Small Business Tax Planning Strategies: IRS Provides ACA Relief for Certain Premium Reimbursement Plans
On February 19, 2015, the IRS issued Notice 2015-17, which provides some interim relief for small employers from the excise taxes that could be imposed for non-compliance with the Affordable Care Act (ACA).
1. Employer reimbursement plans for small employers will be allowed through June 30, 2015 without imposition of the excise tax. Prior to the ruling, the IRS’ position was that programs that reimbursed employees for their individual purchases of health insurance constituted a "plan" for purposes of the ACA, and would therefore be subject to its provisions, regardless of the size of the employer. The Notice provides that programs offered by employers who are not otherwise subject to the ACA (employers with less than 50 full-time equivalent employees) can offer reimbursement programs during the first six months of 2015. These programs can include reimbursement for individual policies, group policies and policies that provide Medicare Part B and D coverage.
2. S-corporation shareholder reimbursement arrangements will not be subject to excise tax in 2015. An arrangement that reimburses S-corporation 2% shareholders for their individually acquired health insurance policies was viewed under prior guidance, as being subject to the ACA excise taxes. The notice provides that this exclusion from the excise tax will only apply to 2% shareholders—programs offered to other employees and less than 2% shareholders of the S-corporation will still be subject to excise taxes unless they meet other exceptions from the imposition of the tax.
3. Employers can offer coverage or reimbursement for individual policies providing coverage under Medicare Parts B and D if certain conditions are met. Prior guidance provided that employers who offered some type of coverage or reimbursement for Medicare Parts B and D coverage would violate the terms of the ACA, and subject the employer to excise tax. Now, a program that provides Medicare premium payment reimbursements (either directly or indirectly) will not be subject to the excise tax if certain requirements are met.
The IRS also stated that a program in which the employer increases pay, but does not require that the employee purchase health coverage to receive the pay increase, is not a program that will be subject to the ACA.
How does the ACA affect your current small business tax planning strategy? We’d be happy to discuss it with you in further detail. Please contact Debbie Torrance at 404-874-6244 or simply fill out our contact form below and one of our professionals will be in touch.