Thousands of small contractors are about to get “blindsided” by a little-known Obama Care-related fine of $100 per day per employee — unless a last-minute Congressional action can save them.
The fines are for health reimbursement accounts, or HRAs. As the name suggests, HRAs are a way employers who can’t offer full health insurance benefits have traditionally offset costs for employees.
Because HRAs are typically offered by employers who don’t meet the Affordable Care Act’s (ACA) employee threshold for health insurance coverage many smaller employers may assume they have nothing to worry about, said Suzanne Beall, federal legislative director for the National Association of Home Builders.
But HRAs were ruled unacceptable because the ACA prohibits cost sharing of health insurance expenses. Then the Internal Revenue Service stepped in, and as of the July, employers offering HRAs can be fined $100 per day per employee, according to a little-known guidance ruling. That’s 600 times the $695 annual fine for violating the individual mandate, said Kevin Kuhlman, director of public policy for the National Federation of Independent Business.
To make matters worse, HRAs are often set up through brokers, and contractors may not even know they’re offering them, Beall said. Contractors should work with an expert or talk to their broker to find out if they could be liable for HRA fines, she recommended.
“I think people are going to be very blindsided,” Kuhlman said. “Business owners are busy operating their business. They don’t have the time or luxury to pay attention to quiet IRS guidelines when they’ve been told that if you have fewer than 50 employees, you don’t have to worry about this.”
Contractors have also traditionally treated HRAs as a way to attract quality workers. “The bottom line is that all your better employers are trying very hard to find the best employees, and I’m disappointed someone is taking one of the arrows out of my quiver to be able to attract them,” said Robert Criner, owner of Criner Remodeling and Chair of the NAHBR.
But that arrow may be retrieved. NAHB and NFIB have partnered with a group of other concerned small business associations on legislation to make HRAs legal again and do away with the penalties, said Beall. The legislation —The Small Business Health Relief Act (HR 2911 and S1697) — already has bipartisan support and a pledge from President Obama to sign it. But with so many other items on Congress’s year-end agenda, Beall only gives a 50/50 chance for the bill to reach the President’s desk.
“We don’t think people are hearing enough about this on the hill to make it a priority,” she said. “They’re hearing about Syria and refugees and terrorism. This doesn’t have the groundswell of support that these other hot topics have.”
She and Kuhlman said contractors can help change that by calling their elected representative and urging them to pass the bill. Both say the bill could pass in 2016, but they worry about the ramifications of waiting. “I think it’s more important than ever that it pass before the end of the year,” Kuhlman said. “If this thing is still unresolved, then a lot of businesses are going to have problems.”