House Votes to Reinstate Health Reimbursement Arrangements

Filed in Capitol Hill, Labor, Safety and Health by on June 21, 2016 2 Comments

capitolhillspringThe House today approved the Small Business Healthcare Relief Act (H.R. 5447), legislation championed by NAHB that would allow small business owners to help their employees pay for health insurance.

“The nation’s home builders commend the tireless efforts of Reps. Charles Boustany (R-La.) and Mike Thompson (D-Calif.) for advancing this bipartisan, common-sense bill that will help small business owners across the land to ease the prohibitive cost of health care insurance for their workers,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill. “We urge the Senate to act promptly to pass companion legislation S. 3060.”

The Small Business Healthcare Relief Act would allow home building firms and other small businesses to provide Health Reimbursement Arrangements (HRAs), which let employers contribute something to their employee health costs. Specifically, HRAs allow small businesses to offer pre-tax dollars to insured employees to help pay premiums and/or other out-of-pocket costs associated with medical care and services.

HRAs are very flexible and affordable, allowing employers to design their plan to meet the unique needs of their company. All employer contributions to the plan are 100 percent deductible to the employer, and tax-free to the employee, making this a great benefit to help workers to obtain health insurance.

Unfortunately, the Internal Revenue Service issued guidance in 2013 stating that employers are no longer able to use HRAs because they don’t meet the requirements of the Affordable Care Act. Not only did the IRS make HRAs illegal, the agency decreed that all employers can face fines of $100 per day per employee if they offer this benefit to their workers. That can add up to $36,500 per employee over the course of a year and up to $500,000 per company. This $100 per day penalty went into effect on July 1, 2015.

“By reinstating the use of HRAs and rescinding the punitive IRS penalties associated with them, this legislation will allow small employers with fewer than 50 employees to help their workers to obtain coverage or pay for their medical bills,” said Brady. “The Senate must now do its part so that our nation’s small businesses can continue to voluntarily provide health care assistance to their employees without fear of government reprisal.”

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  1. David Elliott says:

    As a 50 year wood framing company in Kansas City, we understand the value of a loyal & talented, long term employee. Providing a benefit has always been part of retaining our talent. We average 40 or so employees.
    Since the ACA was passed it has become very difficult to provide insurance to our employees. Our higher paid foreman’s deductibles are going sky high under the ACA. & it is very expensive to provide plans for employees & myself. 6,000.00 out of pocket deductibles is best we can do. We have had HSA’s in the past & found them to be the best plan’s for the company. We support the efforts of the NAHB & ask that you contact your senator’s to pass this bill. As a small business, we have enough challenges without dealing with the IRS!

    David Elliott, President
    Construction & Planning Services Inc.
    Lenexa KS.

  2. Bryan Mudrak says:

    In 2016, the penalty for not signing up for ACA Insurance is 2.5% of you annual earning. This year thousands of hardworking Americans are not insured and will pay this penalty. Yet, there are other affordable insurance programs that will cover most of most American workers but do not qualify under the ACA guidelines. We need to get Congress behind a comprehensive change to the ACA to allow workers to buy insurance plans that cover basic needs like injuries and illness and not sex change provisions, abortions and such. At the same time eliminate the ACA tax penalty for these insurance policies.

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