Small businesses are applauding legislation passed by the House and Senate and signed into law by the President that eliminates a tax penalty on employers who reimburse employees for the cost of health insurance premiums. Even though the tax was not part of the ACA, the IRS had initiated enforcement of the penalty on employers who violated the rule to the tune of $100 per day for each employee, or up to $36,500 a year. To put that in perspective, that amount is 18 times more than the penalty imposed on larger employers that don’t offer insurance to workers.
Under Section 18001 of the 21st Century Cures Act, business owners would be permitted to compensate employees for the cost of individual insurance premiums or medical visits. Small employers (fewer than 50 full-time employees) who do not offer a group health plan to any of their employees now may offer qualifying HRA that employees can use to pay for medical care expenses including premiums for individual health policies. The new changes take effect January 1, 2017.