On Tuesday, December 13, 2016, President Barack Obama signed the 21st Century Cures Act into law that included the Small Business Healthcare Relief Act (SBHRA) or H.R. 5447. The bill addresses small businesses’ concerns, by reviving their ability to make tax deductible contributions to employees.
Effective January 1, 2017, small businesses will be able to purchase low cost, high deductible plans, extending cost savings back to their employees. The law will also protect small businesses against penalties, including those issued by the IRS, as result of providing this cost-sharing option to employees.
Here’s what you need to know:
- Rep. Charles Boutsany, Jr. (R-LA) sponsored the act with 59 representative co-sponsors.
- The law allows small businesses to offer HRAs to fund employees to purchase health insurance.
- A new type of health reimbursement arrangement (HRA), known as Qualified Small Employer Health Reimbursement Arrangements or QSEHRA was established through SBHRA. QSEHRAs are designed to assist employees with out-of-pocket health insurance and medical costs.
- Small businesses with under 50 full time employees, that do not already offer group health plans to their employees, can offer QSEHRAs.
- All employees must be able to provide proof of having minimum essential health insurance to meet the requirements of the individual mandate.
- SBHRA also offers guidance on whether employees with HRAs are eligible for Patient Protection and Affordable Care Act (PPACA) subsidies.
- Small employers that choose to offer QSEHRAs must offer them to all full-time employees. Exceptions apply to those full-time employees that have not completed 90 days of work, are under 25 years of age, or are covered under a collective bargaining agreement for accident and health benefits. Part-time and seasonal workers may be excluded.
- The maximum reimbursement will be $4,950 for single coverage and $10,000 for family coverage, and these amounts will be adjusted annually.
- The employer must make the same contributions for all eligible employees. However, amounts can vary based on the price of the insurance policy.
- SBHRA provisions go into effect on January 1, 2017.
Ahead of signing the 21st Century Cures Act, President Obama delivered his remarks. The signing ceremony is available to watch below:
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