Pub. 3 2013-2014 Issue 2

12 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S any penalties resulting from their failure to withhold, so they should communicate with employees and ensure appropriate payroll system adjustments are in effect. • Flexible Spending Account Limit Prior to 2013, there was no government-mandated limit related to flexible spending account contributions, though a $5,000 limit has become common for many employers. In 2013, the contribution limit is $2,500, with inflation adjustments going forward. In addition, nonprescribed over-the-counter medica- tions no longer are eligible for reimbursement. Implications & Potential Penalty: Employers may adopt the required amendments to their cafeteria plan to reflect the $2,500 limit at any time through the end of 2014. Failing to adopt the new provisions could result in employers offering a nonqualified benefit and terminating cafeteria plan status, thereby converting tax-free benefits to taxable benefits. • Small Employer Health Insurance Credit Since 2010, a maximum credit of 35 percent (25 percent for tax-exempt employers) is available to small business employers that cover at least 50 percent of the cost of single health care coverage for each employee, if the employer has fewer than 25 full-time equivalent employees and average wages of less than $50,000 per year. The maximum credit increases to 50 percent in 2014 (35 percent for tax-exempt employers), but it’s available only to eligible employers offering health insurance coverage through a state exchange and only can be claimed for a maximum of two consecutive tax years after 2013. Implications: The credit can help offset the cost of employer- provided insurance. However, the calculation is complex and subject to phase-out limits, causing many seemingly small employers to receive a credit far less than the maximum or no credit at all. Additional time commitments are necessary for employers to obtain information to calculate the credit and for tax return preparers to complete the required forms. • Patient-Centered Outcomes Research Institute (PCORI) Fee This fee is assessed on self-insured and fully insured health plans to fund PCORI, which was established to conduct and promote clinical effectiveness research. The fee for fully in -  Play or Pay  continued on page 26  Play or pay – continued