Reps. Charles Boustany (R-La.) and Mike Thompson (D-Calif.) introduced legislation on NAHB’s behalf to reverse an IRS regulation preventing small businesses from providing employees with standalone health reimbursement arrangements (HRAs), which have been a popular benefit with HBA members.
Standalone HRAs are an employer-provided benefit that offers participants a spending account to reimburse them for qualified medical expenses.
However, in light of the Affordable Care Act’s prohibition against health plans with an annual dollar limit on essential benefits, standalone HRAs have been deemed impermissible.
The Small Business Healthcare Relief Act of 2014 would restore these tax free employer-sponsored benefits that will help employees offset rising health care costs and pay for qualified medical expenses.
UPDATE (September 9, 2013):
Any employer with at least one employee and $500,000 in annual revenue must notify all employeess by letter about the Affordable Care Act’s health-care exchanges. Failure to comply may result in fines up to $1,000 per day. Click on the links below for important information about this requirement for employers.
Do not expose your company to a fine. Comply with this employer mandate by informing your employees of their coverage option in the Health Insurance Marketplaces (Exchanges).
About the Affordable Care Act
Originally scheduled for Jan. 1, 2014, the Employer Shared Responsibility provisions of the Affordable Care Act will now go into effect on Jan. 1, 2015. The White House announced the one-year postponement on July 2, 2013. Your HBA fought for this delay to give businesses more time to adjust to the new rules. In a letter to the Treasury Department, NAHB said “the employer community needs additional time to properly analyze their workforce and negotiate their plan designs. This is especially true for the small business community, which often lacks access to the human resources staff and technology available to larger businesses.” The delay will provide employers additional time to plan and to adapt their employee health coverage policies to meet the still-to-be determined requirements of the law. The final rules regarding implementation have yet to be published, and it may be six months or more before the new rules are promulgated by the U.S. Treasury Department and the Internal Revenue Service (IRS).
Frequently Asked Questions:
Which employers are subject to the shared responsibility provisions?
All employers who employ at least 50 full-time employees, or who employ an equivalent combination amounting to 50 full-time positions of full- and part-time employees, are subject to the shared responsibility provisions.
A full-time employee position is defined as 30 hours per week. Employers with less than 50 full-time employees are not subject to the shared responsibility provisions.
Will subcontractors be counted as employees?
No. Independent contractors are not employees, and are not to be considered in the determination of the 50 full-time employee threshold.
Are employers required to offer their employees health insurance?
No, but large employers (50 employees or more) who do not offer health insurance coverage to their full-time employees will likely be subject to the shared responsibility penalty. To avoid the penalty, these employers must offer health insurance coverage to substantially all full-time employees (95% or more), but not part-time employees.
What is an Employer Shared Responsibility penalty?
It is a non-deductible excise tax that will be imposed after Jan. 1, 2015 on employers who do not offer affordable health care insurance with minimum coverage levels to full-time employees, and when at least one of their full-time employees receives a tax credit for purchasing coverage through an Affordable Insurance Exchange.
If one of my full-time employees declines my offered health insurance, and purchases coverage through an Affordable Insurance Exchange, will I be subject to the employer shared responsibility tax?
No. As long as you offer qualifying affordable health insurance, you will not be subject to the tax penalty.
What is the amount of the tax for employers who do not offer health insurance?
The tax payment (or penalty) is $2,000 for each full-time employee, minus 30 employees. An example: the calculation for 50 full-time employees would be 50-30 = 20 x $2,000 = a penalty of $40,000).
What qualifies as an affordable health care plan with minimum coverage levels?
Under safe harbor provisions, offered health insurance coverage is affordable if the cost to the employee does not exceed 9.5% of the yearly wages paid to the employee by the employer. The minimum coverage level is met by offering a group health plan or group health insurance coverage that is either:
- A governmental plan
- Any other plan or coverage offered in the small or large group market within a state
- A grandfathered plan offered in the group market
I understand that a qualifying health insurance plan must also provide minimum value to avoid the penalty. What is “minimum value?”
A plan fails to provide “minimum value” if it pays for less than 60% of covered health care expenses. A minimum value calculator will be made available by both the IRS and the Department of Health and Human Services to assist employers in their calculations.
Is the health insurance plan that I currently offer to my full-time employees sufficient to avoid payment of the employer shared responsibility tax?
Most health insurance plans that existed on March 23, 2010 are eligible for grandfathered status, provided that the plan is not subsequently changed to:
- Significantly reduce benefits or coverage
- Raise co-insurance charges
- Significantly raise co-payment charges
- Significantly raise deductibles
- Significantly increase the employee’s share of the premium
- Decrease annual payment limits, or impose new limits
Where can I get more detailed information?
The IRS Question and Answer page will be an excellent resource once it has been updated. NAHB will monitor the progress of the proposed regulations, and will add information to this FAQ when it becomes available concerning the implementation of the Affordable Care Act components. We will also post a more definitive FAQ when the final regulations are published.
View the NAHB-submitted comments on the act, and the additional comments made by NAHB as a member of the Coalition to Promote Independent Entrepreneurs.
Did you know that five percent of the population is responsible for almost 50 percent of healthcare expenditures? A survey by the Federal Agency for Healthcare Research found also that one percent of the population is responsible for 21 percent of healthcare spending. The period of the study was 2008 to 2009.
The agency’s report found that healthcare expenses totaled 1.26 trillion in 2009. Therefore, the top five percent accounted for $630 billion in healthcare spending, and the top one percent accounted for $265 billion.
Perhaps of greater significance for employers and the Federal government, 50 percent of the population account for just 3 percent of all healthcare spending. The top spenders by demographic? People over age 45 and women.
The U.S. Senate passed HR 4, the bill to fully repeal the expanded 1099 reporting contained in last year’s health care law.
While the repeal is not finished until the President signs this bill into law, the effort could not have gotten this far without the involvement of Home Builders around the country. In addition to Home Builders, hundreds of associations around the country, all representing small businesses just like Home Builders, weighed in to tell Congress with one voice that repealing the new 1099 requirement was a top priority and one of the most important issues all small businesses will face in the coming year.
If allowed to stand, the new 1099 requirement will take effect on January 1 and require all businesses to obtain W9 forms, and issue 1099 forms, to every person and business with whom they do business, regardless of the amount transacted. Experts estimate that the average business will need one full-time employee just to comply with the requirement.
HR 4 now heads to the President’s desk for his consideration.
An email has been circulating in real estate circles that contains inaccurate claims about a new 3.8 percent tax on capital gains income that begins in 2013. The new tax, which is an add on to existing capital gains taxes (scheduled to increase from 15 to 20 percent next year), was enacted as part of the health reform legislation.
However, the email is wrong in that it implies that the 3.8 percent tax is a sales tax or transfer fee-type tax. The 3.8 percent tax is assessed only against certain capital gains income, and it only applies to taxpayers reporting more than $250,000 in income ($200,000 if single).
More importantly for housing, the existing $500,000 / $250,000 gain exclusion for a seller of a principal residence continues to apply, so most principal residences sales by homeowners will not be affected. Some sellers of second homes, with high incomes, may have to pay some additional capital gains tax. However, most of the new tax will fall on the sale of stocks, bonds and financial instruments, which have no gain exclusion rule.
Consider the following, typical example. Suppose a married homeowner sells their principal residence for $500,000, after having purchased the home some years ago for $200,000. The capital gain on the sale is about $300,000. The homeowner is allowed (under Section 121 of the Internal Revenue Code) to exclude from all tax (including the standard capital gains tax and the new 3.8 percent tax) up to $500,000, so there is no tax on the realized $300,000 gain on the home sale.
The 3.8 percent tax is not in any way a sales tax paid on the sales price of the home, for either the home seller or home buyer. NAHB has written about this issue in an April edition of Nation’s Building News. Click here to read that article.