PPACA.  Some have direct impact on employers, both for reporting and withholding purposes, while others may simply add to the cost of providing medical coverage to employees.  In any event, here they are:

  1. A 3.8% surtax on investment income for households making in excess of $250,000 ($200,000 single filer)
  2. Medicare payroll taxes increase from 1.45% to 2.35% for employees on wages in excess of $250,000 per household ($200,000 single) and self-employed tax increases from 2.9% to 3.8%.
  3. A 2.3% excise tax is imposed on medical device manufacturers.
  4. Medical expense deduction is raised from 7.5% to 10% of AGI
  5. FSAs are capped at $2,500
  6. Elimination of tax deduction for employer-provided retirement drug coverage

For employers, as plan sponsors, item 5 means you have to make sure your cafeteria plans have been properly amended and that the limit is in place for the 2013 plan year.  For items 1 and 2, employers should make sure that their payroll service provider, payroll department and/or accountants are aware of and prepared to implement the changes.  Throughout 2013, and as we get closer to 2014, we can expect more PPACA guidance to be issued by the respective regulatory agencies.  In the mean time, make sure that your 2013 benefits compliance strategy includes preparation for the 2014 changes so the next new year does not surprise you.