Small Businesses Threatened With $36,500 IRS Fines for Helping Employees With Health Costs

check-penFrom – – by Grace-Marie Turner

Small businesses that reimburse employees for the cost of premiums for individual health insurance policies or pay their health costs directly will be fined up to $36,500 a year per employee under a new Internal Revenue Service regulation that takes effect July 1, 2015.
According to the notice, an employer arrangement that reimburses or pays for employee individual health premiums is considered to be a group health plan that is subject to the $100 per-employee per-day penalty. The penalty applies whether the reimbursement is considered a before-tax or after-tax contribution.

“It’s the biggest penalty no one is talking about,” said Kevin Kuhlman, policy director for the National Association of Independent Business. “The penalty for compensating employees for healthcare-related expenses is enough to destroy most small businesses.” You can read more in this NFIB post, “No Kidding: This Week IRS starts Punishing Businesses for Helping Workers Buy Insurance.”

The new IRS penalty is more than 18 times greater than the $2,000 employer-mandate penalty under ObamaCare for not providing qualifying health insurance for employees. And employers with fewer than 50 workers are not exempt, as they are from the employer-mandate penalty.

The rule appears nowhere in the Affordable Care Act but was developed by the Obama administration’s regulation writers at the IRS. The rule punishes small businesses for providing the only health insurance support many can afford – a contribution to help employees pay premiums for their individual or family health insurance policies or to help finance direct payment for medical services.

“Reimbursing employees for the cost of insurance or medical services is a way for small businesses to help their workers without the administrative headaches of setting up a costly group plan,” Kuhlman said. “Most small employers don’t have HR departments or benefits specialists, so this is a simpler, easier way to help their employees.”

No more, says the IRS. If you take the “simpler, easier” route that you can afford, the IRS will slap you with $100-a-day, per-employee fines until you stop.

Rep. Charles Boustany has introduced legislation in the House (H.R. 2911) and Sen. Charles Grassley, in the Senate (S.1697) to remedy the problem. Both bills await congressional action.

“If there’s an opportunity for a bipartisan improvement toward affordable healthcare, this has to be it,” said Kuhlman. “There’s no real justification for penalizing small businesses that do what the law’s strongest supporters claim to want, which is to help employees obtain coverage or pay medical bills. This is a rigid and thoughtless bureaucratic rule that undermines the purpose of the law, and it ought to be repealed immediately.”

The rule covers employers with more than one employee participating in an employer health care/coverage payment arrangement. Employers can exclude workers who 1) have fewer than three years of service to the company; 2) are under age 25; and 3) are part-time or seasonal employees. The $100 a day fine applies for all other employees covered by the payment arrangement. S Corporations are exempt through the end of 2015.

This Market Watch article by Bill Bischoff provides many more details about this outrageous IRS rule that shows the intrusiveness and heavy-handedness of bureaucrats implementing Obamacare.

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7 years ago

Elect Donald Trump and he will correct many of these problems that plague America.

7 years ago

I keep reading that we need someone like Trump ,My question is whats wrong with Trump. HE has the business side of it, he hires people that knows how to do the mental as well as the labor part of it. Maybe I don’t know all the answers but I think we can’t do any more harm that is already done and what I heard on the pc, tv and people talking we just
may vote another a—–e in.

7 years ago

I’m to the point where I don’t trust anything that comes from the mouth of Democrat or Republican politicians at the federal level. We must have term limits to get the career politicians out of Washington. It’s not going to happen since those who would have to propose such a constitutional amendment are the very ones it would put out of a job.

7 years ago

How long will it be before they exempt small businesses run by illegal aliens? I guess practically, that’s already here since they don’t report. As far as “the land of the free and home of the brave” we have to be brave to stay here and fight for honesty and truth in what may seem at times to be a loosing battle.

7 years ago

I agree with Robert. I would like to Trump or someone like him that is not afraid of the media and would stand up for our country as President of the USA!

7 years ago

Great idea RIK on hiring “specialists” who know something about a specific field. What we have instead are people who contribute $ to those politicians and then receive a “thank you job” later. The lack of professionalism and honesty is mind boggling and very sad today. I’m sure it has existed in the past, but with today’s media coverage, it has been exposed more today. Maybe we do need a “Trump like man” who doesn’t cow-tow to the the special interest groups. Someone who can stand up to them and tell them if they want to save this country, they better stop the special interest favors and start doing what’s right for the majority of Americans.

Ivan Berry
7 years ago

Again, Total Control. This is no longer the land of the free and the home of the brave. Freedom has already ended. We now wait to see what comes next from the brave. And you can bet your sweet Ask that bravery is scant in Congress. Maybe a few, but…

7 years ago

This is exactly why we need a strong conservative President that after he/she gets in office needs to “layoff” EVERY IRS employee that went to law school! … In fact, EVERY government employee that went to law school should be fired! … government agencies should only hire experts in their fields such as: accountants for the IRS, doctors for the FDA, scientists for the EPA, etc. … Oh, wait a minute, let’s just close ALL those agencies and hire ONLY people with “common sense” including the justice dept, that will eliminate ALL Progressives from EVER working for the government! … I can STILL dream, can’t I? … Oh wait, Progressives say dreaming is illegal, since the government can’t YET control it!

Ivan Berry
7 years ago
Reply to  Rik

RIK, and though they cannot control thought, they can punish it–through “hate crime” statutes, that make murder more than murder alone and also creates an avenue for double jeopardy should state courts not satisfy the Federallies. Now if only they could find a court that would make progressives a protected class, our asses would become grass, or start pushing up same.
We should all continue to dream, and hope this nightmare will sometimes end before the end of America.

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