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:
- The SBHRAs will be available after 12.31.16.
- The plan needs to be offered to all full-time employees. Employers must have fewer than 50 full-time employees to have a SBHRA.
- The SBHRA is funded solely through employer contributions (no salary reductions are allowed).
- Annual employer contribution cap: Limited to $4,950 for single employees and $10,000 for families.
- Qualified expenses that may be reimbursed: Health insurance and qualified out-of-pocket medical.
- Employer must make the same SBHRA contribution amount to all eligible employees. (You can assign differing amounts depending on age and family status.)
- Any premium tax credits received by employees on the health insurance marketplace will be reduced $ for $ by the SBHRA amount.
- The health insurance must qualify as minimum essential coverage.
- W-2 reporting by the employer will be required so the employer will need to keep good documentation.
- 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
