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New Bill Eliminates Penalties on Reimbursements for Health Insurance

Published on: 13:54PM Dec 08, 2016

~~Both the House and the Senate, with approval from Obama, have recently passed legislation (21st Century Cures Act) that would eliminate the penalty on employers who reimburse employees for qualified medical expenses, including health insurance premiums.

The IRS began enforcing a penalty last year and employers could have been fined up to $100 per day per employee, or up to $36,500 a year for reimbursing employees for health insurance premiums or other qualified medical expenses as this was deemed to be in violation of the ACA.

Under this new legislation, an employer is eligible to establish a small employer health reimbursement plan if that employer is not subject to the employer mandate under the Affordable Care Act (i.e., less than 50 full time employees) and does not offer a group health plan to any employees. The maximum reimbursement that can be provided under the plan is $4,950 or $10,000 if the plan provided for family members of the employee. Both these amounts will change with inflation.

Although many farmers may have already gone through the hassle of adjusting employee wages to compensate for lost reimbursement plans or underwent some policy or other changes within their farming entities to stay compliant with the ACA, this is a big win for small employers. The most difficult part may be having conversations with employees explaining why decreasing wages and having the health reimbursement plan is better overall for them.