June 30 is the last date for small business owners to make changes in the individual policies that they are paying for their employees on pre-tax basis. If they fail to do so, they might face heavy penalties.
For small employers, these individual policy premiums cost lower than the group insurance premiums. Thus, these individual policies are taken up by small employers as an affordable option. This can be achieved by special account call Health Reimbursement Account (HRA) or Flexible Spending Account (FSA).
But, as per the ACA provisions, this practice is prohibited and any employer found practicing the same, would be subjected to pay a fine of up to $100 per day. The enforcement date for the provision was extended to give these business owners an adequate time to adjust the plans accordingly. Business owners having 50 or less employees were given this transition relief till June 30, 2015.
Some other components are also associated with the strategy that makes it difficult for the employers. For instance, if the employer promises to provide individual benefits reimbursements after 90 days from employment, it is not necessary that they would be able to keep up the promise as the individual market strictly follows the open-enrollment rules and regulations. In case you miss out during the open enrollment period or don’t qualify for the special enrollment period, then an employee might not be able to apply for the individual coverage.
For the new hires, who pay IRS penalty and do not enroll, they will have to wait till next open enrollment period to get coverage. This may lead these employees to leave the organization and join the ones that offer better benefit options. Thus, in order to retain these employees, employers can pay them higher salaries and ask them to buy their coverage while the company pays their payroll taxes. Though, in this option, the employer and employees may not be able to fully enjoy the tax advantages as employee will have to pay premium with after tax dollar and employer will pay the taxes on the basis of the amount given to the employee.
The small business owners that are planning to provide the small group plan to their employees now can enjoy the revised participation requirements from the carriers. As per the relaxed requirements, instead of covering for 70-75% of eligible employees, carriers have now taken it to as low as 25%. Moreover, ACA provisions liberate employers from paying entire premium for the employees. Employers can even designate fixed amount as their premium contribution.
Dovetailing the facts, if you are a small employer practicing the individual policy practice, then it’s time to change your benefit offerings as the June 30 deadline is approaching soon!