This post was written by Patricia Frame of Strategies for Human Resources after encountering many small business owners who were not aware of changes in health care rules under the Affordable Care Act.
Many small organizations provide pre-tax or post-tax payments to employees instead of offering a group health-care plan. The IRS has now reminded small employers that you no longer can do this. If you provide an allowance or reimburse employees for their health care costs, directly or through a Health Reimbursement arrangement (HRA), you must stop this practice by June 30, 2015.
You have options for your next step but need to decide on these quickly. You may:
- Find a group plan via the federal SHOP exchange for small organizations
- Work with your insurance broker to find group coverage that works for your situation
- Include some or all of the payments for health care coverage which you have been making in the employees’ regular pay rate or salary
There are exceptions to these rules for Subchapter S Corporation employee-shareholders and retiree benefit plan beneficiaries. Please check with your insurance broker and lawyer on these.
If you continue to provide such allowances or reimbursements after June 30, 2015, you will be subject to a fine of $100 per employee per day.
For many small businesses, this will create an employee morale issue. It is vital that you learn your options, make your decision, and clearly communicate to each currently covered employee what you are doing and what their options are if you will offer any. We are available to discuss this with you.
Although this IRS rule, under IRS Notice 2015-17, was issued in February, the Alexandria SBDC has recently become aware that some small business owners have not been aware of this change, hence this post. You should consult your insurance broker, employment lawyer, human resources advisor, or CPA for further information.