Attention Employers: Affordable Care Act - Transitional Relief Expired!
The extended time to transition to the guidelines regarding health coverage reimbursement arrangements and employer payment plans in IRS Notice 2015-17 has expired as of June 30, 2015. The $100 per-day per-employee penalty for failure to comply is back.
A few highlights to take away from Notice 2015-17 are:
- Reaffirms that after tax arrangements which are contingent on the purchase of insurance are not permissible. That means employers can no longer reimburse employees for out of pocket medical costs or assist with individual insurance premiums. Employers may give taxable bonuses, but amounts cannot be tied to the employee’s actual expenses.
- Reaffirms that arrangements with one participant are exempt from the market reforms. If your spouse is your only employee, section 105 medical reimbursement plans are still valid!
- 2% or greater S-Corporation Shareholders are exempt from the market reforms for 2015. However, their regular employees are not. That means, for S corporation entities only, the corporation can reimburse the owners for individual health insurance policy premiums rather than secure a group policy in the corporate name.
- Shareholders of S or C Corporations who are covered under the same individual insurance coverage count as one participant for the market reforms.
- Medicare Part B and D premiums can be reimbursed as a tax free fringe benefit under an arrangement as long as the employee receiving the reimbursement is also participating in an employer sponsored group insurance plan.
It is important for small business owners to conform to these reforms. If you have questions regarding IRS Notice 2015-17 and what it really means for you, please call our office.