Health plan rules for small businesses



Health plan rules for small businesses
The online accountant
Tony Novak, MBA, MT, Certified Public Accountant
(610) 572-1724   onlineadviser@live.com  @tonynovak

    The new health plan rules for small businesses

by Tony Novak, CPA, MBA, MT     February 4, 2015

By now most small business owners are at least vaguely aware of the basic rules for complying with the Affordable Care Act. Accountants and advisers are now playing “catch up” on communications in this area1. The remaining problem is that an estimated one million small businesses still have not taken action to address the issue and eliminate their tax liabilities.

There are not many industry resources available for small businesses and their advisers in this specific field. This is partly because the new tax rules, so far, are not inducive for the sale of commissioned insurance products that has historically been the economic driver of small business employee benefit services. Since I have a long track record of working remotely with small businesses and their accountants nationwide in the specific niche of employee benefit plan design and compliance, this type of ACA compliance help is a natural fit for my practice. An effective plan review service must be focused on making it practical for small businesses to take immediate corrective action that will bring their health plans into compliance with current law2.

First we should start with a review of the simple five point checklist for a small business employer3 with common law employees4:

1) Do not include health insurance as taxable wages.

2) Do not pay, reimburse or “bonus up” for the cost of individual health insurance.

3) Do not reimburse employee out-of-pocket medical expenses except as part of an integrated and written Health Reimbursement Arrangement.

4) Update your written health plan documents to comply with ACA limitations and integration requirements.

5) Address the risk of tax penalties for improper use of insurance in 2014 and 2015, especially the potential forexcise taxes under IRC 4980D discussed in myblog post last month.

These five points can be most easily covered in a heath plan review that typically includes an interview of the business owner or office manager and a review of the applicable documents5.

I offer a simple flat-fee review service that includes a review of the insurance, the plan documents, a brief interview and samples from my library of prototype small business health plan documents that may be used by your attorney to update your legal documents.

Footnotes

1 Recent IRS and DOL publications include mention of the fact that the Service is aware that some advisers have promoted incorrect guidance earlier in the ACA implementation process. Commonly misused schemes involved the terms “Section 105 Plan”, “Premium Reimbursement Arrangement” or some similar term.

2 These provisions affecting small business health plans became effective January 1, 2014. Since most small business health plans run on a calendar year, we are now already into the second tax year of compliance concerns. Some advisers anticipate further changes to the regulations and enforcement of these provisions of PPACA but the review services are based on current law.

3 This article is meant only for businesses with less than 50 Full Time Equivalent employees. Larger employers face more onerous requirements including shared responsibility payments also sometimes referred to as “play or pay” or “employer mandate”.

4 Common law employees do not include owner/employees of pass through entities like partnerships, LLCs and S corporations. The tax treatment of owner/employees is not discussed in this article but would be considered in a review engagement.

5 The review does not include a legal opinion, which can only be offered by an attorney.

This Web site is independently owned and operated by Tony Novak operating under the trademarks “Freedom Benefits”, “OnlineAdviser” and “OnlineNavigator”. Opinions expressed are the sole responsibility of the author and do not represent the opinion of any other person, company or entity mentioned. Tony Novak is not a representative, agent, broker, producer or navigator for any securities broker dealer firm, federal or state health insurance marketplace or qualified health plan carrier. Novak is compensated as an accountant, adviser, writer, consultant, marketer, reviewer, endorser, producer, lead generator or referrer to the commercial companies listed on this site or non-governmental commercial insurance exchanges. Information is from sources believed to be reliable but cannot be guaranteed. Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues or a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. Novak would be pleased to perform the requisite research and provide you with a detailed, written analysis at your request. Such an engagement would be subject to an engagement letter that would define the scope and limits of the desired consultation services.

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