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What Tax Reform Means For Small Businesses & Pass-Through Entities

What Tax Reform Means For Small Businesses & Pass-Through Entities

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One of the most significant changes under tax reform is the tax treatment of businesses. Unlike changes to the individual tax scheme, which are temporary and somewhat piecemeal, the changes to the business tax scheme are permanent and fairly comprehensive. It would be impossible to address all of the changes so I’m focusing on what I’ve been asked about most: how the new rules will affect pass-through entities and small businesses.

First, a quick reminder. Currently, you can structure your business in a few ways, including:

  • sole proprietorship is the most simple form of business entity. Taxpayers do not file a separate tax return and instead, business income and expenses are reported on a federal form 1040, Schedule C.
  • partnership is an association of two or more persons to carry on a business and can take different forms (like limited or general partnerships). A partnership files a separate return, a federal form 1065, and passes income and losses to the individual partners who are responsible for reporting that information on their individual tax returns.
  • Limited Liability Company (LLC) is a hybrid entity that offers the option to be taxed as a partnership or a corporation.
  • Single Member Limited Liability Company is an LLC with a single member, typically treated as a “disregarded entity” for federal tax purposes. That means there’s no separate tax form and income and expenses are reported on a Schedule C, just as with a sole proprietorship.
  • C corporation is what most people think of when it comes to business. A C corporation files a federal form 1120 and pays any tax due. Shareholders also pay tax at their individual income tax rates for dividends or other distributions from the company (this is where the term “double tax” comes from).
  • Professional or Personal Service Corporation is a corporation for certain occupations – typically service professions like lawyers, doctors, and architects.
  • An S Corporation is a corporation with tax treatment similar to a partnership. An S corporation files a federal form 1120-S which passes most items of income or loss to shareholders who are responsible for reporting that information on their individual tax returns.

 

Corporate tax rates, like individual tax rates, are progressive. For 2017, corporate rates range from 15% to 39% (except for personal service corporations which are taxed at 35%) while individual tax rates range from 10% to 39.6%. While the brackets vary, the rates for individuals and corporations are pretty closely aligned.

The new tax law now provides for a flat 21% tax rate for corporations (the new tax rates for individuals are here). You can imagine how that could have been problematic without more changes: If companies were taxed at a lower rate than individuals, the pass-through scheme doesn’t work. But creating a new tax rate for the entities would take away the pass-through nature of the entity. Congress’ solution? Business income that passes through to an individual from a pass-through entity and income attributable to a sole proprietorship will be taxed at individual tax rates less a deduction of up to 20% to bring the rate lower.

It sounds easy but it quickly can become tricky since the deduction is subject to limits and restrictions. To understand those, you need some definitions:

  • Qualified business income (QBI). QBI is generally net income from your business without regard for any amount paid by an S corporation that is treated as reasonable compensation, any guaranteed payment for services in business, or any amount paid or incurred to a partner for services outside his or her capacity as a partner. You’ll use the “normal” rules when figuring QBI, so capitalize and amortize expenditures accordingly. One last note: QBI is determined on a per business, not a per taxpayer,  basis.
  • Qualified property. Qualified property is tangible property (typically, things you can touch) subject to depreciation and available for use in your business at the end of the tax year. You must use the property to produce qualified business income (as defined above).
  • Specified service trade or business. A specified service trade or business is any business involving the performance of services in the fields of health, law, consulting, athletics, financial services, brokerage services, or “any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners.” I like to think of it this way: if the success of your business depends on you and not on something that you sell, you’re pretty much included (except for engineering and architecture services, which were specifically excluded). The definition also includes a business where the performance of services consists of investing and investment management trading, or dealing in securities, partnership interests, or commodities.
  • Threshold amount. The threshold amount is the amount above which both the limitation on specified service businesses and the wage limit apply. The threshold amount is $157,500 for individual taxpayers and $315,000 for married taxpayers filing jointly. Phase-ins apply: that means that the benefit decreases as income increases.

Now that we’ve got those definitions down, here’s how to figure the deduction:

If your taxable income is below the threshold amount, the deductible amount for each of your businesses is simply 20% of your QBI with respect to each business.

  • So, if your income is $50,000 and your QBI is $40,000, then your deduction is $8,000, or 20% of your QBI. You’re under the threshold amount so no need to do any more math.

Easy, right?

If you are above the threshold amount, you are subject to limitations and exceptions which are determined by your occupation and a wage (and capital) limit.

Let’s look at specified service trade or businesses first. To figure QBI for a specified service trade or business, you take into account the applicable percentage of qualified items of income, gain, deduction, or loss, and allocable W-2 wages. When figuring the wage (and capital) limit, you’ll include total wages paid to employees during the tax year but not those which are properly allocable to QBI (in other words, don’t double count).

Here’s how it works: Figure 20% of your QBI (a) and compare that to an additional formula (b): the greater of 50% of W-2 wages with respect to your trade or business or the sum of 25% of W-2 wages + 2.5% of the unadjusted basis, immediately after acquisition, of all qualified property. Don’t forget to take into account the applicable percentage rate – 100% less the excess of the taxable income over the threshold amount divided by the range amount or in more simple terms, it’s pro-rated for the amount you’re over the threshold.

  • So let’s say that you are a single taxpayer with taxable income of $200,000. Let’s also say that included in that amount is $100,000 in income from your law firm with applicable W-2 wages of $90,000.
  • For purposes of figuring the deduction, calculate the applicable percentage. The applicable percentage is 15%, or 100% less 85% [($200,000 – threshold amount of $157,500)/$50,000 = 85%].
  • Apply the applicable percentage to QBI (15% of $100,000 = $15,000) and W-2 wages (15% of $90,000 = $13,500).
  • After applying the applicable percentage, your deduction is the lesser 20% of includible QBI (20% of $15,000 = $3,000) or 50% of W-2 wages (50%  x $13,500 = $6,750), or $3,000.

If you are a specified service business and your taxable income exceed the threshold amount plus the phase in range ($207,500 for individual taxpayers and $415,000 for married taxpayers filing jointly), then you lose the deduction completely. In that case, the old pass-through rules apply meaning you pay tax using your individual tax rate.

For all other businesses, if your taxable income exceeds the threshold amount, the wage (and capital) limits begin to kick in. The wage (and capital) limit applies fully for a taxpayer (other than a specified service business) when taxable income exceeds the threshold amount plus the phase in range ($207,500 for individual taxpayers and $415,000 for married taxpayers filing jointly).

Before we do a deeper dive on how the phase in affects the final numbers, let’s look at the wage (and capital) limit: the greater of 50% of W-2 wages with respect to your trade or business or the sum of 25% of W-2 wages + 2.5% of the unadjusted basis, immediately after acquisition, of all qualified property. The addition of qualified property to the formula accommodates businesses which rely on the acquisition of capital, like real estate businesses. In other words, the “W-2 rule” under the Senate plan has been expanded to include wages paid plus capital.

Here’s an example of how the wage (and capital) limit is intended to work:

  • Let’s assume you have $5,000 in W-2 wages, and you buy equipment worth $200,000 and place it in service during the year.
  • According to the formula, 50% of W-2 wages = $2,500
  • And, according to second part of the formula: 25% of W-2 wages + 2.5% of unadjusted basis of the machine = $6,250.
  • The greater of the two amounts is $6,250: use that amount to figure your deduction. Note in this example that we’re aren’t figuring the actual deduction since we don’t have enough information, like total income or QBI. This is just an illustration of how you use the formula to determine the wage (and capital) limit when you have capital and W-2 wages.

If you sell the qualified property before year end, it’s no longer available for use and is not used in the formula. It’s not yet clear under the law what will happen in circumstances such as like-kind exchanges or involuntary conversions – expect guidance from the Internal Revenue Service (IRS).

If you put QBI together with the wage (and capital) limit, you can figure your deduction. Remember that this only applies if you are over the threshold amounts.

Here’s an example of how the whole formula works together:

  • Let’s say you and your spouse file a joint return reporting taxable income of $350,000. Your business (not a specified service business) income was $75,000 and your share of W-2 wages paid by your business was $20,000. There is no qualified property.
  • Under the formula, (a) is 20% of your qualified business income, or $15,000.
  • Under the formula, (b) is 50% of W-2 wages, or $10,000 (since 25% of W-2 wages + 0 = $5,000 and you use the bigger number under the wage (and capital) limit part of the formula).
  • Since (b) is less than (a), the wage (and capital) limit applies and your deduction is reduced according to the phase in. The applicable percentage is ($350,000 – $315,000 threshold amount)/$100,000, or 35%.
  • You’ll reduce the tentative QBI deduction of $15,000 (a) by the difference between (a) and (b) (or $5,000) times the applicable percentage of 35% ($5,000 x 35% = $1,750).
  • Your deduction should be $13,250 (or $15,000 – $1,750).

You should be able to deduce that the higher the applicable percentage, the more that the wage limit applies. Let’s switch up the numbers in the above example to have income of just $1,000 less than the top of the range:

  • The applicable percentage is ($414,000 – $315,000 threshold amount)/$100,000, or 99%.
  • You’ll reduce the tentative QBI deduction of $15,000 (a) by the difference between (a) and (b) (or $5,000) times the applicable percentage of 99% ($5,000 x 35% = $4,950).
  • Your deduction should be $10,050 (or $15,000 – $4,950).

And if you’ve reached the top of the range? The wage limit applies in full.

No matter which variation of the formula applies, your deduction may not exceed your taxable income for the year (reduced by net capital gain). If the net amount of your QBI is a loss, you’ll carry it forward as a loss to the next tax year.

And remember, these deductions from income reduce your taxable income on your individual return. It does not change how you calculate your taxable income inside your business. Business expenses remain deductible.

Got all that? Admittedly, I am relying on “easy” rules and examples for purposes of explanation. Additional rules apply to qualified cooperative dividends, qualified REIT dividends, and qualified publicly traded partnership income. Also complicating matters? Losses. If those items affect you, consult with your tax professional. Although, who are we kidding? Even if they don’t apply to you, you should consult with your tax professional.

And yes, there are a million “what ifs?” to be considered. Remember, this is just an overview. With respect to questions about the value of incorporating and other planning issues, there is no one size fits all answer but I will be following up with some general planning tips shortly.

And if you catch a math or other error, my apologies in advance. This wasn’t easy to work through and without further guidance from Congress or IRS, I am, like many of my peers, just doing the best I can.

5 things small business owners should know or do in 2018

5 things small business owners should know or do in 2018

FILE – In this Monday, Dec. 4, 2017, file photo, Gail Trauco, owner of The PharmaKon, looks over her health insurance benefit comparison chart which shows out-of-network coverages dropped for 2018, at her home office in Peachtree City, Ga. Most…

NEW YORK (AP) — Small business owners have entered 2018 with many questions about how big their tax bills will be, but they’re also optimistic about profiting from a strong economy. And aside from financial matters, owners with employees must stay mindful about one of the troubling issues of 2017, sexual harassment.

Here are five things small business owners need to know about or do in 2018:

TAXES

The new tax law changes rates for many small business owners, whether they are sole proprietorships, partnerships or corporations. But the benefits aren’t across the board: Some owners will lose out on savings because they’ll end 2018 with income above thresholds set out in the law, or they work in fields like accounting, law or consulting.

Many business owners aren’t sure yet how the law will affect them. Although accountants and other tax professionals may have given owners some general ideas about the impact, the IRS must still write regulations that will spell out what taxpayers can do under the law and how they must comply.

Some things are known. The Section 179 deduction that small businesses can use to get an immediate break on purchases of equipment ranging from computers to vehicles to manufacturing equipment doubles this year to $1 million.

And separate from the tax bill, the IRS has set the standard mileage rate for business use for a car at 54.5 cents per mile, up 1 cent from 2017. The rate is one of two methods for accounting for how much an owner spent on using a car for business; the second is to deduct the actual expenses for the car. Under the actual expense method an owner must calculate the percentage of miles the car is driven for business, and apply that percentage to expenses like lease payments, fuel, maintenance, repairs, insurance and depreciation.

THE ECONOMY

If the economy maintains the robust expansion it showed in 2017, owners’ profits and their optimism should grow as well. But that may not translate into more jobs.

In multiple surveys last year, owners indicated they’re generally sticking to their conservative hiring patterns. Job creation plans ticked higher in a fourth-quarter survey by researchers at Pepperdine University’s Graziadio School of Business and Management and Dun & Bradstreet Corp., with 42 percent of small business owners saying they’d add one to two staffers in the next six months, up from 38 percent in the third quarter.

Owners have said a significant revenue increase might persuade them to hire. For many, that could depend on whether consumer spending remains strong. The government’s figures on retail sales and consumer spending show Americans were feeling fine about spending as 2017 ended, a sign that business will be good in the new year. Retail sales rose 0.8 percent in November after a 0.5 percent gain in October, according to the Commerce Department. Overall consumer spending rose 0.6 percent in November after rising 0.2 percent in October.

Many small businesses are dependent on consumers, among them restaurants, retailers and service providers like hair salons. Consumers may feel like spending if the stock market extends its big 2017 advance; the Dow Jones industrial average rose 25 percent, giving many people with 401(k)s and other accounts a stronger sense of financial well-being.

Unpredictable events like blizzards and hurricanes can hurt spending, and slow the economy. But if consumers regain their confidence quickly, small businesses are likely to shrug off any dips.

HEALTH CARE

Most companies’ health care plans are set for 2018, but there will be some changes when it comes time to choose policies that begin later this year or in 2019.

Owners who want to sign up for group insurance through the government’s Small Business Health Options Program, or SHOP, now must do so through a health insurance agent or broker or directly through an insurance company. They’re no longer able to sign up through the government website, www.healthcare.gov. However, they can visit the site to get information.

The new tax law has ended the requirement that individuals buy health insurance starting in 2019. Some very small business owners had stopped offering health plans when the Affordable Care Act was enacted because their staffers were able to get coverage through health insurance exchanges. While businesses with fewer than 50 employees aren’t required to offer insurance, some may find their staffers are interested in group coverage.

SEXUAL HARASSMENT

Human resources experts usually advise business owners to update their employee handbooks early in the year. It’s a task that’s more of a priority at many companies this year following a series of reports of workplace sexual harassment.

“Every employer should have a policy in their handbook that makes clear that sexual harassment is not welcome and that defines sexual harassment,” says Jay Starkman, CEO of Engage PEO, an HR provider based in Hollywood, Florida.

Owners can find templates for sexual harassment policies online. Whether they’re creating a policy for the first time or already have one, they should have it reviewed by an HR professional or an attorney with expertise in sexual harassment or employment law.

Companies may also want to consider training sessions to educate staffers and managers about harassment — what it is, how to recognize it, how to report it to owners or senior executives.

Owners who don’t have employee handbooks should think about creating them. Besides harassment policies, they should contain the company’s policies on discrimination, discipline, vacations, performance reviews, ethics and use of company computers, among many other issues. They should also include information on benefits. Owners can find templates online.

MINIMUM WAGE RISES

Eighteen states have higher minimum wages as of Dec. 31, 2017, or Jan. 1.

Laws were passed boosting the wage floor in 10 of those states: Arizona, California, Colorado, Hawaii, Maine, Michigan, New York, Rhode Island, Vermont and Washington state.

Eight states see increases because their minimums are tied to the inflation rate. They are Alaska, Florida, Minnesota, Missouri, Montana, New Jersey, Ohio and South Dakota.

Small businesses such as restaurants or food service companies are most likely to now be paying their workers more under the higher minimums. Three-fifths of all workers paid at or below the federal minimum wage of $7.25 an hour are in the leisure and hospitality industries. Almost all of those are restaurants or food service businesses, according to the Department of Labor.

Top 10 reasons your business needs consulting

Top 10 reasons your business needs consulting

business websiteWhether you’re starting a new company or growing an existing business, one day you might need the help of a professional. A consultancy business plan can save you thousands of dollars. A great consultant provides a fresh perspective, innovation ideas, specific expertise and other things to improve the client’s condition.

Here are the top ten reasons why companies hire business consultant:

1. An objective onlooker is needed

As we turn to friends and family for personal advice, ventures turn to an expert in business. An experienced consultant can provide a fresh viewpoint and identify problems that a client wouldn’t have been able to see.

 2. To get a specific expertise

Often clients hire professionals who have a specialized skill set they need right now and couldn’t find it in-house.

3. To obtain assistance with a business launch

Due to lack of prior experience or knowledge often new entrepreneurs need someone to assist them in the very first steps of business development. So, they start to look “business consultants near me”. A good consultancy service guarantees successful launches of operations using tried and tested methods.

4. To cut costs

Hiring a business consultant you can save thousands of dollars per week because they don’t need benefits as full-time employees. Generally, it seems like a consultant’s fees are higher than an employee’s salary, but not over the long haul.

5. To do a “dirty job”

Obviously, people find it difficult to cut their own staff. That’s why ventures need a business consultant, who is impartial and can easily handle such unpleasant tasks. In the movie Up in the Air, George Clooney’s character doing such job — he was engaged to go around the country conducting employment terminations on behalf of his clients.

6. To help with a small business optimization

Lots of newly-made entrepreneurs faced with the extremely fast growth and they start to think “I need help running my business”. So, maybe it’s time to turn to a consultant. The right expert can quickly evaluate all areas of your business, and based on this determine the processes to increase productivity and offer some beneficial challenges.

7. To determine the root of a problem

Let’s face it: sooner or later every business has temporary issues, such as falling in sales, or no flow of new customers. In this case, a consultant’s role to analyze, diagnose and criticize. Especially it works with a business consultant for small business when they also bring tons of ideas to solve the issues and develop the business.

8. To enable changes

Implement changes for a small business can be too hard because of lack particular skills for carrying these changes out. In this case, consulting is beneficial for a business, as a consultant knows what to do and can do things without any risk and worrying about the employee morale.

9. Need to get out of the box

When you have really tight budgets, you need to be more creative to achieve your goals. A talented consultant who provides innovative approach will cost you some money, but save a lot of time to get what you want.

10. To share contacts

Great business consultants have their own lists of contacts with all business’s movers and shakers in it. So, if you want to tap into that knowledge try to ask business consultants.

Hospital Indemnity Coverage On the Rise

By Michael Waddell

As a way of offsetting high out-of-pocket medical expenses following a hospital stay, including ambulance costs, more employees are adding supplemental hospital indemnity coverage to their plans through their employers. With the cost of the average hospital stay at nearly $20,000 in Tennessee and the average cost per night topping $4,800, “gap plans” are becoming more popular ways for people to bridge the gap on potential expenses.

“The trend has been years in the making,” said Tom Wiffler, UnitedHealthcare Specialty Benefits CEO. “Indemnity products have been around for decades. I think employers are recognizing that there is real value in providing these kinds of plans.”

Roughly 21 percent of employers with more than 500 employees now offer hospital indemnity coverage, according to the Mercer National Survey of Employer-Sponsored Health Plans.

“The benefit can be found in just basic peace of mind that the employee gets from covering expenses that are associated with hospital stays that may exceed their own means to cover,” said Wiffler, who points out that two-thirds of Americans have less than $1,000 in the bank. He expects more employees in Middle America to take on the additional coverage.

With hospital indemnity coverage, an employee who has a hospital stay will receive a lump sum of money, determined by the plan he or she has, that can be used however he or she chooses to handle medical bills or other household bills.

Smaller plans can cost as low as $100 to $125 per year.

“So one hospital stay will more than pay for itself for the premium that you’re paying,” said Gary Harger, UnitedHealthcare vice president of supplemental health products. “The beauty of this plan is its broad appeal. Unlike a critical illness or accident plan where there might be a more definitive target demographic, this plan really applies to any demographic because it’s about a hospital stay regardless of what age you are and what reason you are going in for your hospital stay.”

HRO Partners, an enrollment services company and human resource/benefits consulting firm for large and small employers, represents a variety of supplemental insurance carriers.

AUSTIN BAKER

“Supplemental or gap plans have been one of our strongest trending lines in terms of requests and offerings,” said Austin Baker, president of HRO Partners. “We’ve seen great growth there, and we’ve seen a lot of value for both employers and employees.”

HRO gets to hear from employees one-on-one about their coverage and what they are looking for, and the company works with employers to design programs to help meet employee needs.

Baker cites a rural Tennessee school system with about 300 employees, where the employer and employees saved a combined $1.1 million in health insurance premiums in the first year by using supplemental gap coverage like hospital indemnity/confinement. In another case, a public sector entity with 6,000 employees saved more than $20 million by making the supplemental coverage a volunteer offering.

“It’s an excellent strategy when used in the right way,” said Baker, who has also personally benefited from having the supplemental coverage, due to major medical incidents that required a hospital stay over the past couple of years.

Research shows that adding ancillary benefits to a core medical benefits offering can help improve companies’ bottom lines by increasing productivity and employee engagement. According to a report by LIMRA, a worldwide association of insurance and financial services companies, ancillary benefits can help attract and retain employees while improving morale.

Tim Finnell, principal of Group Benefits LLC, is seeing more employees adopting the coverage as a payroll deduction.

“We are not seeing employers purchasing supplemental hospital indemnity at a high rate (just a few),” Finnell said. “However, many are offering it to employees on a voluntary payroll deduction basis. As deductibles continue to rise, employees are purchasing supplemental plans to protect against the cost of a hospital stay.”

As an example, one indemnity plan with premiums of $11.75 per month for a 35-year-old and $16.75 per month for a 55-year-old pays a lump sum of $1,000 per admission to a hospital.

“If you stay in the hospital, you’re going to hit your deductible. There’s not many ways around it,” Baker said. “Sixty percent of Americans can’t pay a $500 bill. We need to change that. We need to help people save and have more of a nest egg, and we need to help people afford to do that out of their checks by saving money on their premiums. These gap programs are just so affordable.”

UnitedHealthcare’s Hospital Indemnity Protection plans are available to businesses with 51 or more eligible employees in 45 states and Washington, D.C., and the company also offers the plans to individuals who buy their own health insurance in 32 states.

Akron Public Schools Use Supplemental Benefits to Lower Bills

http://www.cleveland.com/akron/index.ssf/2017/12/akron_public_schools_district.html

AKRON, Ohio – Akron Public Schools will offer employees and their families supplemental health insurance that’s designed to drive down costs. Health care will be offered out of a new facility established at the district’s administration building near downtown Akron.

The insurance will not replace the district’s existing health plan but will offer free supplemental  care through Paladina Health. School employees can opt to sign up for the plan and the district will pay the fee — $99 for adults and $35 for children, said Akron Public Schools CFO Ryan Pendleton.

School board members on Monday gave the go-ahead for Akron-based Hasensab Architects to provide $39,000 in architectural work at 400 W. Market St. The site, has been a “swing space,” housing the school district’s elementary schools while new buildings were under construction.

Case Elementary students meet there now but will start at the new Case Community Learning Center next fall, said Akron Public Schools spokesman Mark Williamson. The building is also the future home of the LeBron James family Foundation I Promise School.

Officials hope the supplementary health care option will offer more accessible care to employees and drive down the district’s health care costs by offsetting rate increases.

Between school district employees and their dependents, 7,500-8,000 people are on the district’s health plan each year. The school district currently pays about $50 million a year for health insurance and medical benefits, such as disability insurance, Pendleton said.

However, rate increases have averaged about 10 percent, or about $5 million per year. The district’s hope is that supplemental insurance will slow or stop those increases by offering employees and their families high quality, accessible care.

Paladina doctors see from 700-800 patients per year, as opposed to regular doctors 2,500-3,000 patients per year, meaning Akron school district employees and their dependents will be seen more quickly and have more time with the physicians.

“This is a fairly new and positively disrupting approach,” Pendleton said. “A year from today I think we’ll be seeing very positive numbers and a positive return on investment.”

Adding the supplemental plan also gives the school district better bargaining power when negotiating with existing healthcare providers, who now “sharpen their pencils on some of the services they provide,” he said.

“We’re not going to lesson that $50 million initially but we can potentially cut in half what next year’s increase will be,” Pendleton said. “Those dollars are real when we can increase the health and welfare of employees.”

CRITICAL SOLUTIONS INSURANCE

Lump-sum benefit
 $10,000, $20,000, $30,000, $40,000, $50,000, $60,000 or $70,000

FREE QUOTES

This benefit is paid when you are first diagnosed with cancer (except skin cancer), heart attack, stroke or end-stage renal failure—based on the coverage you’ve selected—with acceptable proof of diagnosis. This benefit is payable once for each insured, and premiums are based on the benefit level you select. Coverage for child(ren) is available at $10,000.

Wellness benefit
$50 per year for critical illness cancer only coverage
$50 per year for critical illness without cancer coverage
$100 per year for critical illness with cancer coverage

This benefit pays for covered screenings. Covered screenings vary based on the selected coverage; please refer to your policy for a complete list of covered screenings. This preventive benefit is limited to one test per person per calendar year. This benefit is
paid whether or not you are diagnosed with cancer, heart attack, stroke or end-stage renal failure.

Hospital confinement 
$200 per day, 1–30 days
$400 per day, 31+ days
Benefits are paid each day you are confined to a hospital when you are diagnosed with cancer, heart attack, stroke or end-stage renal failure, based on the coverage you selected.

Consultation benefit
$250 per specified critical illness diagnosis
This benefit is paid when you are diagnosed with cancer, heart attack, stroke or end-stage renal failure and consult a physician or alternative care provider for a treatment plan. The benefit is paid one time according to the coverage you selected.
Radiation and chemotherapy
$200 per day or $200 per drug
This benefit is payable when a physician prescribes radiation or chemotherapy as part of a cancer treatment plan. Treatment may be performed on an inpatient or outpatient basis. At the time of administration, the treatment must be fully or investigationally approved by the U.S. Food and Drug Administration for cancer treatment.

Radiation: $200 per day
Chemotherapy, injected by medical personnel: $200 per day
Injections must be made by medical personnel in a physician’s office, clinic or hospital.
Chemotherapy, self-administered: $200 per drug
This benefit is limited to $1,600 per month.

CRITICAL SOLUTIONS BROCHURE

Accidental Injury Plans

ACCIDENTAL INJURY PLANS

You can’t prevent every accident—but you can protect yourself and your family with ACCIDENT insurance.

FREE QUOTES

Examples of accident coverage

Inpatient hospital confinement             $500 per day
Intensive care unit                                         $1,000 per day

Ambulance
Ground ambulance:                                       $250
Air ambulance:                                                 $1,500

Emergency room services
Adult:                                                                     $500
Child(ren):                                                           $350
Transportation                                                 $600
Family lodging                                                  $125 per day
Physician’s office visit                                 $50 per visit
Physical therapy                                             $50 per visit
Medical imaging                                              $200
Medical appliances                                        $125
Prostheses                                                          $750
Blood and plasma                                           $200

Fracture

Hip or thigh                                                       $ 3,200
Vertebrae                                                          $ 2,900
Pelvis                                                                    $ 2,550
Skull (depressed)                                           $ 2,400
Leg                                                                          $ 2,000
Foot, ankle or kneecap                               $ 1,600
Forearm or hand                                            $ 1,600
Lower jaw                                                           $ 1,300
Shoulder blade, collar bone, sternum$ 1,300
Skull (simple)                                                     $ 1,200
Upper arm or upper jaw                             $ 1,200
Facial bones                                                       $ 1,000
Vertebral processes                                      $ 750
Coccyx, rib, finger, toe or nose                $ 250

Dislocation

Hip                                                                           $ 3,000
Knee (not kneecap)                                        $ 2,100
Shoulder                                                               $ 1,600
Foot or ankle                                                      $ 1,300
Hand                                                                        $ 1,200
Lower jaw                                                             $ 1,000
Wrist                                                                       $ 800
Elbow                                                                      $ 650
Finger or toe                                                       $ 250
Laceration  More than 5 inches               $ 400
2 to 5 inches                                                        $ 200
Up to 2 inches                                                     $ 100
Injuries requiring surgery Eye injury    $ 200
Tendon or ligament
Single                                                                       $ 800
Multiple                                                                 $ 1,200
Ruptured disc
During first year of coverage                    $ 200
After first year of coverage                        $ 800
Torn cartilage
During first year of coverage                    $ 200
After first year of coverage                        $ 800
Hernia
During first year of coverage                    $ 200
After first year of coverage                        $ 400
Paralysis Paraplegia                                       $ 10,000
Quadriplegia                                                       $ 12,500
Burn Second- or third-degree burn       $ 1,200

DISMEMBERMENT
One finger or toe                                             $ 2,000
More than one finger and/or toe           $ 2,500
One eye, hand, foot, arm or leg               $ 12,000
More than one                                                   $ 40,000

TYPE OF ACCIDENT
Common carrier                                              $ 150,000
Motorized vehicle                                          $ 125,000
Accidental death                                             $ 75,000

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Health Care Reform: The Basics for Small and Large Employers

Health Care Reform: The Basics for Small and Large Employers

As more provisions of the Affordable Care Act (ACA) become reality, employers should be increasingly aware of the law’s impact on their organization and on employees. Health care reform law will affect U.S. organizations of all sizes, whether or not they offer health insurance benefits to employees. The key provisions of health care reform and implications for small, medium and large employers have been outlined below to help assist you.

SMALL-BUSINESS TAX CREDITS ■ S

If your full-time workforce has average wages of less than $50,000, your business may be eligible for the Small Business Health Care Tax Credit for the 2014 and 2015 calendar years. The tax credit will be equal to 50% of your health insurance premium costs.1 The credit is available only to employers who purchase insurance through the SHOP Marketplace. SMALL BUSINESS HEALTH OPTION PROGRAM (SHOP)

MARKETPLACE    ■ S ■ M

Employers with up to 50 workers (in some states, up to 100) may choose to offer health insurance to all full-time employees through the SHOP Marketplace. The SHOP employer-choice model is available for 2014. Employers can select one or more plans, and employees can choose their coverage from those options. Beginning in 2015, the employee-choice SHOP model will be available. The employer will select an actuarial value level from four options: bronze, silver, gold and platinum. Employees then can select any of the plans offered at that level in their state. Also in 2015, the SHOP Marketplace will provide a group billing service to combine employees’ premium costs and prepare a single invoice for the employer.

EMPLOYER MANDATE ■ L

The employer mandate is being delayed until 2015. At that time, large employers must either offer affordable, minimum value coverage to full-time employees and their dependents,1 or pay a “shared responsibility payment” if one or more employees receives a premium tax credit or subsidy through the Health Insurance Marketplace.

EXTRA MEDICARE WITHHOLDING ■ S ■ M ■ L

A new additional Medicare tax of 0.9% took effect in 2013, raising the Medicare tax rate for the highest wage earners from 1.45% to 2.35%. This rate applies to the individual’s wages, Railroad Retirement Tax Act compensation and self-employment income that exceed $250,000 for married taxpayers filing jointly, $125,000 for married taxpayers filing separately and $200,000 for most others. Employers are responsible for withholding the full Medicare tax amount from employee wages and compensation.

MEDICARE ASSESSMENT ON NET INVESTMENT INCOME ■ S ■ M ■ L

Beginning in 2013, a new 3.8% net investment income tax applies to individuals, estates and trusts with net investment income and modified adjusted gross income that combine to exceed $250,000 for married taxpayers filing jointly, $125,000 for married taxpayers filing separately and $200,000 for most others. The rate applies to all types of investment income, including interest, dividends, capital gains, rental and royalty income, nonqualified annuities, proceeds from trading financial instruments or commodities, and other types of passive income.

WAITING PERIOD LIMIT ■ S ■ M ■ L

Beginning on January 1, 2014, the maximum permissible waiting period under an employer group health plan is 90 days.

TRANSITIONAL REINSURANCE PROGRAM CONTRIBUTIONS ■ S ■ M ■ L

From 2014 through 2016, all group health plans are required to contribute a per-capita amount toward the individual insurance market’s transitional reinsurance program. The amount is paid by the insurer or, for self-funded plans, by the third-party administrator.

MEDICAL-LOSS REBATES ■ S ■ M ■ L

Depending upon a group’s size, the insurance company must use 80% or 85% of premium dollars to pay medical claims or otherwise improve healthcare quality. An insurer that misses the target must provide a rebate to the employer, who then will rebate a share to each employee.

W-2 REPORTING ■ L

Large employers—i.e., those issuing 250 or more W-2 forms in a calendar year—must report the total cost of group health plan coverage and certain pretax-funded supplemental health benefits on each employee’s annual W-2. Reporting is optional for employers who file fewer than 250 W-2s. The purpose is to provide employees with information on the costs of their health plan coverage.

FLEXIBLE SPENDING ACCOUNT (FSA) LIMITS ■ S ■ M ■ L

The maximum annual pretax amount an employee may contribute to an employer-sponsored medical FSA is $2,500. The maximum will be indexed for cost-of-living adjustments in future plan years.

EMPLOYER WELLNESS INCENTIVES ■ S ■ M ■ L

Health care reform increases the level of permissible rewards for health-contingent wellness incentives. These types of incentives generally require employees to meet a health standard (e.g., a normal BMI) to earn a reward. The maximum reward is now 30% of the total cost of health coverage. A higher reward—up to 50%—can be offered for programs that help employees reduce or quit tobacco use.

COVERAGE REPORTING ■ S ■ M ■ L

Beginning with the 2015 plan year, all self-insured employers and all large employers subject to the employer mandate must report certain coverage information to the Internal Revenue Service. Reporting details include the names of covered employees, coverage dates and employer-paid premium amounts. On January 31 of each year, employers will be required to provide an individual statement with these details for each employee.