Immediate action for 2015: In the absence of further guidance from the Department of Labor or Treasury (after today’s date of February 20, 2015), entities with one or more employees should cease reimbursement of health care programs outside of an ACA compliant employer-provided group health care plan. If you have compliance questions with respect to an existing healthcare-related plan, you should consult with your payroll advisor or plan administrator regarding corrective measures.
Employer options regarding health care programs:
- Offer an employer-sponsored ACA compliant plan,
- Offer nothing, or
- Offer nothing and increase taxable wages – i.e. essentially a “raise”.
These new regulations under the ACA (healthcare reform act) have resulted in many uncertainties and ambiguous language, resulting in frustration among taxpayers who were not aware of their program’s non-compliance when they had fewer than 50 employees.
Generally, small employers are not required to provide health insurance to their employees. However, ANY health reimbursement arrangement that covers one or more employees is deemed a group health plan and is subject to ACA requirements which include, among other things, a prohibition on annual and lifetime limits, and a prohibition on cost-sharing for preventive services. A health reimbursement arrangement is a plan / policy whereby the employer reimburses the employee for part or all of qualified medical care expenses and provides coverage up to a maximum dollar amount for the period covered.
As it stands now and as we understand it, any employer with non-qualifying arrangements after June 2015 are subject to penalties as high as $100 per day, per individual. The penalty is an excise tax that is self-reported on Form 8928. Beginning June 1, 2015, for an employer to be able to provide a deductible health insurance fringe benefit to an employee, the health plan must be sponsored and paid for by the employer on a non-discriminatory basis. The employee may pay a portion of the coverage through a pre-tax flexible spending account (FSA), or absent FSA participation, on a post-tax basis.
We will keep you updated as we get more guidance on this matter from the IRS and other regulatory agencies. At McIlvain & Associates, we feel it is important to communicate to you about any new developments that could affect your tax compliance. Our commitment to you is to continue to stay on top of the regulations and to interpret them to the best of published guidance and tax law cases.
McIlvain & Associates, CPAs