Q: We are a small school and cannot afford to offer health insurance for our employees. We’re thinking it will make more sense for us to let them purchase insurance in the marketplace and payroll-deduct the premium pretax. Now I’m hearing we cannot do that. What is the right answer?
A: With the marketplaces open in most states, your school has several options, some of which are deductible pretax.
If you’re an employer with 50 or fewer employees, you can go to your state’s Small Business Health Option Program (SHOP) at the marketplace and, depending on your state, you can pick a plan for your employees. You will be able to chose from a metal level (bronze, silver, gold, or platinum) from which your employees will be able to chose a plan they want from the metal level you’ve selected. Or, you can choose a health insurance provider. Employees are then able to pick a plan offered by that provider. These premiums can be run thru payroll on a pretax basis to employees. If you have 25 or fewer employees, you may get a small business tax credit.
If you do not go to the SHOP for health insurance, you cannot pretax employee individual or family insurance premiums. This was reiterated on September 13 with the guidance release simultaneously from the IRS and DOL. (See DOL Technical Release 2013-03 Q &A 1).
If you currently allow employees the pretax benefit through a cafeteria plan or you pay for individual health insurance policies through a Health Reimbursement Arrangement (HRA) or cafeteria plan, you will have to discontinue this policy for plan years after December 31, 2013.
Submit your health care reform questions to ISM’s Health Care Reform Specialist at linda@isminc.com. If published, your question will remain anonymous.
Looking for different benefit options to meet your school’s unique budget? ISM Insurance has worked closely with private-independent schools for nearly four decades, helping them build benefit packages that promise long-term, sustained success. Since the health care reform changes have begun implementation, we have been working with schools and special health care consortiums that help to keep costs predictable and manageable. To see if your school qualifies for one of our state health care consortium programs, or to see what creative insurance solutions we have to help your school’s bottom line, contact us at martin@isminc.com.
