Needed Relief for Small Employers

congress-steps1-crop-600x338A lot of buzz is going on in the Small Business and CPA communities regarding the introduction of a congressional bill that would allow employers to have a strong win-win option for their employees if employer sponsored group health insurance was no longer affordable.
Called the Small Business Healthcare Relief Act,  this bill, if passed, would allow businesses with less than 50 employees the ability to reimburse individual health insurance and "qualified" medical expenses through a Health Reimbursement Arrangement (HRA) for employees. This pre-tax structure would be a significant cost savings alternative for many small businesses.
The legislation received bipartisan support and is co-sponsored by Representatives Charles Boustany (R-La.) and Mike Thompson (D-Calif.) in the House, and Senators Charles Grassley (R-Iowa) and Heidi Heitkamp (D-N.D.) in the Senate.
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In addition to the cost savings for many small businesses, the bill would protect employers from being financially penalized for providing this cost-sharing option to employees.  Small businesses have been doing this form of pre-tax reimbursement for years.  In October of 2013, guidelines came down from both the IRS and Department of Labor, IRS Notice 2013-54, that Stand Alone HRAs were no longer allowed within the healthcare reform (ACA) structure.  $100 per employee per day would be enforced for those not in compliance up to $36,500 annually.
After Congressman Boustany questioned Secretary Jack Lew on this issue in a House Ways & Means Committee hearing February 3, 2015, the Treasury announced on February 18th that it would delay enforcement of this guidance and any penalties till after July 1, 2015.  IRS Notice 2015-17 was released with the delay in place.   Now that July 1st is here, small businesses and their accountants are asking for Congress to push this legislation through.
Cost of insurance, for employers with less than 50 employees, generally goes up more than those with more than 50 employees according to National Federation of Independent Businesses.   Insurance carriers are asking the Department of Insurance for an average increase in premiums as much as 26% in North Carolina and even higher in other states. As cost escalate, employers will have to decide if continuing to provide coverage for their employees with group health benefits is a cost effective option.
Hamilton Edwards has worked with employers since 2007 using the both a Stand Alone HRA and Section 125 pre-tax program called “defined contribution”.  Since 2014, the program became totally unstructured in accordance with Notice 2015-17, following “Guidance” Section II, Question 4/Answer 4 (compensation adjustment only).  This may be the best and “only” option for many, providing, in some cases, thousands of dollars in relief even when there isn’t pre-tax savings or a reimbursement structure.
Employers do feel an obligation to their employees in providing group health benefits.  Unfortunately, when it becomes too cost prohibitive, for both the employer and employee, the only answer may be to walk away.   There are tools now that can be used to analyze what is in the best interest of the company, not just from a “go” or “no go” with group health insurance, but tools to provide best options within group health benefits to maximize savings.
The Small Business Healthcare Relief Act recognizes the need for small businesses to help employees’ afford health benefits by reimbursing them tax-free for both individual health insurance premiums and eligible out-of-pocket medical expenses.   Whether this bill passes or Healthcare Reform get's overhauled, Hamilton Edwards will continue to bring innovative tools,  resources, and solutions to the marketplace.
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