Bill voids IRS penalty on business health option

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The National Federation of Independent Business (NFIB)  applauded Senate passage of a measure eliminating a controversial IRS penalty on businesses that reimburse workers for the cost of health insurance. Last week, the House passed an identical version of the bill.

“Both the Senate and the House have now passed critical legislation to protect small business owners from outrageous IRS fines,” said NFIB President and CEO Juanita Duggan. “Our research showed that a significant percentage of NFIB members reimbursed employees for the cost of health insurance, a practice the IRS tried to stamp out despite the lack of clear direction from Congress. Now Congress has acted to make it clear that businesses should not be punished just for trying to help their employees pay for health care costs.”

In July of 2015, the IRS began enforcing a new penalty on employers who reimburse their workers for the cost of premiums or health care services. Neither the penalty nor the reason for it appears anywhere in Affordable Care Act. Nevertheless, employers who violate the rule face fines of $100 per day, per worker. That amounts to $36,500 a year, which is 18 times larger than the penalty imposed on larger employers that don’t offer insurance to their workers.

Under Section 18001 of the 21st Century Cures Act, small business owners would be allowed to compensate employees for the cost of individual insurance premiums or medical visits. President Obama has issued a statement supportive of the legislation.