Patient Protection and Affordable Care Act Archives

Repeal of Expanded Tax Information Reporting Requirements Under PPACA and Small Business Jobs Act of 2010

On April 14, 2011, President Obama signed legislation that repeals the expanded Form 1099 reporting requirements under the Patient Protection and Affordable Care Act (PPACA) and the Small Business Jobs Act of 2010.

The new legislation eliminates the requirement to expand tax information reporting, beginning in 2012, for payments in excess of $600.00 either (i) for the purchase of goods or merchandise; or (ii) made to a corporation, on Forms 1099-MISC. The legislation also eliminates the requirement that recipients of rental income from real estate, but who are not otherwise considered engaged in the trade or business of renting property, be required to issue Forms 1099-MISC reporting payments of $600.00 or more that are made in the course of earning the rental income (for payments to a service provider, such as a painter, plumber, or accountant). Before the enactment of PPACA, payments under each of these circumstances, or to these categories of recipients, would generally have been exempt from the tax information reporting rules under Section 6041(a) of the Code and the Regulations thereunder.

For more information please contact your regular McDermott attorney.

Recent Publications Providing Guidance on Health Care Reform

In the second half of 2010, employers should review their current benefit plan offerings to ensure compliance with new regulations issued by the U.S. Departments of Health and Human Services, Labor and the Treasury under the Patient Protection and Affordable Care Act (PPACA). For more information, see “Health Care Reform: PPACA Interim Final Regulations on Pre-existing Condition Exclusions, Lifetime and Annual Limits, Rescissions and Patient Protections” (6/29/10). Employers must also determine whether group health plans in existence as of March 23, 2010 (the general effective date of PPACA) are “grandfathered” for the purpose of applying many of the changes under PPACA. Part of this determination is analyzing the benefits of maintaining grandfathered status versus the restrictions on plan design and cost-sharing changes that are necessary to maintain grandfathered status. For information regarding determining grandfathered status and actions that result in the loss of grandfathered status, see “Health Care Reform: Grandfathered Health Plan Regulations” (6/15/10).

The PPACA enacted IRC Section 162(m)(6) which imposes a $500,000 deduction limit on compensation paid by certain health insurers and their related companies to all employees and other individual service providers. This provision limits the ability of many health insurers and their related companies to fully deduct compensation paid to employees and other individual service providers in 2013 and later tax years. All health insurers will want to take action now to determine the effect of the new rules and to review the compensation structure for their highly paid employees and individual service providers in order to maximize potential deductions. See “Health Care Reform: New Deduction Limit on Compensation Paid by Certain Health Insurers” for a detailed discussion of this new provision. (6/30/10).

Under PPACA, both group health plans and insurers offering group health coverage must implement internal claims and appeals processes that comply with the claims and appeals procedures requirements under Section 503 of the Employee Retirement Income Security Act (ERISA). HHS, DOL and Treasury recently clarified the scope of an employer’s internal claims and appeals procedures and external review processes. See “Health Care Reform: Guidance on Claims and Appeals Rules” (7/29/10).

Finally, the PPACA retains the Retiree Drug Subsidy, but eliminates an employer’s ability to deduct the amount of the subsidy. This change increases an employer’s income tax liability, in effect increasing the employer’s cost of providing prescription drug coverage to retirees. Employers should analyze the increased future tax liability and the current accounting charges necessary to retain retiree prescription drug coverage. A more detailed discussion of these issues can be found in “Health Care Reform: Elimination of Retiree Drug Subsidy Deduction” (7/21/10).