The House of Representatives recently approved the Small Business Healthcare Relief Act (H.R. 5447), legislation pushed by the National Association of Home Builders (NAHB), that would allow small-business owners to help their employees pay for health insurance.
“The nation’s home builders commend the tireless efforts of Reps. Charles Boustany (R-La.) and Mike Thompson (D-Calif.) for advancing this bipartisan, common-sense bill that will help small-business owners across the land to ease the prohibitive cost of health care insurance for their workers,” says NAHB chairman Ed Brady. “We urge the Senate to act promptly to pass companion legislation S. 3060.”
The act would allow home-building firms and other small businesses to provide Health Reimbursement Arrangements (HRAs), which let employers contribute something to their employee health costs. Specifically, HRAs allow small businesses to offer pre-tax dollars to insured employees to help pay premiums and/or other out-of-pocket costs associated with medical care and services.
HRAs are flexible and affordable, allowing employers to design their plan to meet the unique needs of their company, according to NAHB. All employer contributions to the plan are 100 percent deductible to the employer and tax-free to the employee, which helps workers obtain health insurance.
Unfortunately, the Internal Revenue Service issued guidance in 2013 stating that employers are no longer able to use HRAs because they don’t meet the requirements of the Affordable Care Act. Not only did the IRS make HRAs illegal, the agency decreed that all employers can face fines of $100 per day per employee if they offer this benefit to their workers. That can add up to $36,500 per employee over the course of a year and up to $500,000 per company. This $100 per day penalty went into effect on July 1, 2015.
“By reinstating the use of HRAs and rescinding the punitive IRS penalties associated with them, this legislation will allow small employers with fewer than 50 employees to help their workers to obtain coverage or pay for their medical bills,” says Brady. “The Senate must now do its part so that our nation’s small businesses can continue to voluntarily provide health care assistance to their employees without fear of government reprisal.”