NEWS RELEASE Contact Person: JoAnne Stabile
    Director of Finance
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Small Businesses Must Provide Health Plan For Employees To Avoid Penalty After June 30, 2015

GARDEN CITY, NY, -- Per the Internal Revenue Service, small employers (less than 50 employees) must provide health coverage for their employees or they will incur a penalty of $100 per day, per employee after June 30, 2015.

Prior to the Affordable Care Act (ACA), employers that wanted their employees to be protected with health care coverage, but could not provide a company plan, could simply provide employees with an amount of money that would to enough to cover the cost of coverage or a portion of it. As long as the individual provided evidence that they used the money for purchasing health insurance, the dollars were excludable from taxable income for the employees. Alternatively, employers could also pay the premiums directly to the insurance carrier.
However, the ACA said that those types of reimbursement arrangements failed to meet ACA requirements in two ways: the requirement that group health plans have no annual limit on benefits, and no co-pay for certain preventive health services must be paid. The penalty for failure to comply is $100 per day per employee or $36,500 per year per employee.
Temporarily, the IRS has announced that small employers with reimbursement plans in place will not be penalized unless they maintain them beyond June 30 of this year. They will also not be required to File Form 8928, which covers failures to satisfy group health plan requirements.

2% shareholders of S corporation stock should be aware that they might have a different tax treatment. Previously they were required to report the premium reimbursement as income on their 1040s, but were allowed to take a deduction equal to the amount of income reported, leaving them tax-neutral. More guidance will be issued on this in the future, however for the time being "S" corporations will still be allowed to continue to deduct that income as self-employed health insurance.

The IRS has made it clear that the ACA's market reforms, as they pertain to this issue, do not extend to arrangements covering only a single employee (regardless of whether that employee is a 2% or more shareholder). That means if you own the company and have one employee that you want to reimburse for the cost of buying individual coverage, you will not be subject to any penalties.

Small business owners should be sure to have something in place by June 30, 2015. Each situation is different, so be sure to discuss this with your tax professional to ensure that you are complying, and that everything meets your individual needs.

Israeloff, Trattner & Co., CPAs, PC is one of the region's leading certified public accounting, financial and management consulting firms with offices located in Garden City and Manhattan. The Firm provides a wide range of services for individuals and businesses in a number of industries. Their many services include accounting and auditing, forensic accounting, fraud engagements, business, professional practice and license valuations, domestic and international tax planning and compliance, merger and acquisition consulting, management consultation, technology, human resources and marketing consulting, financial and estate planning.

For more information, call or write Israeloff, Trattner & Co., P.C., 1225 Franklin Avenue, Garden City, NY 11530, 516-240-3300, or visit the web site at


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