Small businesses beware. The IRS has started picking on the little guy.
The tax man has started fining small firms large sums for doing nothing more than giving their employees money to help pay for health insurance.
The feds claim that the arrangement subverts the Affordable Care Act by allowing employers to avoid offering full-fledged insurance policies. But the fines are actually depriving small-business employees of thousands of dollars in compensation — and reducing the number of people with insurance.
These IRS fines have to go.
At issue are “Health Reimbursement Arrangements.” Historically, small businesses that cannot afford to provide comprehensive health coverage have deposited money into HRAs to help their employees cover out-of-pocket medical expenses and insurance premiums. In 2014, employer contributions to about 10 million HRAs averaged $1,390 for individuals and $2,781 for families.
But the IRS has said that HRAs must meet Obamacare’s many requirements on health plans, even though HRAs are accounts, not health plans. Because HRAs don’t comply with the law’s rules requiring health plans to cover things like preventive care at no cost, they’re considered illegitimate.