Many Small Business Owners at Risk For This Penalty

The new ruling under Code 4980D that went into effect on July 1, 2015 could put many small business owners at risk for a huge IRS penalty.

Are you an employer or do you have a client who does not offer group insurance coverage, but instead pays their employees extra to help them pay for their individual insurance? If you do, it could mean risking a $100 per-day per-employee penalty. This affects many small business owners, including those with as few as two employees.

According to CPA Magazine, the National Federation of Independent Business has been watching this penalty closely since it will likely affect many small businesses across the country.

In a recent article in CPA Magazine written by Jerry Love, the NFIB warns small business owners.

“It’s the biggest penalty that no one is talking about,” said NFIB Policy Director Kevin Kuhlman. “The penalty for compensating employees for healthcare related expenses is enough to destroy most small businesses.” (CPA Magazine)

While this ruling went into effect over seven months ago, there are still small businesses not offering group insurance, but reimbursing their employees instead.  This is a slippery slope for employers who think they are doing something good for their employees since they are putting themselves at risk for a $100 per-day, per-employee penalty.

Make sure you know the best options to steer clear of this penalty while providing employee benefit options. BASE® offers a Section 105 HRA or an Integrated HRA to employers who want to reduce the overall cost of an insurance plan and decrease the impact of health care expenses. Most importantly, have peace of mind in knowing you have an administrator keeping you in compliance so that you don’t have to worry about any big penalties issued by the IRS. 

To see what businesses qualify for these products, call 1-888-386-9680 or contact BASE® today. 

Emily Greiner

BASE®--Marketing/Communications Specialist 

IRS Compliance Update – Notice 2015-87

On December 16th, the Treasury Department and IRS released Notice 2015-87 regarding the treatment of employer health care arrangements and the market reforms of the Affordable Care Act.  Below are a few highlights from the most recent Notice 2015-87: 

1) The notice reaffirms that an HRA or employer payment plan with one participant can still reimburse individual market premiums without violating the market reforms.

2) The notice solidifies that an HRA or employer payment plan with two or more participants cannot pay or reimburse individual market premiums.  These types of arrangements are subject to the $100 per-employee per-day penalty.

3) The notice amended previous guidance regarding Integrated HRAs.  Prior to this notice, the benefit amount of the Integrated HRA could be extended to a spouse and dependent who were not insured by the employer’s group insured plan, but insured by another employer’s group insurance plan.  From this point moving forward the Integrated HRA benefit amount can only be extended to individuals who are insured by the employer’s group insurance plan.  

4) The notice reiterates that an employer who utilizes an Excepted Benefits HRA or 125 Plan for two or more participants does not violate the market reforms.

5) The notice further confirms that an employer cannot utilize a Section 125 plan to pretax individual market premiums, even if it is funded solely by the employee.  These types of arrangements are subject to the $100 per-employee per-day penalty.

Many of the questions addressed elaborate on IRS Notice 2013-54, FAQs about the Affordable Care Act Implementation (Part XXII), Notice 2015-17, and final regulations implementing the market reform provisions of the ACA, which BASE® has already complied with, leaving our customers effectively untouched by this notice.  While BASE® plans have been operating under this interpretation already, you may have customers who are not utilizing BASE®, either self-administering or using another administrator, and will want to consider completing a compliance assessment.

Anne Case

BASE® - Director of Marketing & Communications  

Be the Difference For Your Client

Section 105 allows you to be the “Go To” for your self-employed client

It is open enrollment season and we find that we are speaking with more and more health insurance agents lately. In a field with a lot of competition, how do you stand out?  What can you offer your clients that other agents may not know about? Allow BASE® to help you create Section 105 BASE® HRA plans for your clients.  Assist farmers and other small business owners by allowing them to deduct up to 100% of their family’s qualifying medical expenses as a legitimate business deduction. 

This plan saves your client an average of $4,500 a year on taxes.  Also, this plan is low maintenance. This well received plan takes an average of 12 hours per year to keep updated and current. 

BASE® assists you in creating this money saving plan every step of the way. We provide legal plan documents, which are required by the IRS, DOL & ERISA, third party adjudication and stellar customer service. When you call, we answer.

Using BASE® has been a success for many agents.  Iowa Insurance agent, Beau Jorgensen, recalls using BASE®. “I used BASE® with a client and it turned out great,” he said.  The client is a sole proprietor farmer and his wife helps out on the farm an average of 30 hours per week. The couple had $1650 in health insurance premiums and averaged $8,000 per year in out of pocket expenses. By establishing an HRA they were able to deduct the qualifying health expenses and had $9,000 in tax savings.

Another agent, Linda Gosch from South Dakota, has come to realize the Section 105 HRA helps more than just farmers. “Initially I was only interested in BASE® for the farmers I work with, and now look back and think if I would’ve only spent the couple hundred dollars on a BASE® plan myself. That small fee would have been worth it to have $2,400 back in my pocket,” she says.

No matter what type of client, providing a Section 105 HRA to save thousands in tax dollars can make a huge difference in their lives.  Be the difference and show how small actions can lead to big outcomes.

Give your client the opportunity to save money in an easy way– Partner with BASE®!  To learn more about the BASE® HRA and who qualifies, call 1-888-386-9680 or contact BASE® today!


Emily Greiner

Marketing/Communications Specialist