Recent change to ACA allows small employers to pay for individual health policies
Due to a recent law change, the Affordable Care Act (ACA) now allows small employers to pay for individual health policies for employees in lieu of providing group coverage.
Enacted January 1, 2017, the 21st Century Cures Act allows small employers to pay or reimburse employees for the cost of coverage for an individual policy of health insurance with pre-tax employer contributions as long as it meets some conditions. This new law only applies to small employers -- firms with fewer than 50 Full-Time Equivalent employees (FTEs). (Note: Employers part of a control group with 50 or more FTEs are considered to be Applicable Large Employers (ALEs) under ACA. ALEs generally have more than 50 or more FTEs.)
In order to qualify for this new benefit, small employers must set up a special HRA to fund or reimburse employees’ individual health policies, called a Qualified Small Employer Health Reimbursement Account (QSEHRA). These accounts are only allowed if the following conditions are met:
— The employer cannot offer a separate group health plan for employees.
— Reimbursement must be funded solely by employer contributions (i.e., no salary reduction contributions).
— Reimbursement must be offered to all eligible employees on the same terms (excluding part-time, seasonal, etc.).
— The maximum annual employer contribution is $4,950 per year for an HRA covering only the employee, and $10,000 for an HRA covering the employee and his/her family.
A specific written notice must be given to all eligible employees at least 90 days before the beginning of the plan year. IRS penalties will incur for any lack of notice to eligible employees.
Let Plexus lend a hand
Effective now, this new benefit option is available to small employers who are not considered ALEs under the Affordable Care Act. If you are interested in this new benefit option, please contact a Plexus client service team member at 847-307-6100 (Deer Park, Ill.), 312-606-4800 (Chicago), 972-770-5010 (Dallas) or 405-840-3033 (Oklahoma City).
