Affordable Care Act (Obamacare)
Patient Protection Affordable Care Act (ACA)
and the Impact on Your Business
There have been several significant changes this past year related to the Affordable Care Act (ACA or ObamaCare). Some of the changes may have a very significant impact on your business. The following applies equally to small employer groups (less than 50 employees) as well as to large groups of more than 50.
Employers are no longer able to reimburse employees for heath care insurance coverage. Any reimbursement MUST take the form of additional payroll. If you have employees, (including owner-employee) who have an individual policy or who is covered in part by a spouse, whose premiums your company reimburses, you must stop this practice as soon as possible. Penalties are substantial and though there hasn’t been any enforcement yet, the practice is expected to be closely scrutinized by the IRS. Prior to the ACA, this practice was allowed and had the benefit of treating the insurance as a tax-free fringe benefit identical to a group policy. Unfortunately, reimbursements are expressly forbidden under the ACA and therefore the benefit will now be taxable.
Potentially a much bigger problem is “discrimination” in your group health care coverage. In the past, a group health plan could provide non-taxable benefits to executives and other highly compensated individuals even if the plan discriminated in favor of those individuals with regard to eligibility to participate or benefits provided. Under ACA, an employer who sponsors a plan that discriminates in favor of highly compensated individuals or owners is subject to a $100 per day penalty multiplied by the number of those individuals “discriminated against.” This amounts to a $36,500 per year penalty per employee not included in the same coverage as the owners or other highly compensated employees. Though this penalty has not yet been enforced, any policy renewal plan for 2015 should consider the anti-discrimination rules of the ACA.
If your company currently provides health benefits in the form of reimbursements to any employees (including owner/employees) this practice should stop immediately. If your company has a two-tiered policy with benefits that are not the same for all eligible employees, this practice should stop immediately. Any employer-sponsored plan MUST BE the same for all eligible employees (generally defined as 30 or more hours per week). You will want to discuss these issues with your group health insurance agent. If you don’t have an insurance agent we would be happy to provide a referral. Clearly, the penalties are very steep and these issues should be taken very seriously.
If you are a sole proprietor, corporation (S or C), or LLC with no employees other than the owner, nothing has changed relative to the ACA and how or where premiums must be paid.
Please call if you have any questions and we will assist you in any way possible.
Heemer, Klein & Company, PLLC