May 24 2010
New Tax on Health Care
New Email Regarding Health Care Changes
A new viral email has hit the streets that discusses new taxes on health care provided by private and public employers. While it is rooted in fact, the email leaves out an incredible number of pertinent items, most of all the fact that it won’t go into effect until 2018 and that the actual tax only applies to so called ‘Cadillac’ health insurance plans – those that cost more than $10,500 for individual plans and $27,500 for family coverage. And the tax would only be applicable to anything that exceeds the $27,500 threshold. It also contains a very clear misstatement that the cost of health care will be added to your gross income next year. A response from our Government Relations team follows the viral email.
The Email
You really need to read this……starts nextext year …This is part of the new Health Care Bill.
Contacted my Congressman about House bill HR3590 the health care bill just passed. I asked for a summary of changes.
The aid directed me to go to www.thomas.gov ; enter HR3590 in the search Box and look for summaries.
Starting in 2011 (next year folks) your W 2 tax form sent by your employer will be increased to show the value of what ever health insurance you are given by the company. It does not matter if that’s a private concern or governmental body of some sort. If you’re retired, so what; your gross will go up by the amount of insurance you get.
You will be required to pay taxes on a large sum of money that you have never seen.
Take your tax form you just finished and see what $15,000 or $20,000 additional gross does to your tax debt. That’s what you’ll pay next year. For many it also puts you into a new higher bracket so it’s even worse.
This is how the government is going to buy insurance for 15 % that don’t have insurance and it’s only part of the tax increases.
Not believing this I researched the summaries and here’s what I’m reading:
On page 25 of 29:
TITLE IX REVENUE PROVISIONS- SUBTITLE A: REVENUE OFFSET PROVISIONS-(sec. 9001, as modified by sec. 10901) Sec.9002. “requires employers to include in the W-2 form of each employee the aggregate cost of applicable employer sponsored group health coverage that is excludable from the employees gross income.”
Joan Pryde is the senior tax editor for the Kiplinger letters. Go to Kiplingers and read about 13 tax changes that could affect you. Number 3 is what I just told you about.
Why am I sending you this? The same reason I hope you forward this to every single person in your address book. People have the right to know the truth because an election is coming in November.
MOAA’s Response
This is a classic case of someone taking a fact and twisting it into something else.
Yes, the new law requires an entry on the W-2 showing the cost of employer-provided care.
But that doesn’t mean the employee will be taxed on it. the purpose of including it on the W-2 is mainly to show the employee what the value of the benefit is. As for the tax aspect:
First off, there isn’t any tax on health benefits value before 2018.
Second, there won’t be any taxes imposed on plans that aren’t deemed “Cadillac” plans (which are defined as those costing more than $10,200 for individual coverage or $27,500 for a family plan)
Third, it’s not the employees, but the insurance companies that provide those plans that will be taxed on part of such value – starting in 2018.
Fourth, the tax won’t be on the total value of the plan. Insurers will be assessed a tax equal to 40% of whatever share of the value exceeds the $27,500 threshold. i.e., if the value of a plan is $30,000, the insurer will be taxed 40% of $2,500 = $1,000.
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