HEALTH BENEFITS
BY: JENNIFER STEIN,
BOWEN MICHLETTE & BRITT
THE IRS IS WATCHING:
TREAT YOUR HEALTH BENEFITS
LIKE YOUR TAXES
F
rom the employer’s perspective,
one of the most important and
stressful results of the Affordable
Care Act is the need to document
decisions about their employee
health plan for future reporting to the
government. Beginning in the 1940s,
health benefits were offered by employers
as a “perk” of the job, and they were
viewed by employees as a benefit that was
a welcome addition to compensation. But,
they were not viewed as a core aspect of a
person’s income.
Starting in the 1990s, health benefits
became much more expensive, due to
the rising cost of health care treatment
itself. And, as the cost of health benefits
increased, employees started to view health
benefits as a more important aspect of
what their job provided. Simultaneously,
employers began to set aside more money
to pay toward these expensive and valuable
health benefits. This increase in cost
was a financial stressor to employers,
but ultimately the decisions employers
made about their health benefits were
determined like wages—based on the
financial capacity of the company and the
needs for recruitment and retention.
On March 23, 2010, the Affordable Care
Act (ACA) changed many aspects of health
care benefits. One of the most difficult
adjustments for employers has been the
onset of detailed reporting requirements
about health benefits which employers
must provide to the IRS. Specifically, the
ACA requires employers to report whether
health coverage was offered to each
employee (identified by name), whether
coverage offered was offered to a spouse,
and if so, whether it was offered on a
conditional basis. Additionally, employers
are required to report whether coverage
was offered to children; the percentage of
the employee’s income that the employee
must pay for certain coverage; and which
of three formulas the employer used to
determine whether that coverage was
“affordable” under the law. Additionally,
employers must document when the
coverage started and ended. COBRA
coverage is documented, and if the
employee rejected coverage, this is also
documented.
Now employers must do this annual
reporting to the IRS regarding their
employee health coverage. And, this
reporting comes with heavy penalties if the
reporting is not done, or if the reporting
is done but the health coverage offered
does not meet certain requirements.
Most people refer to this reporting as
the “employer pay or play” portion of the
ACA, or “employer carefully document
shared responsibility.” The bottom line is
that employers now must factor into their
health plan decisions the need to keep
good, clear records of those decisions. Years
ago, employers probably did not imagine
that a benefit they offered as a “treat”
would be heavily scrutinized by the IRS!
So, the safest path for an employer is to
think about this IRS oversight as you
make your decisions, with the help of your
BMB healthcare broker. The IRS’s reach
now extends into your health insurance
decisions—treat them that way! +
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