Provisions of the Affordable Care Act dramatically changed the tax treatment of employer paid health benefits for employees. Some of the most popular traditional health plans of the recent past now extract an extreme tax of up to $36,500 per employee per year. This blog post addresses the strategies available to small business employers who have a plan that may trigger 2015 excise taxes under Internal Revenue Code 4980D.
- Review the plan document, summary plan description and any employee communications
- If one or more of the documents above does not exist, consider the legal implication of this. (Does a plan exist?)
- Terminate or amend the plan immediately if it triggers an excise tax.
- Consider the legal risks of retroactive termination or amendment and what can be done to mitigate this risk.
- Consider the impact of any past transaction that may trigger an excise tax. (Those after June 30, 2015)
- Consider whether transactions that may trigger excise tax can be renegotiated and recharacterized.
- Seek legal guidance if the excise tax is large enough to threaten the financial viability of the business. The IRS has discretion to reduce it in some instances.
References and background information is available in other posts in this blog. I am available for a limited flat fee telephone consultation to discuss these options in more detail and share ideas on how other small businesses have implemented their response to the new law.
Please note that I am not an attorney. Some of these issues have legal implications outside of taxes. In this case, seek the guidance of an attorney.