A simple individual health insurance alternative for small contractors

Help is available to convert employer-paid individual health insurance to the new IRS-permitted payment plans

Many small businesses do not offer employee health insurance but want to help employees afford their own individual health insurance. Small contracting businesses are among many who formerly paid for or reimbursed part of the cost of individual employee health insurance.

Federal tax law changed after June 30 last year to make employer payments for individual health insurance prohibitively expensive. The practice of reimbursing employee health insurance expense that was commonplace in the past now triggers a staggering IRS tax penalty of $100 per employee per day.

Fortunately, IRS left us with a simple alternative solution and I strongly recommend that businesses that previously paid for individual health insurance should take deliberate and well-documented steps to prove that they have converted to the new allowable practice. Personal professional assistance is available to help with each step of the transition.

sample allowable payment arrangement for individual health insurance
sample allowable payment arrangement for individual health insurance

I now offer a small business toolkit that helps make the conversion to the new allowable type of individual health insurance payments. The kit is more fully described on FreedomBenefits.org web site and includes seven resources designed to ensure that the business is meeting all IRS requirements to avoid excise taxes:

  1. Sample employee benefit document explaining the termination of prior health plan and the new health insurance payment option now available
  2. Sample email cover note communication to employees
  3. Sample employee election form
  4. Sample corporate resolution
  5. Sample ACA notice of Health Insurance Marketplace eligibility
  6. Order form for customizing the tools
  7. Copy of engagement agreement and fair use agreement.

These tools have been available through a paid consultation since early this year. From now until the end of tax season (April 18) the tools will also be available to the members of the National Association of the Remodeling Industry (NARI) as a test of an association benefit, as well as select other small business contractors, through a free consultation. A free consultation can be scheduled directly from this web page.

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