AICPA Insights

Health Care Considerations for Employee Benefit Plans

2013-06-19T10:03:37-04:00

The debate continues about how the Patient Protection and Affordable Care Act will impact health care costs in the overall economy. While CFOs may not be interested in the macroeconomics of it all, they will want to keep their own company’s health insurance costs down. It will not be easy.

Signed into law in 2010 and upheld by the Supreme Court in 2012, the Patient Protection and Affordable Care Act will profoundly affect individuals, employers, health care providers and insurance companies. In addition to the many new tax rules to offset the cost of these reforms, the law also contains many changes that employers are going to need to consider and how it may affect employee benefit plan operations, internal controls, financial reporting and more.

Here are a few things that may have a larger impact on plans:

Retiree Prescription Drug Benefits. Employers who currently receive a federal tax subsidy for providing retiree prescription drug coverage under the retiree drug subsidy program will no longer be able to take a deduction for that subsidy as of 2013. Recent guidance issued by the Center for Medicare and Medicaid Services, coupled with certain changes from Patient Protection and Affordable Care Act, created savings opportunities for many employers who are now considering an alternative subsidy program referred to as the Employer Group Waiver Program.

Medical Loss Ratio Rebates. Health care insurers are now required to publically report on major categories of spending of policy holder premium dollars, such as clinical services provided to enrollees on activities that improve health care quality. The law also established medical loss ratio standards, stating that health care insurers will be required to provide rebates to enrollees when spending on health care quality improvement services is less than the premiums the insurance company received, as defined by the MLR standards. Beginning in June 2012, insurers were required to start reporting certain data on these medical loss ratios to any state in which they do business. In August 2012, refunds started being given by those that didn’t meet those standards.

Patient-Centered Outcomes Research Fees. Patient Protection and Affordable Care Act also created a non-profit corporation called the Patient-Centered Outcomes Research Institute. It will be funded, in part, by fees that will be paid by health insurers and applicable sponsors of self-insured health plans. Fees will only be effective for seven years. The fee for a plan with 2012 calendar year-end is $1 per covered life in that plan. A covered life includes any employee, covered spouses/partners, and children in the plan. Interestingly, one of the ways this fee can be calculated is by the headcount provided in the 2012 form 5500. Therefore, if you have a client that wants to calculate their fees based on that form, it must be filed on or before July 31, 2013. For 2013 the fee is $2 per covered life.

Transitional Reinsurance Fees. Beginning in 2014, a transitional reinsurance fee will be assessed to help insurers to partially offset the high cost of enrollees in the new exchanges that are being set up. The cost per covered life has not been verified, but the Department of Health and Human Services currently estimates the cost will be $63 per covered life in a plan for the first year. That is a pretty big amount to pay. A year ago, not too many people were focused on this fee, but that high-dollar estimate is now attracting some attention.

At the end of the day, these changes are going to cost employers more and are already on the minds of many firms and clients. Many of the insurers will likely pass on some of the cost to sponsors; sponsors will in turn pass along some of that cost to their employees. If you are auditing a health and welfare plan, it would be prudent to get a thorough understanding of these fees and programs to fully understand what effect they will have on the plan’s accounting and reporting.

For more information on the Patient Protection and Affordable Care Act, visit the AICPA’s Health Care Reform Resources Center; or learn more about how the Affordable Care Act may affect your employee benefit audits in the 2013 edition of the AICPA Employee Benefit Plans Industry Developments - Audit Risk Alert.

Debbie Smith, CPA, Partner, Grant Thornton, LLP. Debbie is the chair of the AICPA Employee Benefit Plans Expert Panel and was a member of the Employee Benefit Plans Audit Guide Overhaul Task Force. She specializes in employee benefit plan assurance and has more than 24 years of experience auditing benefit plans.

Health care image via Shutterstock

Global Governments Waging War on Corporate Tax Avoidance

2013-06-18T07:00:00-04:00

While reading through the Sunday New York Times, I stumbled across an opinion piece on corporate tax avoidance that I think is particularly relevant for business and industry CPAs. In today’s struggling economy, the corporate tax system is a hot button issue both in Washington and around the world. As companies become more global, we as CPAs in industry can continue to add value in this area.

The article, “Who Will Crack the Code?” by David Leonhardt, starts out by talking about the shift in the soda industry from domestic to foreign concentrate production—just one example of a thread that runs through many different industries. Leonhardt notes, “as a result [of moving manufacturing operations overseas], the industry paid a combined corporate income tax rate of only 19.2 percent over the past six years…the average rate for companies in the S&P 500 was 29.1 percent.”

In mid-May, Apple’s CEO Tim Cook testified on Capitol Hill about the company’s income tax payments. According to a Bloomberg article on the subject, Cook testified that Apple paid $6 billion last year—a rate of 30.5 percent. “While nobody at the hearing questioned the figure, it provides a distorted picture of Apple’s total tax burden. Based on its public filings, the company pays just under 14 percent of its income in taxes worldwide.”

These kinds of facts add fuel to the fire of governments looking to reform corporate income tax. In the United States, the House Ways and Means Committee is working on reforming the tax code by reducing the statutory rate while eliminating tax breaks. “The net effect could be to close the gap between companies that pay relatively little in taxes and those that pay much more,” said Leonhardt. “The market, rather than the tax code, would then play a bigger role in determining companies’ success and failure.”

In Europe, the issue has come up many times in just the past few months: the European Commission announced that tax evasion and avoidance costs the EU 1 trillion euros ($1.29 trillion) a year; the Organization for Economic Cooperation and Development has issued a report critical of profit shifting and will submit an action plan to the G-20 by July; and a parliamentary committee in the U.K. has held at least three hearings on tax dodging.

So, are corporations poor citizens for legally minimizing their tax burdens? And what is a CPA’s social responsibility as a key advisor to those companies? This issue is a hot one and we are certainly going to hear more about this as the year goes on. I would love to read your opinions on corporate taxes in the comments section below.

Arleen Thomas, CPA, CGMA, Senior Vice President - Management Accounting, American Institute of CPAs.

3 Ways the New COSO Framework May Affect Your Business

2013-06-17T07:58:44-04:00

Over the past 20 years, change seems to come at the speed of light and has had a significant impact on the way businesses operate. Markets have become global, just about every process can now be outsourced and technology has become integrated into the DNA of every business. If anything, changes in rules, regulations and standards have accelerated. Businesses must now satisfy the high expectations of regulators and other stakeholders regarding governance oversight, risk management and the detection and prevention of fraud. All of this change means that stronger internal control practices must be developed to help to grow, as well as protect, the organization.

The Committee of Sponsoring Organizations of the Treadway Commission, which the AICPA is a member of, released its updated Internal Control - Integrated Framework in May 2013. The original framework, released in 1992, has been adopted by a significant majority of US public companies subject to the Sarbanes-Oxley Act Section 404 requirements to assess and report on the effectiveness of their internal controls over financial reporting. Now the framework has been updated to help address how organizations establish and implement their internal controls in today’s evolving and technology-enabled business environment.

The new and easier to understand framework will clarify what's needed - and what's not. The new modernized COSO framework will affect businesses in three big ways by:

Articulating the role of a company when outsourcing. While today's businesses can outsource many activities, they can never outsource responsibility.
Putting fraud right out in the forefront. A business's control structure must now address issues of fraud directly.
Highlighting the critical nature of IT. Information technology is a needed component that cannot be avoided in today's business environment. Let's face it, we simply don't use manual ledgers anymore!

CPAs in business, industry and government have a great opportunity to upgrade internal controls and fortify their organizations at a time when new risks and opportunities are multiplying everyday. You’ll want to be aware of the most significant changes to the framework (for example, COSO has identified 17 principles within the five components of internal control), as well as the key steps and dates for transitioning to the new framework and what external auditors will be looking for in the new process. Learn more about the framework.

To gain a better understanding of the new framework, please join me, J. Stephen McNally, Finance Director/Controller, Campbell Soup Company, and Stephen Soske, Partner, PwC on June 20 for a webcast entitled Implementing the New COSO Internal Control Framework: Key Steps for a Smooth Transition.

Bill Schneider, CPA, CGMA, Director - Accounting, AT&T. Bill is responsible for Corporate Accounting Policy, Executive Compensation Accounting & Benefits Finance, serves on the AICPA Council and IFAC Professional Accountant in Business Committee, and was a member of the COSO Advisory Council on the revision of the Internal Control- Integrated Framework.

Time is Running Out: Verify Your Clients’ FBAR Obligations Now

2013-06-13T07:00:00-04:00

June 30 will be here very soon – making sure your clients are compliant with the requirement to file a Report of Foreign Bank and Financial Accounts by that date is critical as civil penalties for failure to file are huge – they range from $10,000 up to $100,000 or 50% of the total foreign account balance. Criminal penalties include $250,000 or five years of imprisonment or both.

If your client is a U.S. resident and has a total of $10,000 or more in all foreign bank accounts combined or has signature authority over a foreign account, he or she must file FBAR Form TD F 90-22.1 annually. The FBAR is a report and is not to be filed with the income tax return. What makes the FBAR different from many other forms is that it must be received, not postmarked, by June 30 and it is filed with the U.S. Department of Treasury, not the IRS. Also, there are no extensions.

You can see why I am sounding the alarm. And once your client meets the FBAR reporting obligation, the FBAR must continue to be filed even if the foreign accounts do not generate any income (interest income or other taxable income).

And some detective work may be in order. When reviewing your client’s foreign bank activity, you may be surprised to find out that they have an additional account that they didn’t know about or that they have funds in a non-US person’s account but do not have legal ownership. For some clients, they will tell you that they closed their account, did not receive any more statements from the bank and believe there is no more reporting obligation. In this situation, the account was still open for part of the year and, therefore, needs to be disclosed on the FBAR. These are some things to watch out for.

Don’t wait until the last minute to complete your client’s FBAR! Why? First, it takes time to request account information from the overseas banks. For non-brokerage accounts, monthly or periodic statements are needed to determine the highest balance for the year. For brokerage or securities accounts, the requested information should include these three essential bank documents:

Statement of Assets (monthly or periodic),
Income Summary, and
Capital Gain/Loss summary

If the banks do not have this information available, then your client should request account activity statements for the year.

Second, for clients on extension, you will need this information to complete their tax return. Analyze the bank statements for interest income, dividends, securities sales and other earnings generated by the account. Any earnings on the foreign accounts are required to be reported on the return. Special rules apply to income from foreign mutual funds (Passive Foreign Investment Company). Remember to report your client’s highest account balance on Form 8938, Statement of Specified Foreign Financial Assets.

Form 8938 is in addition to the FBAR and has different reporting requirements - it focuses on specified foreign financial assets and covers a broader area than a foreign bank account. View a comparison of the differences between Form 8938 and FBAR.

It makes sense to work on your client’s FBAR before you prepare the tax return because the account information you analyze for the FBAR may be used for the return. You will avoid filing an amended tax return if you later discover that account earnings were previously excluded from the original filing.

For more information about who must file and other key facts on filing FBAR, explore the links below:

FBAR Form TD F 90-22.1
IRS Fact Sheet (who must file, background information, links to notices and regulations)
FAQs on FBAR

Gary L. Howard, CPA, Managing Principal, G.L. Howard, CPA. Gary has been specializing in tax controversy and litigation support for civil and criminal matters since the founding of his firm in 1986. He holds a M.S. in Taxation from Golden Gate University, San Francisco and a B.A. in Economics and Accounting from California State University, Fullerton.

Magnifying glass and hourglass images via Shutterstock

How Specialization Can Improve Your Service Offerings

2013-06-12T12:30:00-04:00

In our last live blog session from the 2013 Practitioners Symposium and Tech+ Conference in Partnership with the Association for Accounting Marketing Summit, Jerry Love, CPA, CGMA, ABV, PFS, CFF, CITP of Abilene, Texas, offers insight as to how CPAs can specialize and improve their bottom line. Specializing will:

Deepen existing client relationships – with each additional value-added service that you offer a client, they rely on you more heavily as their trusted advisor.
Increase the firm’s bottom line with additional revenue streams.
Retain staff – specialized services provide staff exposure to a wider array of assignments and fulfilling career paths.

(Email subscribers: See the live blog coverage on AICPA Insights).

&amp;amp;amp;amp;amp;amp;amp;amp;amp;lt;a href="http://www.coveritlive.com/mobile.php/option=com_mobile/task=viewaltcast/altcast_code=117cf30465" _mce_href="http://www.coveritlive.com/mobile.php/option=com_mobile/task=viewaltcast/altcast_code=117cf30465" &amp;amp;amp;amp;amp;amp;amp;amp;amp;gt;Improving Your Bottom Line Through Specialization&amp;amp;amp;amp;amp;amp;amp;amp;amp;lt;/a&amp;amp;amp;amp;amp;amp;amp;amp;amp;gt;

Heather O'Connor, AICPA Staff.

What is the Next Generation of CPA Firms?

2013-06-11T16:20:00-04:00

Join the new generation of CPA who is finding success by reimagining and recreating the traditional CPA firm for the 21st century at the 2013 Practitioners Symposium and Tech+ Conference in Partnership with the Association for Accounting Marketing Summit.

Leverage new technologies.
Implement new workflows.
Invent new client acquisition and relationship management systems.
Improve efficiency and effectiveness.
Grow revenues.
Optimize profitability.
Embrace value pricing.
Kill the billable hour.
Attract, nurture and motivate the best talent.

Get ready to renew your commitment – and be inspired anew – to transform your life, and the lives of colleagues and clients for the better.

Join Rick Telberg as he moderates this panel of young CPA professionals including:

Jason Deshayes, CPA, Vice President, Butler CPAs, Albuquerque, NM
Michael Elliott, CPA, Manager, Dittrick & Associates, Inc., Burton, OH
Joy Lizotte, CPA, Owner, Joy L. Lizotte, CPA, LLC, Lake City, FL

(Email subscribers: See the live blog coverage on AICPA Insights).

&amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;lt;a href=&amp;amp;amp;amp;quot;http://www.coveritlive.com/mobile.php/option=com_mobile/task=viewaltcast/altcast_code=48eeb2af8f&amp;amp;amp;amp;quot; _mce_href=&amp;amp;amp;amp;quot;http://www.coveritlive.com/mobile.php/option=com_mobile/task=viewaltcast/altcast_code=48eeb2af8f&amp;amp;amp;amp;quot; &amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;gt;New Owner/New Firm/New Generation: Leading-Edge Innovation and Opportunity&amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;lt;/a&amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;gt;

Heather O'Connor, AICPA Staff.

Are You Using Digital Signatures?

2013-06-11T12:55:00-04:00

Kicking off day two of the 2013 Practitioners Symposium and Tech+ Conference in Partnership with the Association for Accounting Marketing Summit is the session "What‘s in the Future for Digital Signatures?." Business in general, and the CPA profession specifically, have long sought a solution to the inefficiencies of ink and paper-based signatures. Has technology finally solved the problem or do we continue to wait? There are many popular “solutions,” but do they really solve the problem(s)? This session, presented by Erik Asgeirsson, CEO, CPA2Biz, a subsidiary of the AICPA, and Brian Fox, CPA, founder of Confirmation.com, will define the problems and compare and contrast some of the proposed solutions. (Email subscribers: See the live blog coverage on AICPA Insights).

&amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;lt;a href=&amp;quot;http://www.coveritlive.com/mobile.php/option=com_mobile/task=viewaltcast/altcast_code=31ed0124ed&amp;quot; _mce_href=&amp;quot;http://www.coveritlive.com/mobile.php/option=com_mobile/task=viewaltcast/altcast_code=31ed0124ed&amp;quot; &amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;gt;What‘s in the Future for Digital Signatures?&amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;lt;/a&amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;gt;

Heather O'Connor, AICPA Staff.

AICPA Launches #MainStFinancials (FRF for SMEs)

2013-06-10T16:45:00-04:00

Earlier today, the AICPA announced the launch of the Financial Reporting Framework for Small- and Medium-Sized Entities. This session at the 2013 Practitioners Symposium and Tech+ Conference in Partnership with the Association for Accounting Marketing Summit covers AICPA Director of Private Company Financial Reporting, Robert Durak, CPA, CGMA, as he highlights key features and benefits of the Financial Reporting Framework for SMEs, as well as important accounting topics within the FRF for SMEs. You can find more information on the framework by following #MainStFinancials. (Email subscribers: See the live blog coverage on AICPA Insights).

&amp;amp;amp;lt;a href=&amp;amp;quot;http://www.coveritlive.com/mobile.php/option=com_mobile/task=viewaltcast/altcast_code=4aef0dcb7a&amp;amp;quot; _mce_href=&amp;amp;quot;http://www.coveritlive.com/mobile.php/option=com_mobile/task=viewaltcast/altcast_code=4aef0dcb7a&amp;amp;quot; &amp;amp;amp;gt;AICPA’s Financial Reporting Framework for Small- and Medium-Sized Entities&amp;amp;amp;lt;/a&amp;amp;amp;gt;

Heather O'Connor, AICPA Staff.

New Taxes and the Cost of Healthcare and Insurance

2013-06-10T13:25:00-04:00

The 2013 Practitioners Symposium and Tech+ Conference in Partnership with the Association for Accounting Marketing Summit takes place June 10 to 12 in Las Vegas. I am live blogging from select sessions throughout the three days. The first session is "The Impact of Healthcare Reform on Small Business: New Taxes and the Cost of Healthcare and Insurance" with Mark Dietrich, CPA/ABV, of Framingham, Mass. Mark wrote a prelude on AICPA Insights which generated a lot of interest and conversation.

This session covers the Accountable Care Act, which is the most significant and costly social spending legislation since the Great Society programs of the 1960s. Its impact extends beyond health insurance, and envisions a system of regulation and taxation that aims to restrict the impact that income has on access to healthcare, except the wealthiest top .1% (one-tenth of 1%) of taxpayers. (Email subscribers: See the live blog coverage on AICPA Insights).

&amp;lt;a href=&quot;http://www.coveritlive.com/mobile.php/option=com_mobile/task=viewaltcast/altcast_code=e3939ec94d&quot; _mce_href=&quot;http://www.coveritlive.com/mobile.php/option=com_mobile/task=viewaltcast/altcast_code=e3939ec94d&quot; &amp;gt;The Impact of Healthcare Reform on Small Business: New Taxes and the Cost of Healthcare&amp;lt;/a&amp;gt;

Heather O'Connor, AICPA Staff.

CPA Exam Q3/Q4 2013 Score Release Timetables

2013-06-10T07:00:00-04:00

CPA Exam score release timetables have been such a hot topic amongst candidates that we have decided to post regular updates. Updated score release timelines are announced twice annually on AICPA Insights and also posted on the CPA Exam website. Since we would rather have candidates study for the CPA Exam than spend time notching off business days on a calendar, we have contained the score release timeline in a table below for candidates to easily find their score release dates.

Scores for the CPA Exam are released by the National Association of State Boards of Accountancy to individual boards of accountancy based upon the target score release dates listed in the table below.

July / August (13Q3) Testing Window
**Results Received By	Target Release Timeline	Target Score Release Date
July 20, 2013	11 business days following the cut-off receipt date	August 5
August 14, 2013	6 business days following the cut-off receipt date	August 22
September 1, 2013	6 business days following the cut-off receipt date	September 10
After September 1, 2013	6 business days after receiving all remaining scoring data for the testing window	TBD

October / November (13Q4) Testing Window
**Results Received By	Target Release Timeline	Target Score Release Date
October 20, 2013	11 business days following the cut-off receipt date	November 4
November 14, 2013	6 business days following the cut-off receipt date	November 22
December 1, 2013	6 business days following the cut-off receipt date	December 9
After December 1, 2013	6 business days after receiving all remaining scoring data for the testing window	TBD

**Note: ‘Results Received By’ refers to the date the AICPA receives the test result, not the test date. For the vast majority of cases, the AICPA receives the test result within 24 hours after a candidate completes the Exam. Candidates who wish to improve the certainty of a score release date are encouraged to take the Exam at least two days prior to the cut-off receipt date.

Additionally, some candidates who take the BEC section might receive their scores approximately one week following the target release date due to additional analysis that might be required for the written communication tasks. Scores are generally released during regular business hours.

For more information on the scoring of the CPA Exam, please visit the Psychometrics and Scoring page on the Exams website.

Calendar image via Shutterstock