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Dos and Don'ts for small business health plans

by Tony Novak, CPA, MBA, MT         revised November 4, 2015

Small business health plans are subject to regulation by the Internal Revenue Service, the U.S. Department of Labor and state insurance departments. The Affordable Care Act enacted in 2010 and implemented in phases from 2010 until 2017 adds many additional health plan requirements. This article does not include references or discussion but simply lists the topics as either in a category of allowed and recommended as a best practice or potentially problematic as of the date of the most recent article update.

The article focuses on small businesses with more than 1 but less than 50 common law employees.

This article does not address unique circumstances pertaining to one person businesses, S-corporation shareholder employees, church plans, union employee plans, independent contractors, the requirements of federal law known as COBRA for employers with 20 or more employees and some of the requirements of HIPAA.

Consider that small businesses are not required to offer employee health benefits. This list only pertains to employers who voluntarily opt to provide employee health benefits. The overriding advice to all employers in this subject matter is "do it right or don't do it at all".

Do...

- Have a plan document

- Review your plan annually

- Make sure your plan was updated recently to meet market reform requirements

- Have a Summary Plan Description available for employees

- Notify employees in writing of eligibility for employer-provided health benefits and the benefits available through the public insurance exchange

 - Pay for 'excepted benefits' including dental, vision, accident, employee wellness and limited benefit hospitalization plans.

- Pay for employer-sponsored group health insurance

- Pay for out-of-pocket expenses that are integrated with your employer-sponsored group health insurance

- Pay for employer contributions to employees' Health Savings Accounts

- Provide employees with a source of independent advice on health benefits

 

Don't...

- Presume that your insurance policy is the health plan document

- Pay for individual major medical insurance

- Pay for insurance provided through an employee's spouse

- Pay for out-of-pocket medical expenses that are not integrated with your group health insurance plan, governed by a qualified written plan and verified by an independent claims processor.

- Include employer-paid health benefits as taxable employee compensation

- Discriminate in either the eligibility requirements or the payment of health benefits

- Inadvertently disqualify low income or part-time workers from government-paid subsidies for health insurance

- Rely on the opinion of the product seller as to the product's legal standing

- Rely on products using the phrase "Section 105 plan" or programs offered by the firm "Zane Benefits"

- Assume that your insurance company takes care of your company's heath plan compliance requirements

- Administer your own health plan claims

 

Grey areas

Finally, consider that there is at least one popular topic without clear definition or definitive legal guidance that could fall in either category depending on the specific details of the arrangement. The terms "health care allowance" or "benefits savings account" or other similar terms have been introduced to describe an arrangement where salary or wages paid by an employer is segregated and used by an employee to pay health expenses including individual insurance premiums. Some such arrangements would be allowed while other employer practices would trigger penalties.

These arrangements should be individually reviewed by an independent professional (not the company selling the product or service!) to ensure compliance with all applicable laws and to avoid the severe excise tax penalties of non-compliant small business health plans under Internal Revenue Code Section 4980D dealing with market reform requirements.

Schedule a free call with Tony Novak CPA, MBA, MT to ask how your firm can reduce costs and improve employee satisfaction with your benefit options. No fee for initial consultation.

FreedomBenefits.org web site is independently owned and operated by Tony Novak Certified Public Accountant operating under the trademarks "Freedom Benefits", "OnlineAdviser" and "OnlineNavigator". Opinions expressed are the sole responsibility of the author and do not represent the opinion of any other person, company or entity mentioned. Tony Novak is not an agent, broker, producer or navigator for any federal or state health insurance exchange but may provide uncompensated advice, reviews and referrals to these official resources. Novak is compensated as an accountant, adviser, affiliate, consultant, marketer, reviewer, endorser, producer, lead generator or referrer to some of the commercial companies listed on this site. Information is from sources believed to be reliable but cannot be guaranteed.