WASHINGTON – Responding to a question from Sen. Chuck Grassley, a representative of a major association for small businesses confirmed that a number of small businesses continue to be unaware that they are no longer permitted under the President’s health care law to provide a benefit to their employees that many have provided for years– reimbursing their employees for the cost of health insurance purchased on the individual market.  According to the National Federation of Independent Business, around 18 percent of small businesses last year reimbursed employees or provided other financial support to workers who bought individual insurance plans.  Such health reimbursement arrangements are prohibited by the President’s health care law, and the IRS will begin imposing penalties against small businesses with health reimbursement arrangements in July.  Grassley is working to reverse this situation.

“Small businesses that fail to recognize this could face as much as a $100 per day per employee penalty simply because they want to help their employee obtain health coverage,” Grassley said at a Finance Committee hearing today.  “This fails to meet the common sense test.”  

Holly Wade, Director of Research and Policy Analysis, National Federation of Independent Business, said that in addition to the number of small businesses that have paid their employees’ health insurance premiums, an additional number of small businesses are interested in the option, no longer available to them without penalty, and that many of these employers are confused by the complicated nature of complying with the new requirements without penalty or unaware of the stiff penalty facing them if they don’t comply.  

Grassley is working on legislation to permit small businesses to continue to reimburse their employees for health insurance premiums on a pre-tax basis.  He has heard from small business owners in Iowa who want to keep this option to help their employees.