Health Care Reform Changes- You Are In It Together
As we all know, health care reform is introducing many changes. And, we are all acutely aware that many of these changes are complex and numerous questions unanswered. If we are feeling a high level of uncertainty, how must employees be feeling?
This is an opportunity for you to demonstrate that you and your employees are all in this together and that you are going to support and guide them through these changes. As employees continue to be concerned about the economy, their jobs and their futures, proactively communicating about issues of importance to employees can help you alleviate their fears, build connection and ultimate better engage your workforce.
One immediate issue is changes in Medicare payroll taxes, which took effect January 1, 2013. Here are some key points to convey in your communications:
Payroll Tax Increase on Earned Income
- Higher-wage earners will owe an additional 0.9% on earned income above the following thresholds:
- $200,000 for individuals
- $250,000 for employees filing joint tax returns
Earned income includes wages and tips.
- Employees pay the entire 0.9% in additional tax; it is not split with employers.
- Medicare tax on income up to these thresholds remains at 2.9%–employees pay half and employers pay half.
New Tax on Net Investment Income
- In the past, investment income (e.g., capital gains, dividends and taxable interest) has not been subject to Medicare tax.
- Now, employees may owe a 3.8% tax on some or all of their investment income.
- The amount owed is based on the lesser of the employee’s total net investment income or the amount of the employee’s modified adjusted gross income that exceeds $200,000 for individuals, $250,000 for couples filing jointly or $125,000 for spouses filing separately.
- Summarize the changes so that employees know if they are impacted. Many employees will not be affected by these changes, in which case you don’t want them to worry about it.
- Provide a more detailed explanation of the changes for those who need them.
- Use examples to illustrate how the new taxes work.
- Direct employees to the appropriate resource for questions.
- Encourage employees to talk with a financial advisor.
Take advantage of this communication opportunity to build a positive connection with your employees.