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Affordable Care Act Update

Nina009A large part of the Affordable Care Act was implemented in 2013.  We are not here to debate the success or failure of the Act, but to provide some more clarity to you on one of the most complicated pieces of legislation enacted in recent history.  There is a great deal of confusion on health care fringe benefits including Health Savings Accounts (HSAs), Health Reimbursement Accounts (HRAs), Flexible Spending Accounts (FSAs) and group insurance benefits.  The penalties for non-compliance and discrimination are steep at $100 per employee per day.

Here are a few of the changes you should know about.

  • HRAs are still allowed, but only for excepted plans.  Multi –employer HRAs can no longer be used for health insurance premiums, out of pocket medical expenses, or prescription drugs; however, HRAs can still be used for long-term care insurance, dental and vision benefits.
  • Employers can no longer reimburse employees pre-tax for not participating in an employer plan.  Previously an employee may have bought their own health insurance or been covered through a spouse’s plan and the employer reimbursed the employee for the expense pre-tax.  This is no longer allowed and discrimination penalties apply.
  • FSAs (or section 125 plans) are still allowed for medical reimbursement and are limited to $2,500.

There are a number of tax advantages to picking the right benefit plan for your situation.  HRAs can still be used for health care premiums if the company has only one employee.  This might work well for proprietorships that employee a spouse or a child.  FSAs are cheap to administer and save not only the employee money, but the employer saves 7.65% in FICA on the employee contribution.

Call our ACA team with any questions you have on this complicated act. Also, watch for updates on our website, ktllp.com.

Nina Braun

Nina Braun

CPA, CFE, Partner at Ketel Thorstenson, LLP
Nina's experience in the commercial audit arena commenced in the year 2000 - she has been practicing in manufacturing, construction, retail, and various other industries ever since. Nina also has extensive experience auditing 401(k) plans.
Nina Braun

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