Here is what large businesses (Over 50 employees) can and should do to ease the pain.
Large
businesses should employ a "linked" Healthcare Reimbursement
Arrangement (HRA). Here is how it works. Let's say you have a group
insurance plan that offers a $1,000 deductible for your employees. With a
linked HRA, the business adjusts its group policy to a $5,000
deductible (or higher). However, they maintain the lower deductible for
their employees, essentially self insurring the amount between the
deductibles.
When an employee hits the $1,000 deductible, the
business reimburses the employee for out of pocket expenses until the
higher deductible is reached.
The premium for the $5,000 policy will be
significantly lower in cost. Most employees will not hit their
deductible. The savings can be substantial - and all reimbursed expenses
absorbed by the business are deductible expenses.
For businesses
with 2 to 49 employees, the answer lies in a Cafeteria 125 plan. With
this plan - the business cancels its group insurance plan (if it had
one). A business is not required to provide insurance for employees if
they are under 50 full time employees.
The Cafeteria 125 plan
allows all employees to purchase their own insurance (on or off the
exchange depending on their individual needs) and pay for their
insurance and other qualified out of pocket expenses with pre tax
dollars. Also employees will be able to take advantage of the Federal
subsidies if they apply.
Here's how it works. The employer
withholds the amount of individual health insurance premium from the
paycheck of the employee (pre tax) and sends the withholding to the plan
administrator. The employee pays his insurance premium as always to the
insurance company, and submits proof of payment to the administrator.
The administrator reimburses the employee the full amount (tax free). If
an employee makes $35,000 and pays a post subsidy premium of $5,000
annually, the employee's tax liability falls to $30,000.
The
business wins in several ways. The savings from not having to provide a
group healthcare plan will be tremendous. But beyond that, the business
will see a significant reduction in FICA, Social Security and Medicare
taxes. Also, the amount of the salary reported to its worker's
compensation policy will reduce, providing savings on that premium as
well. The Cafeteria 125 plan is a tremendous win/win for businesses and
employees alike.
Smaller businesses where the owner employees
family members may not get the same bang for the buck, as under a
cafeteria 125 plan, the owner and immediate family members may only
reduce 25% of the premium expense.
Small "mom and pop" businesses
have solutions too. If a person owns a business, is a sole proprietor or
and S corp, or even an LLC, they may likely qualify to open an HRA
(Healthcare Reimbursement Arrangement) section 105 plan. Under this
plan, the business may reimburse the owner 100% of healthcare premiums
and out of pocket expenses, creating a very nice tax break.
These small
business may already "deduct" health care premiums of the owner. This
goes a step further by allowing the out of pocket expenses as well. The
average business with an HRA 105 plan saves over $4,000 per year in
taxes.
Here is a calculator where small business owners may figure their tax savings under the HRA section 105 plan:
http://www.baseonline.com/105hra_savings.html.
Obamacare
has created quite a stir. The law is helpful for many, and harmful for
others. But, it is the law of the land. The wise and prudent business
owner will learn that in order to combat a harmful tax law, one must use
other tax law to their best possible benefit. The Linked HRA, the
Cafeteria 125 plan, and the HRA 105 are long established solutions for
business owners. Their usefulness has just become paramount in the new
ACA economy and environment.
Barry Draper is a licensed insurance broker with Insphere
Insurance Solutions. He has studied the effects of the Affordable Care
Act on businesses and offers these tried and tested solutions as
effective tools for any business to implement. Barry may be reached by
visiting
http://Insphereis.com/bdraper
Article Source:
http://EzineArticles.com/?expert=Barry_Draper
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