New law opens door to HRAs for small businesses

A new law, The 21st Century Cures Act,  signed in December by President Obama has eased some restrictions and provided some flexibility for small employers who want to offer their employees financial assistance through a standalone health reimbursement plan beginning in 2017.

A standalone HRA – Health Reimbursement Arrangement – is one that is not paired with a health insurance plan.

HRAs are a way for small employers who cannot afford to provide a group benefit plan to still help offset medical expenses incurred by their employees. Under these arrangements, an employer agrees to reimburse medical expenses, including health insurance premiums, up to a certain amount per year.  The reimbursement for medical expenses are  not included in the employee’s taxable income.

So, under the new law, qualified small employers can use standalone HRAs to reimburse employees for purchasing individual insurance coverage, rather than providing them with costly group health plans.

A “qualified small employer” is one that had fewer than 50 full-time and full-time equivalent employees during the preceding calendar year and does not offer a group health plan to any of its employees.

As a result of the new law, qualified small employers can now provide HRAs without facing steep penalties. Under the Affordable Care Act, all employers – whether they are considered large or small employers – had to conform to the requirements of the ACA if they were to offer group health plans. As a result, many HRAs – favored by many employers with fewer than 50 full-time employees – did not comply as group health plans under the ACA, resulting in hefty excise tax for employers who maintained these arrangements.

Through the new Cures Act, though, a small employer HRA is no longer defined as a group health plan, meaning these arrangements are now an option for small business owners. Qualified HRA plans beginning after Dec. 31, 2016, will not face an excise tax.

A qualified small employer HRA must adhere to the following requirements:

  • It is maintained by an employer with fewer than 50 employees and no group health plan is offered to any of those employees;
  • It is offered to all eligible employees; however, the employer may exclude employees who haven’t completed 90 days of service, employees under the age 25, part-time or seasonal employees, employees covered in a collective bargaining unit and certain nonresident aliens.
  • It is funded solely by the employer and no salary reduction contributions are made under the HRA;
  • The amount of payments and reimbursements do not exceed $4,950 per employee (or $10,000 for those that provide payments or reimbursements for an employee’s family members). Furthermore, for any year beginning after 2016, these dollar amounts are subject to cost of living increases.

If offering an HRA, employers must do the following:

  • Provide written notice to each eligible employee that includes a statement of the amount of the employee’s permitted benefit under the HRA for the year;
  • Advise the employee to provide information about the employer-offered HRA to any health insurance exchange to which the employee applies for advance payment of the premium assistance tax credit; and
  • Inform the employee that if he or she is not covered under minimum essential coverage for any month, the employee may be subject to tax under the individual mandate for that month.

Failure by the employer to make these disclosures can result in a $50 per-employee, per-incident of failure penalty, up to a $2,500 calendar year maximum.

Employers also need to report the total amount of permitted benefit under an HRA on their employees’ W-2s. However, keep in mind that benefit isn’t included in the taxable wages on the employee’s W-2. It is simply required to be included on the W-2 for informational purposes.

The Cures Act also states that reimbursements from an HRA cannot be treated as paid or reimbursed under the employer-provided coverage for any medical expenses during a month when the employee does not have minimum essential coverage as required under the ACA.

All in all, this is a good option for small business owners who want to help their employees with medical expenses and have not been able to do so for fear of financial penalty. Please let us know if you would like to learn if this is a good option for your business.

Recent Articles:

Follow Antares CPAs:

Succession & Transition Strategies

Creating a successful succession plan is about protecting the future of a business and/or brand and ensuring there is a strategy in place to ensure your business continues to thrive.

After years of investing time, money and other resources, it’s imperative to prepare for this next stage in business and life. Poor planning can increase risks for stakeholders and tarnish legacies. Let’s make sure the next generation is well-equipped and ready to take your life’s work and family legacy to an even greater level of success.

Each situation is unique because the needs of each one involved are unique. We carefully review each opportunity to determine how best to structure a transition while meeting your goals, complying with any brand licensing polices and minimizing the tax implications of the transfer.

  • Next generation succession planning
  • Retirement planning
  • Wealth management

Let's get started.

Call us at 770.785.7855 Or email hello@antaresgroupcpas.com

Technology Services

Antares Group’s technology team provides convenient hardware and software support, along with comprehensive cloud accounting services with 24/7 access to up-to-date financial information exactly the way you want it, on any connected device, with a customizable dashboard interface. We use best-in class cloud accounting platforms and software including Sage Intacct, Bill.com and robot process automation (RPA) with integration capabilities with some of the leading point-of-sale, payroll, and business operations management software programs.

Cloud accounting is just the beginning; Antares Group’s experienced technology team also performs system evaluations and makes recommendations for products and services that will help your business run more efficiently, as well as protecting your information and infrastructure with robust security options. Using the right technology for automation will simplify your life and keep your valuable data safe..

  • Technology and security optimization
  • Complete cloud accounting services
  • Computer troubleshooting assistance with remote and onsite repair

Let's get started.

Call us at 770.785.7855 Or email hello@antaresgroupcpas.com

Business Planning & Valuation

An accurate understanding of your company’s current value and financial viability is vital for achieving business success and the launch pad to boundless possibilities in the years to come. Realistic valuations are essential for long-term strategic plans, business successions and expansions, gift and estate planning, and a lucrative retirement package. Planning for where you want to go in the future is what our business and tax advisors do best. Whatever your goals, we are here to provide you with the right plan and insightful guidance to achieve it.

  • Trend reporting and analysis and business valuation
  • General business and start-up consulting
  • Major reinvestment planning
  • Cash flow projections

Let's get started.

Call us at 770.785.7855 Or email hello@antaresgroupcpas.com

Back Office Solutions

In such a fast-moving business environment, business owners need every advantage to succeed. Improving efficiency should be an ongoing part of your strategy for financial success, empowering you to make continuous improvements.

Whether your business is a single location seeking to grow effectively and sustainably, an established franchise brand adding new locations, or something in between, Antares Group provides a suite of back office services and the financial expertise to help business owners and managers achieve their operational and financial goals. In the process of supporting your essential back office operations with practical solutions, we analyze the function and effectiveness, looking for inefficiencies and potential liabilities, offering valuable insights for owners and managers.

  • Daily deposit verification and online banking monitoring
  • Process invoices and code general ledger accounts
  • Process vendor payments and file 1099s
  • Prepare and file sales and use tax returns
  • Reconcile bank, credit card and cashless sales accounts

Let's get started.

Call us at 770.785.7855 Or email hello@antaresgroupcpas.com

Tax Advisory

Minimizing your tax burden is a year-round strategy; planning for and preparing complex business and individual tax returns is where Antares Group excels. Beyond simply helping you fulfill basic tax obligations, you can rely on our tax advisory team to keep you informed of ever-changing regulations and keep you in compliance. We conduct regular reviews to make sure all methods of reducing your tax liabilities are being used. We routinely assess your personal income tax situation and cash flow to guard against the unexpected. This ongoing strategic analysis empowers you to maximize tax savings and capitalize on new opportunities.

In addition, we provide advisory services for new business startups, acquisitions, and dispositions. Through careful analysis, we help clients determine the best structure and make the process as seamless as possible.

  • Business and individual year-end tax returns
  • Personal property, gift, and trust income tax returns
  • Fixed asset setup and maintenance
  • Annual tax planning and preparation

Let's get started.

Call us at 770.785.7855 Or email hello@antaresgroupcpas.com

Cloud Accounting

Whether you run a small closely held business or a large franchise operation, maintaining a firm grasp of accounting and bookkeeping can be challenging. Between managing staff and overseeing daily operations, there is not enough time to dig into the books and make sense of the financials. You need to know the facts and the implications. – having precise, up-to-date information at hand means you always know your financial position so you can make informed decisions that keep your business moving forward.

The financial experts at Antares can create a custom menu of accounting and tax services perfectly catered to your business needs, including accurate and timely financial statements and reports, so you are always prepared to respond quickly to changing and challenging circumstances. Along the way, we provide clear feedback and financial guidance to help you predict trends and recognize issues, then make the necessary adjustments to sustain cash flow throughout the year.

  • Timely preparation of financial statements based on your particular needs
  • Complete preparation of sales, payroll, inventory, accrual, and prepaid journal entries
  • Meticulous monthly bank and credit card reconciliations

Let's get started.

Call us at 770.785.7855 Or email hello@antaresgroupcpas.com