Obamacare Penalties and Small Businesses
The Affordable Care Act (ACA), also known as Obamacare, established some market reform restrictions that apply to all employer-provided group health plans, including those offered by small businesses. The penalties for ignoring these restrictions are substantial.
According to the IRS, businesses who run afoul of the market reform restrictions outlined in the ACA can be slapped with stiff financial penalties. Businesses that do not provide coverage to their employees, or provide coverage that doesn’t meet minimum value specifications or offer coverage that is deemed unaffordable, will be required to make an Employer Shared Responsibility payment. More than just a slap on the wrists, the 100 dollars per day per employee penalty can amount to as much as $36,500 per employee in a given year! That’s some serious dough and a potentially crippling cost for any businesses not currently in compliance.
A Blow to Small Employers
Particularly hard hit are the many small businesses that rely on employer payment arrangements to help their workers obtain health coverage without the hassle and expense of setting up a full-fledged, company-sponsored health insurance plan. These businesses are NOT exempt from the Employer Shared Responsibility penalties. It is worth repeating, businesses who currently employ an arrangement under which an employee has an after-tax amount applied towards tax coverage, or takes that amount as compensation, will be penalized. The IRS considers these employer plans to be group health plans subject to market reforms. In the past, the IRS offered a temporary penalty exemption to small employers. However, those exemptions expired June 30, 2015, which means that any businesses not in compliance are fully liable.
Still A Few Exceptions
While a large segment of the small business sector is now on the hook, two sets of exemptions remain for S-corporations and one employee arrangements. While employer payment arrangements for S-corporations still run afoul of the ACA’s provisions, the IRS has exempted such agreements from penalties until December 31st, 2016. As for one employee arrangements, no penalties will be assessed, which is great news for the thousands of mom and pop shops out there. Businesses with only one full-time employee can still employ an employer payment arrangement to reimburse his or her health insurance premiums without triggering financial penalties.
Obamacare penalties are no joke. Request your PEO Evaluation from PEO Broker to ensure that your business is ACA-proof.
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