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Reimbursement: Small businesses can now reimburse employees who purchase their own health insurance

Small Businesses Can Now Compensate Employees Who Purchase Their Own Health Insurance

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Small Businesses Can Now Compensate Employees Who Purchase Their Own Health Insurance

New, small employer ACA requirements effective for plans beginning after Dec. 31, 2016

President Barack Obama recently announced a small gift for small businesses as it relates to insurance. Title 18 of the new 21st Century Cures Act, signed by President Obama on Dec. 13, 2016, allows small employers the use of Health Reimbursement Arrangements (HRAs) to compensate employees who buy their own health insurance for themselves and their families.

Reimbursement Amounts

Maximum annual benefits for the individual are $4,950 or $10,000 a year for families. Employers are to report the total amount of benefits received on their employees’ W-2 forms, beginning with the 2017 calendar year. After 2016, the above dollar amounts are subject to annual cost-of-living increases.

Reimbursement Details

The reimbursements are for the cost of employee health insurance plans purchased through the Affordable Care Act (ACA) marketplace or on the individual market, effective after Dec. 31, 2016. Reimbursements only can be funded by the employer, and cannot include employee salary reduction contributions. The employee’s out-of-pocket plan must provide for the payment or reimbursement of medical care expenses that are incurred by the employee or the employee’s family members and the employee must provide proof of health coverage to their employer. HRAs must be offered on the same terms to all eligible employees, but employers may exclude from eligibility employees who have not completed 90 days of service, have not reached age 25, part-time or seasonal employees, employees included in a collective bargaining agreement and employees who are non-resident aliens who have no earned income derived from sources within the U.S.

Notice Requirements

Small employers must give an annual notice to eligible employees:

  • at least 90 days before the start of the year, or,
  • at least 90 days before the employee’s initial eligibility date, or
  • no more than 90 days after the legislative enactment of the 21st Century Cures Act; whichever is later.

 

The annual HRA notice must:

  1. state the amount of the employee’s permitted benefits
  2. educate the employee on how to disclose the reimbursement amount to any health insurance exchange if an employee chooses to apply for the premium assistance tax credit
  3. warn about taxes that may be charged if the employee does not have minimum essential coverage each month
  4. remind the employee that the HRA may be included in Gross income

 

If the business fails to follow the above requirements, it will be subject to a $50 per-employee per-incident penalty, up to $2,500 per calendar year, unless the failures were due to reasonable cause and not willful neglect.

This HRA Isn’t for Every Employer

The 21st Century Cures Act created a new type of HRA called the “qualified small employer HRA” (SEHRA). The IRS code does not consider SEHRAs as group health plans, therefore making them unqualified for the excise tax levied on group health plans that don’t meet the ACA market reform requirements. If your company is considered an applicable large employer and/or has at least 50 full-time or full-time equivalent employees then you are not eligible to provide a SEHRA.  Additionally, you cannot provide an SEHRA if you offer a group health plan to any of your employees.

DISCLAIMER: The information provided in this blog is for general informational purposes only. Accordingly, Paycom and the writer of the above content do not warrant the completeness or accuracy of the above information. It does not constitute the provision of legal advice, tax advice, accounting services, or professional consulting. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other professional services.


Heidi Lively

by Heidi Lively


Author Bio: Heidi Lively is the former Paycom Additional Business Manager, where she focused on the compliance and service of additional business products. Previously, she served customers in the Paycom Service Department where she quickly rose through the ranks to earn a team leader position. Having performed in a leadership position for a number of years, Heidi was able to cultivate and influence others through Paycom’s leadership initiatives.

ACA ‘Cadillac Tax’ Delayed to 2022

ACA ‘Cadillac Tax’ Delayed to 2022

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The short-term spending bill that ended the government shutdown on Jan. 22 included a small provision that again delayed the Affordable Care Act’s (ACA) “Cadillac tax,” now to 2022.

So nicknamed because it targets employer-sponsored health plans with the most generous level of benefits, the Cadillac tax originally was to take effect in 2018. In 2015, the effective date was pushed to 2020, and now the new bill pushes the effective date two additional years into the future.

When – or if – the Cadillac tax goes into effect, it will impose a 40% excise on the cost of employer-sponsored health coverage exceeding a certain dollar value per employee. The dollar value would have been $10,200 for individual coverage and $27,500 for family coverage in 2018, had the tax not been delayed. The law calls for the amount to be adjusted annually with growth in the consumer price index.

How does this affect Employers?

Employers do not have to contend with the tax for an additional two years. The IRS has not yet issued regulations addressing implementation; with this additional delay, the agency likely will not do so in the near future.

Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.

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Posted in ACA, Blog, Compliance, Featured

Erin Maxwell

by Erin Maxwell


Author Bio: As a compliance attorney for Paycom, Erin Maxwell monitors legal and regulatory changes at the state and federal level, focusing on health and employee benefits laws, to ensure the Paycom system is updated accordingly. She previously served as assistant general counsel at Asset Servicing Group in Oklahoma City. She holds a bachelor’s degree from the University of Central Oklahoma and a J.D. from the University of Oklahoma. Outside of work, Maxwell enjoys politics, historical mysteries and spending time with her family.

Deadline Extended

Employer Deadline Extended for Furnishing 2017 ACA Forms

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Distribution of 2017 Affordable Care Act (ACA) Forms 1095-B or -C to your employees has been extended.

As issued in Notice 2018-06, the IRS has extended the deadline from Jan. 31 to March 2. (However, the deadline to provide Forms W-2 and 1099 to employees and contract workers remains as Jan. 31.)

Filing deadlines unchanged

While the deadline to furnish forms was extended, the filing deadlines remain the same: Feb. 28 for paper forms, and April 2 for electronic forms.

IRS Notice 2018-06 emphasizes that employers who do not comply with the due dates for furnishing or filing are subject to penalties under sections 6722 or 6721.

Good-faith transition relief extended

The IRS also announced the extension of good-faith transition relief. This may allow an employer to avoid some penalties if it can show that it made good-faith efforts to comply with the information reporting requirements for 2017.

This relief applies only to incorrect and incomplete information reported on the ACA forms, and not to a failure to file or furnish the forms in a timely manner. Additionally, the IRS stated it does not anticipate extending either the good-faith transition relief or the furnishing deadline in future years.

Contact a trusted tax professional if you have questions on how this may affect your business specifically.

Click here to read more about how the ACA is affect by the new Tax Cuts and Jobs Act.

Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.

Tags: , , , ,
Posted in ACA, Blog, Compliance, Featured

Erin Maxwell

by Erin Maxwell


Author Bio: As a compliance attorney for Paycom, Erin Maxwell monitors legal and regulatory changes at the state and federal level, focusing on health and employee benefits laws, to ensure the Paycom system is updated accordingly. She previously served as assistant general counsel at Asset Servicing Group in Oklahoma City. She holds a bachelor’s degree from the University of Central Oklahoma and a J.D. from the University of Oklahoma. Outside of work, Maxwell enjoys politics, historical mysteries and spending time with her family.

Employers Unaffected by ACA Changes in New Tax Law

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On December 22, President Trump signed the Tax Cuts and Jobs Act. The bill includes a provision that reduces the penalty for not complying with the Affordable Care Act’s (ACA) individual mandate to $0, effectively removing the penalty for individuals who do not have health insurance coverage after the effective date of Jan. 1, 2019.

However, this update will not impact employers, since the law does not remove the employer mandate (the requirement that large employers offer health insurance coverage to their full-time employees or pay a penalty) or the associated employer reporting requirements. Large employers subject to the mandate still face penalties if they fail to comply with either, and the IRS has begun sending out notices with preliminary assessments of the employer shared responsibility penalty for tax year 2015.

Employers subject to the employer mandate should continue to comply and be prepared to file Forms 1094 and 1095 with the IRS in accordance with the normal deadlines.

For the 2017 tax year, the deadlines to provide Forms 1095-C to employees is Jan. 31, 2018.  The deadline to file Forms 1094-C and 1095-C with the IRS is Feb. 28, 2018 if filing paper forms, and April 2, 2018, if filing electronically.

Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.

Posted in ACA, Blog, Compliance, Featured

Erin Maxwell

by Erin Maxwell


Author Bio: As a compliance attorney for Paycom, Erin Maxwell monitors legal and regulatory changes at the state and federal level, focusing on health and employee benefits laws, to ensure the Paycom system is updated accordingly. She previously served as assistant general counsel at Asset Servicing Group in Oklahoma City. She holds a bachelor’s degree from the University of Central Oklahoma and a J.D. from the University of Oklahoma. Outside of work, Maxwell enjoys politics, historical mysteries and spending time with her family.

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