With a looming deadline of July 1, 2015 for small businesses to make changes in their premium reimbursement plan practices, it’s a good time to review options for staying in compliance with the ACA. As background, in previous months the IRS, the Department of Labor (DOL), and Health and Human Services (HHS) all released FAQ around premium reimbursement plans for individual health coverage. Specifically, the FAQs state that premium reimbursement plans, also known as employer payment plans, are out of compliance with the ACA and therefore are subject to heavy excise taxes of up to $100/day for each employee affected. For one employee, this could mean $36,500/year in fees.
That said, because small businesses have often used premium reimbursement plans in the past to provide healthcare for employees, there are three options* to support them with this reform mandate:
- Small business owners can take advantage of a brief reprieve, which states that any business with less than 50 employees has until July 1, 2015 to alter their group insurance offerings without facing penalties for being out of compliance with the ACA in 2014 and the first half of 2015.
- For employers that want to continue with premium reimbursement practices without paying the excise tax, they can provide an unconditional wage increase (subject to income and payroll taxes), which employees can use for health insurance if they choose – although employers cannot require this.
- Another alternative is that employees can request that employers send post-tax wages directly to their health insurance provider.
In addition, cash incentives for high-risk employees are strictly prohibited according to the DOL as it is considered discrimination and in violation of ERISA and HIPAA.
For more information about providing employees with healthcare options that are in compliance with ACA andwill save you money, contact us.
* None of the above options are available to companies with 50+ employees.
