WASHINGTON – Sen. Chuck Grassley of Iowa is working to prevent small business owners from facing a little-known penalty under Obamacare for paying their employees’ health insurance premiums.
“I’m hearing from Iowa small business owners who could face major fines from the IRS for doing what they’ve done for years to help their employees buy health insurance,” Grassley said. “The dentist or the farmer who has just a few employees and has no obligation to offer insurance in the first place could be subject to as much as $100 per day per employee as a penalty for helping their employees purchase health insurance. This would be devastating to small businesses and impose hardships on their employees. Congress has to fix this problem.”
Grassley prepared an amendment to allow small business owners to offer their employees financial help to buy health insurance, just as they did before the President’s health care law, on a pre-tax basis without penalty. Grassley discussed his amendment at the Finance Committee, which approved another bill to fix another Obamacare problem.
Grassley’s amendment addresses a problem created under Obamacare’s “market reforms,” which dictate the types of coverage any valid group health plan must offer. The IRS has ruled that monetary assistance provided by an employer to an employee to buy insurance on the individual market is generally considered a “group health plan” but generally doesn’t meet Obamacare requirements. As a result, small businesses, which are exempt from the employer mandate, may be subject to a $100 per day per employee as a tax penalty simply for providing monetary assistance to their employees to purchase a qualified health plan on the individual market, Grassley said.
The penalty is becoming known to Iowa small business owners and accountants as they review their tax obligations for 2014 and realize the penalty is a possibility. The IRS’ decisions have been little noticed or understood.
The Iowa State University Center for Agricultural Law and Tax wrote an article on the penalty last November, available here.
Grassley was unable to offer his amendment at the Finance Committee today but will keep working at it. “I’ll keep looking for opportunities to fix this problem,” Grassley said. “Small businesses shouldn’t face steep penalties just for trying to help their employees. This is the kind of problem Obamacare created because it was poorly thought out.”
Grassley voted for the Obamare fix approved in the Finance Committee today. The Hire More Heroes Act of 2015 provides incentives for companies to hire more veterans by ensuring they don’t count against the 50 employee threshold requiring employers to offer health insurance if the veteran already has medical coverage elsewhere.
The text of Grassley’s amendment is available here. The text of Grassley’s statement on the amendment is available here.