No Kidding: This Week IRS starts Punishing Businesses for Helping Workers Buy Insurance

Date: June 29, 2015

Jack
Mozloom, 202-406-4450 or 609-462-5610 (cell)

NFIB urges quick repeal of schizophrenic IRS rule imposing fines on small
businesses for helping defray the cost of their workers’ insurance or medical
expenses

Washington, DC (June 29, 2015) – An obscure IRS rule takes effect on
Wednesday under which small businesses that get caught helping their workers
buy insurance or pay medical bills can be fined 18 times more than larger employers
that don’t provide coverage at all, warned the National Federation of Independent Business (NFIB) today.  

“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.”

Under
the rule, which appears nowhere in the Affordable Care Act, employers who do
not offer a group health plan, but give their workers additional pay to
compensate for the purchase of health insurance or direct medical expenses can
be fined $100 per day, per employee. 
Over the course of a year that’s $36,500 per employee up to $500,000 in
total.  The penalty on businesses for failing
to comply with the employer mandate is only $2,000 per year.

“It’s
hard to believe Congress or the President intended to punish employers much
more severely for actually helping their workers,” said Kuhlman.  “Nevertheless, that’s the consequence and
most small businesses don’t know it.”

In
fact, according to NFIB research 14 percent of small businesses that don’t offer group insurance
reimburse their workers instead.  They
think they’re doing a good thing but they’re walking into a minefield. 

“Reimbursing
employees for the cost of insurance or medical services is a way for small
businesses to help their workers without the administrative headache of setting
up a costly group plan,” said Kuhlman. 
“Most small employers don’t have HR departments or benefits specialists,
so this is a simpler, easier way to help their employees.”

Congress
could remedy the situation by repealing the IRS rule.  There is legislation in both houses awaiting
action (S. 1697/H.R. 2911). 
 

“If
there’s an opportunity for a bipartisan improvement toward affordable
healthcare, this has to be it,” said Kuhlman. 
“There’s no real justification for penalizing small businesses that do
what the law’s strongest supporters claim to want, which is to help employees obtain
coverage or pay medical bills.  This is a
rigid and thoughtless bureaucratic rule that undermines the purpose of the law,
and it ought to be repealed immediately.”

Related Content: Press Release | Healthcare | National

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