Small business health insurance reimbursement is back!

Your Guide to State, Local, Federal, Estate + International Taxation

small business health insurance reimbursement, doctor, health care, tax It appears that the 21st Century Cures Act will soon be signed by President Obama. One of the anticipated provisions of the bill includes a section for health insurance reimbursement arrangements (HRAs) for small businesses. These new plans or SBHRAs will allow businesses with fewer than 50 full-time employees to again reimburse the health insurance cost of their employees.

Of course no legislation is simple, so here’s a few of the provisions:

  1. The SBHRAs will be available after 12.31.16.
  2. The plan needs to be offered to all full-time employees. Employers must have fewer than 50 full-time employees to have a SBHRA.
  3. The SBHRA is funded solely through employer contributions (no salary reductions are allowed).
  4. Annual employer contribution cap: Limited to $4,950 for single employees and $10,000 for families.
  5. Qualified expenses that may be reimbursed: Health insurance and qualified out-of-pocket medical.
  6. Employer must make the same SBHRA contribution amount to all eligible employees. (You can assign differing amounts depending on age and family status.)
  7. Any premium tax credits received by employees on the health insurance marketplace will be reduced $ for $ by the SBHRA amount.
  8. The health insurance must qualify as minimum essential coverage.
  9. W-2 reporting by the employer will be required so the employer will need to keep good documentation.
  10. The Act also includes a waiver for penalties to 1.1.2-17 for out-of-compliance small employers, those who had non-compliant HRAs in prior years (the $36,500 annual penalty).

More details will certainly be coming but it looks like great news for small employers!

Melinda Nelson, CPA