21st Century Cures Act – A Welcome Gift to Small Employers!
On December 13, 2016, President Obama signed the 21st Century Cures Act (“Act”). Tucked deep away, towards the end of the law, is a welcome gift to small employers! The law makes it possible for small employers to use Health Reimbursement Arrangements (“HRA”s) to pay back employees who buy their own health insurance.
Beginning January 1, 2017, companies with less than 50 employees will be able to pay back employees for the cost of their health care expenses, including health insurance premiums. The new opportunity takes away an earlier drawback – taxes. Employees will not have to pay taxes on the money received and the company will not have to pay payroll taxes on the money contributed.
The law does set some terms for this new benefit. The company:
HRAs, of course, are not new. But over recent years, the Internal Revenue Service basically blocked companies from having a HRA unless it was tied to a group health plan — the opposite of what the new law allows. The penalty was severe – $100 a day, per affected employee.
Small companies not offering a group health plan can increase employee morale and satisfaction with this new opportunity. Small companies offering a group health plan may consider transitioning to a HRA reimbursement plan, giving employees the ability to shop and choose their own health benefits. Contact Nyhart’s Consumer Driven Healthcare team to learn how we can help!
This article was last updated on January 12, 2017