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Medicare Tax Changes
A 0.9 percent additional Medicare tax goes into effect starting in 2013, raising the Medicare
tax rate for certain earners from 1.45 percent to 2.35 percent. The additional Medicare
tax applies to an individual’s wages, Railroad Retirement Tax Act compensation, and self-
employment income that exceeds a threshold amount based on the individual’s filing status
($250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file
separately, and $200,000 for all other taxpayers). It is paid solely by employees and does not
have to be matched by employers; however, the employer is responsible for withholding the
additional Medicare tax from wages or compensation paid to an employee in excess
of $200,000 in a calendar year.
Medicare Part D Subsidy Deduction Eliminated
An employer offering retiree prescription drug coverage that is actuarially equivalent to the
Medicare Part D coverage is currently entitled to a Retiree Drug Subsidy (RDS) payment.
Additionally, prior to 2013, employers could deduct the entire cost of providing the prescription
drug coverage, even though a portion of the cost is offset by the RDS payment. Health care
reform retains the subsidy, but eliminates the ability to deduct the portion of the cost that is
covered by the subsidies for taxable years starting on or after January 1, 2013.
Notice of the Health Insurance Marketplace
Employers are required to notify all current and new hires by October 1, 2013 about the
availability of the Health Insurance Marketplace. The notice will need to include the following
items:
• Availability of the Health Insurance Marketplace
• Description of the services provided by the Health Insurance Marketplace
• Contact information for the Health Insurance Marketplace consumer assistance
• Information disclosing that if the plan provided by the employer does not meet minimum
value coverage requirements, the employee may be eligible for a premium tax credit and/
or a cost-sharing reduction if he or she purchases a qualified plan through the Health
Insurance Marketplace
• Information that if the employee purchases coverage through the Health Insurance
Marketplace, the employee may lose his or her employer contribution toward health
benefits
Health Insurance Marketplace Open Enrollment
On October 1, 2013, the Health Insurance Marketplace for individuals and Small Business
Health Options Program (SHOP) Marketplace for small employers will be operational for open
enrollment for coverage effective January 1, 2014.
Market Reform and Benefits Design Changes
Beginning in 2014, major medical health insurance plans must be guaranteed issued,
renewable and available to individuals regardless of the applicant’s health status or pre-
existing conditions. Additionally, in the individual and small employer market, rates cannot vary
2014:
Putting
the Law into
Practice
