Buried in the depths of two recently passed acts of Congress with pleasant sounding names that bear vague resemblance to the legislative intent are a few things that are actually good for those of us who live outside the USA .

I’ll share some of the good news and the bad news that come out of these two major legislation actions that have substantial tax code modifications imbedded in them.  These tax law changes were included specifically to look like they were incorporating a means to pay for the benefits that the proponents of the legislation were boasting about.  

Some in Congress have been touting their efforts to provide wider health care services as provided in the legislation titled The Patient Protection and Affordable Care Act.  There are dozens of changes to the IRS code buried at the end of this legislation, some of which take effect immediately; others are phased in over the next four years.  

There’s good news on two different levels in the Act.  On a broad level, it is an employment act, beyond the explicit inclusion of incentives to train and develop a larger medical support group of doctors and nurses and the forgiveness of student loans used to get their expensive education.  There will be a large cadre of new monitors needed to review and address the compliance reporting requirements of employers, insurers, and tax payers.   The rules are so complex and the imposition dates so varied that it will take sophisticated new computer programs to track the payments and specially trained accountants to monitor and verify compliance.  Companies will have to document and report both to the IRS and the recipient the exact amounts paid for health plans, ostensibly so that the recipients can ‘accurately file’ their tax forms.  All payments made by any trade or business that exceed $600 will be reported to the IRS.  These new regulations are likely to significantly increase the costs of financial audits of any company.

 In the 70s when the last huge social tax reforms were done, those of us in the financial service professions referred to the legislation as the “Accountants and Attorneys Relief Act of 74”.  Nearly everyone had to meet with one of us to review their wills, and revise their estate and retirement planning.  Those employment effects will be dwarfed by the complexities that companies are facing as a result of these new laws.  Individuals will have to carefully review all their business employment contracts, personnel agreements and insurance contracts to account for the changes imbedded in this Act. All pre-tax medical payment plans will need to be reviewed and revised including Health Savings Accounts, Archer Medical Savings Accounts, and other Flexible Health spending arrangements.   All employer reimbursement plans will need to be reviewed and amended to meet the $2,500 limits imposed by the Act.  Individuals who are not part of any employer plan will have to investigate, negotiate and enter in to health insurance contracts with approved insurers.  Those plans are supposed to be affordable (it says so in the title of the Act), but if you didn’t need insurance or want it, you are now required to buy what is likely to be a sizable redistribution of your formerly disposable income.

So what’s the good news for exPats in the Health Care Reform Act?   Buried in a subparagraph to the legislation is a reference to those exempt from the requirements to obtain insurance coverage.   The phrase used is “… those not legally residing in the US are deemed to have adequate coverage…”  This author believes that this excludes those of us who are legal residents of a foreign country from having to obtain a federally approved health insurance plan.  Veterans covered under TriCare are safe. What is not clear is whether the older exPats who have Medicare -- which is of no value outside of the US -- may be required to purchase the doctor coverage Part B even though it provides no benefit outside the US.  Write your Congressional Representative and ask them.

The other good news for exPats, at least those living in Panamá and Costa Rica, is that there are first-world medical services available here at reasonable cost.  Although we have seen a ratcheting up of the costs in the past two years, they are still more affordable here than US-delivered health care.  

The H.I.R.E. act (Hiring Incentives to Restore Employment Act) was passed 18 March 2010 and signed into to law by President Obama. I’ve written separately at our webpage about the expected consequences on the foreign banks to document and comply with newly imposed complex reporting requirements of any US account holder.  We are already receiving reports from clients and others that the foreign branches of US based banks are closing or freezing accounts of Americans.   Preliminary analysis indicates that the affected account holders are generating significant funds flows and unless and until the account holder can satisfy the banker that the sources of funds are entirely legitimate they are unable to use the account. Any resistance to or delay in supplying the requested information will result in either the bank refusing to accept an incoming transfer or the outright closure of the account.   More than one business associate has complained to me personally about being treated like a criminal by some low level bank employee.  In one case the individual had merely transferred his own money from a US bank to a foreign account that was intended as a gift.  But it is not just ‘wealthy Americans’ who are being inconvenienced.  Some banks are applying these rules to a level even we skeptics had not imagined.  I know of one individual who gets a $200 a month child support payment and had to physically visit the bank and provide them with current copies of notarized settlement papers that the funds were what she claimed they were, and the bank had been receiving the monthly payments for at least five years from the same source.  She was told to be sure to return every year to verify the facts again.