This week, the House of Representatives passed the Small Business Health Care Relief Act, which allows small employers the flexibility to offer pre-tax dollars to help pay premiums and/or other out-of-pocket costs associated with medical care and services. Specifically, the bipartisan legislation allows employers with less than 50 employees to provide Health Reimbursement Arrangements (HRAs) to employees without being penalized.
Under an HRA, an employer can set aside pre-tax money to reimburse employees for premiums and other out-of-pocket expenses. The money cannot be deducted from an employee's paycheck, but HRA's allow employers to limit some spending on health care each year.
Historically, HRAs have been a valuable option for employers wanting to help their employees pay for health expenses with tax-free dollars. However, effective July 1, 2015, the Department of Treasury issued guidance under the authority of the Affordable Care Act (ACA) that employers continuing to offer HRAs are subject to a $100 per day, per employee penalty totaling up to $36,500 per year.
The Small Business Healthcare Relief Act will:
• Ensure small businesses and local municipalities with fewer than 50 employees are allowed to continue using pre-tax dollars to give employees a defined contribution for healthcare expenses;
• Allow employees to use HRA funds to purchase health coverage on the individual market, as well as for qualified out-of-pocket medical expenses if the employee has qualified health coverage; and,
• Protect employers from being financially penalized for providing this cost-sharing option to employees.
NLBMDA encourages all members to take action by visiting the Legislative Action Center and ask their Senators to pass the legislation. Please take a moment to write a letter or send a tweet asking them to support the Small Business Health Care Relief Act (S. 3060).