You may have had other matters on your mind in February, when the IRS issued additional guidance for business health insurance. But you’ll want to catch up with the clarifications published in Notice 2015-17. Why? Because you may need to make some changes to your health insurance reimbursement arrangement before July 1. That’s when penalty relief provided by the notice expires.
The penalty is an excise tax that applies when you reimburse employees’ health insurance premiums. The original health insurance law effectively converted these reimbursements into a group health plan. Because this type of “plan” does not meet the requirements for insurance coverage under the law, a penalty of $100 per employee, per day, can be assessed. Beginning on January 1, 2014, the penalty applied no matter how many employees you had.
Notice 2015-17 waived the penalty when you employ less than 50 full-time workers — but the waiver expires June 30.
What do you need to do if you’re still reimbursing your employees for health insurance premiums? One option is to adopt a group health insurance plan. Alternatively, instead of providing reimbursements specifically related to health insurance, you can increase your employees’ taxable wages. Just be sure the payment is not based on the cost of health insurance premiums or whether your employees actually purchase health insurance.
Give us a call for more information about how this and other health insurance law provisions will affect your 2015 business return.