We have a small non-profit office of 5 employees. We have offered health insurance in years past to our employees and done the Employer Payment Plan, where each employee chooses his or her medical insurance and the company simply pays the premiums directly.
Given that we are too small of a company to fall under any of the ObamaCare mandates, can we still pay for health insurance this way? Researching your website, it seems that – in one document – Employer Payment Plans are fine and the premiums are not considered taxable. But in another document it looks like Employer Payment Plans may not be able to incorporate the market reforms of ObamaCare, and there may be IRS fines associated with them.
Like I said, we are a very small company. So any guidelines you can give us about how we can continue to pay for our employees’ premiums would be most helpful.
Thank you so much.
Employer payment plans are valid under the ACA, count as group health plans, and are subject to market reforms (no pre-exiting conditions, no dollar limits, etc).
The wording of the guidelines is a little confusing, but from what we understand: HRAs and employer payment plans are fine as long as 1) an employer has 50 or less FTE 2) an employee doesn't use that "group plan" to get Marketplace subsidies. The gist being healthcare arrangements can't be used to skirt the requirement to offer minimum essential coverage. Since you have a small business with less than 50 FTE your Employer Payment Plan shouldn't be a problem unless it meets one of the two previous criteria.
We wrote up a detailed page on HRAs, Employer Payment Plans, FSAs, and other employer arrangements to try to clarify this. We will update that page as we learn more, so check it for a final answer moving forward.
Notice 2013-54 clarifies that such arrangements cannot be integrated with individual policies to satisfy the market reforms. Consequently, such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code. - IRS
Please note, we aren't legal, tax, or medical experts. We are simply trying to interpret these documents the best we can. We will review our site to make sure to avoid any potential confusion. However, we certainly wouldn't mind some extra clarification and input from our readers!
When in doubt fall back on these document from the department of labor and IRS.
- Department of Labor Technical Release No. 2013-03 provides final rules for Employer Healthcare Arrangements under the ACA.
- The IRS issued this clarification on HealthCare Arrangements and potential fees.