• Skip to navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

American Academy of Estate Planning Attorneys

AAEPA, Inc

Find a Member Member's Login
Call Today (800) 846-1555
  • Membership
    • Membership Membership
    • submenu
      • Why Join?
      • Member Requirements
      • Become A Member
      • Meet the Team
  • Estate planning software
  • Education
  • Practice management
    • Practice management Practice Management
    • submenu
      • 11 Essential Systems
      • Coaching
      • Law Firm Marketing
  • Resources
    • Resources Resources
    • submenu
      • Live Training
      • Blog
  • Contact Us

21st Century Cures Act Provides Options for Small Businesses

Home » Law Practice Management » 21st Century Cures Act Provides Options for Small Businesses

I’m the owner of a small business, and providing health insurance to my employees is a difficult task. I’ve heard about something in the new 21st Century Cures Act that might make it easier to accomplish. Will you explain?

While most of the media attention around the 21st Century Cures Act focused on the provisions related to medical innovation, the law also included good news for small employers previously prohibited from offering Health Reimbursement Arrangements (HRAs). Beginning January 1, qualified small businesses CAN use HRAs to reimburse employees who purchase insurance coverage, instead of providing the more traditional, and expensive, group health plans.

Rethinking HRAs

HRAs are a way for small companies to reimburse their workers’ medical expenses, including health insurance premiums, up to a certain amount each year. The reimbursements are excludable from the employees’ taxable income, and untapped amounts can be rolled over to future years. HRAs generally have been considered to be group health plans for tax purposes.

But the Affordable Care Act (ACA) prohibits group health plans from imposing annual or lifetime benefits limits and requires such plans to provide certain preventive services without any cost-sharing by employees. According to previous IRS guidance, “standalone HRAs” — those not tied to an existing group health plan — didn’t comply with these rules, even if the HRAs were used to purchase health insurance coverage that did comply.

The IRS position was troublesome for smaller businesses that struggled to pay for traditional group health plans. The changes in the 21st Century Cures Act give these employers a third option for providing one of the benefits most valued by today’s employees.

New option, new requirements

These new “Qualified Small Employer Health Reimbursement Arrangements” (QSEHRAs) won’t be treated as group health plans. Employees won’t be required to pay taxes on the employer’s contribution, nor will the employer be liable for payroll taxes on it.

QSEHRAs must satisfy a number of requirements. The employer must have fewer than 50 full-time employees. The employer cannot offer a separate group health plan to any of its employees. The HRA is provided on the same terms to all eligible employees, except that an employee’s benefit can vary based on criteria such as age and family size. The HRA is funded solely by the employer, with no salary-reduction contributions. The HRA provides payment or reimbursement for medical care expenses, which can include individual health insurance as well as out-of-pocket expenses. The amount of payments and reimbursements don’t exceed $4,950 for individual employees or $10,000 for family coverage.

In addition, when an employer offers an HRA, all employees generally must be eligible unless they’re within their first 90 days on the job, under age 25, part-time or seasonal workers, covered in a collective bargaining unit, or are certain nonresident aliens.

New reporting obligations

At least 90 days before each plan year begins (or on the first day a new employee is eligible), the employer must provide eligible employees a notice stating the amount of the employee’s permitted benefit under the HRA for the year, that the employee should provide information about that amount to any Health Insurance Exchange to which the employee applies for advance payment of the premium assistance tax credit (also referred to as a federal subsidy), and that, if the employee isn’t covered under the minimum essential coverage for any month, the employee may be subject to tax under Internal Revenue Code Section 5000A for that month and reimbursements may be included in gross income.

Failure to provide timely notice will subject an employer to a $50 penalty for each employee, up to $2,500 annually. Notice will be considered timely for 2017 if provided by March 13, 2017.

In addition, employers must report the value of any QSEHRA benefit on employees’ Forms W-2, beginning with forms issued in January 2018 for 2017.

Uncertain future

Although President Trump and the Republican Congress have promised to repeal the ACA, the QSEHRA exception in the 21st Century Cures Act could complicate matters. If smaller employers take advantage of the exception, the individual insurance market is likely to expand and the risk pool is likely to diversify. This could both stabilize premiums and give more citizens a stake in preserving some of the ACA’s provisions.

Stacey Huff is the Advisory Services Director at MCM CPAs & Advisors, where she works closely with the firm’s HR consultants. Her practice expertise is currently in tax compliance as it relates to the Affordable Care Act, and her experience also includes retirement plan administration and not-for-profit tax compliance and consulting.

Academy Guest Blogger
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (800) 846-1555
www.aaepa.com

  • Author
  • Recent Posts
Stacey Huff
Latest posts by Stacey Huff (see all)
  • Building Effective Teams - November 24, 2017
  • Affordable Care Act: Awareness is Key for Employers - February 24, 2017
  • 21st Century Cures Act Provides Options for Small Businesses - January 27, 2017
SHARE

Primary Sidebar

Subscribe to our blog

Recent Posts

  • Avoid Unnecessary Family Disputes with a Letter of Instruction
  • Understanding Undue Influence – Part I
  • The Top 3 Estate Planning Must-Haves
  • How Do I Trust Thee… Part III
  • Time for a Mid-Year Check-In?

Categories

  • Academy Girl Friday (33)
  • Client Services (239)
  • Coaching (33)
  • Consumer Advantage (3)
  • Counseling (21)
  • Elder Law (5)
  • Estate Planning (930)
  • Estate Planning Documents (5)
  • Estate Planning Education (201)
  • Financial Analysis (3)
  • Financial Services (1)
  • General (20)
  • Law Firm Marketing (282)
  • Law Firm Net Revenue (7)
  • Law Firm Staffing (99)
  • Law Firm Technology (45)
  • Law Firm Web Tips (186)
  • Leadership (191)
  • Legal Education (651)
  • Marketing Tools (2)
  • Medicaid (1)
  • Member Services (1)
  • Owners Compensation (1)
  • Peak Performer Focus (1)
  • Practice Building Calls (1)
  • Practice Management (497)
  • SEO/Social Media Support (3)
  • Software (6)
  • Strategic Planning (10)
  • Uncategorized (15)

Footer

logo of American Academy of Estate Planning Attorneys

About Us

  • Meet the Team
  • Site Map
  • Legal Notice
  • Privacy Policy

Explore Our Services

  • Coaching
  • Estate planning software
  • Events
  • Legal education
  • Marketing
  • Web and SEO

Keep in Touch

Mon-Fri

9444 Balboa Ave. Suite 300

San Diego

(800) 846-1555

info@aaepa.com

Take Back Control of Your Business and Your Life

+

footer section | American Academy of Estate Planning Attorneys

© 2022 American Academy of Estate Planning Attorneys, Inc All rights reserved.

We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent. Don't sell my personal information.
Cookie Settings Accept All
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
Save & Accept