Congress Approves Employers' Ability to Offset Healthcare Costs

Washington DC, June 23,2016—Congress today approved the Small Business Healthcare Relief Act (H.R. 5447), legislation submitted by the National Association of Home Builders (NAHB) that would allow small business owners to help their employees pay for health insurance.

The Small Business Healthcare Relief Act would allow small businesses (under 50 employees) to provide Health Reimbursement Arrangements (HRAs), which let employers contribute something to their employee health costs. Specifically, HRAs allow small businesses to offer pre-tax dollars to insured employees to help pay premiums and/or other out-of-pocket costs associated with medical care and services.

Unfortunately, the Internal Revenue Service issued a guidance in 2013 stating that employers are no longer able to use HRAs because they don't meet the requirements of the Affordable Care Act. Not only did the IRS make HRA illegal, the agency imposed a fine of $100 per day per employee for firms that choose to offer this benefit to their workers. This $100 per day penalty went into effect on July 1, 2015.

This bill still needs Senate approval.