From the Desk of Bob McNett….
Small Businesses will be Fined for Paying for Individual Policies for Employees.
See attachment to this email for an article from Forbes Magazine that describes this in more detail.
Beginning July 1, 2015, or January 1, 2015 for S Corporations, small businesses that pay for individual policies for employees, in lieu of providing coverage through a group health plan, will be fined $100 per day per employee.
The penalty applies whether the reimbursement is considered a before-tax or after-tax contribution.
This is one fine that employers with fewer than 50 employees will also be subject to.
The attached article says that you can still provide coverage for one worker with an individual policy, but any more than one will trigger the penalty.
The article also suggests that providing group insurance coverage is more expensive than individual policies for small businesses.
From my experience, this is simply untrue. In most cases I have reviewed, group premiums are in the same neighborhood, and sometimes less expensive, than individual plans. Also, group plans often provide better benefits than do individual plans.
Group plans allow employers to provide insurance to employees as a tax-deductible expense to the employer, and a tax-free benefit to the employee. Also, by using a Sec. 125 Premium-Only Plan, the employee can pay for any part of the premium, including for dependents, using pre-tax dollars. Individual plans offer none of these tax benefits.
None of this is mentioned in the article, so in that regard, it is very misleading. The McNett Agency does write quite a number of individual policies, but we rarely, if ever, recommend an individual policy to a business client, unless this client is a sole practitioner and only needs to provide coverage of his or her self.
There are bills introduced in the House and Senate to allow employer-paid individual policies, but for now doing so could result in a penalty that could close down many small businesses.
**The McNett Agency is in no way a tax or legal advisor. To ascertain how various rules may affect you or your business, consult your tax or legal advisor.
Bob McNett
The McNett Agency
918 294 3712
1 866 497 7119 toll free
918 494 6725 fax