On December 13, President Obama signed into law the "21st Century Cures Act". The Act was previously passed by the House of Representatives on November 30 and the Senate on December 7th. Among other non-tax health subjects, the Act eliminates a tax penalty on small employers who reimburse employee health insurance premiums and medical expenses under a Health Reimbursement Arrangement (HRA).

 

Previously, the IRS could enforce a penalty on a small employer that compensated or reimbursed employees for costs of individual insurance plans through an employer paid HRA. Employers who violated the rule were fined up to $100 per day per employee being reimbursed, with a cap at $36,500 per year. This total was 18 times greater than the penalty faced by larger companies that do not offer health insurance to workers.

 

Under the new law, qualified small employers (employers with less than 50 employees) who reimburse employee health insurance and medical expenses through an HRA will not face a tax penalty. This change will be a welcome relief for smaller organizations that do not wish to create company health insurance plans, and is effective for plan years beginning after December 31, 2016.

 

If you have any questions about the laws surrounding employee health insurance, contact your Berntson Porter representative at 425-454-7990 and we would be happy to assist you.