You can’t guarantee that your employee will use the “bonuses insurance money” to buy health insurance. This will only guarantee one thing: ACA penalties!
Bud Bowlin has been advising business owners about health insurance and benefits for more than 35 years. For his 70th birthday, we gave him his own advice column. Got a burning benefits question for Bud? Send it to [email protected].
I opened a cross-fit gym at the beginning of the year, and I’ve already got 12 employees. We’re doing so well, I’ll probably add 5 more trainers before 2016. YEAH!
In my business, preventative care is crucial, and I was thinking about offering a group health insurance plan. But when I went looking for information, it got really complicated and seemed expensive. So I gave up, and now I’m thinking of giving my employees bonuses to use to buy individual coverage instead.
What do you think about that?
Benched Over Bonuses
Grab a bench, because what I’m about to say is going to save you a ton of money—and maybe even your business! If you give your employees bonuses instead of health insurance, you’re in for a world of pain. You know that phrase, “No pain, no gain?” It might work in the gym, but if you run afoul of the law on this one, it’s all pain and no gain.
Here’s what the numbers look like:
If you offer your employees a healthcare bonus instead of a healthcare plan, you could be fined $100 per day, per employee. With twelve employees, you’re looking at a penalty of $438,000. That’s a lot of money, and I’m sure there’s a lot you’d rather do with it—like pay the salaries for those five additional trainers you want, plus hire five more…
A little history:
I don’t want to sound like I’m coming down so hard on you. It’s a valid question because bonuses haven’t always been restricted. Back in the day, employers who were unable (or unwilling) to purchase group health insurance might pay (or reimburse) employees for their individual health insurance policies. But the Affordable Care Act put the squeeze on these kinds of “employer payment arrangements.” As of July 1, 2015, penalties are being enforced at a rate of $100 per day, per employee, up to a maximum of $500,000 a year.
Stick with me here…
I bet I know what you’re thinking: you’re a small business trying to do something good for your employees—so why is the ACA picking on the little guy?! New restrictions are always, at first, hard to stomach; but something tells me you’ve got the core strength to persevere. One of the best parts of healthcare reform is the ways in which it’s simplified the health insurance process.
ACA = Fairplay.
The government now views all health-related employer payment arrangements as employer-sponsored health insurance plans. For example, you wouldn’t want a 250-pound bodybuilder competing in a weight class for 150-pound bodybuilders. You want an even playing field. The penalty on employer payment arrangements helps enforce the ACA’s mandate. It leaves no loopholes for companies—big or small—to provide health coverage that doesn’t meet the minimum value requirements.
Want 3 more reasons why offering health insurance is good for your business?
Well, employers with fewer than 25 employees aren’t required to offer any health benefits, but there are plenty of good reasons for small businesses to do this anyway. I talk a lot about the value of health benefits in recruiting and retaining your employees. Are there other cross-fit gyms in your area? Do your competitors offer health benefits? The big, national gyms do…
You mentioned that preventative care is important to your business. A built-in advantage of ACA-compliant, employer-provided insurance plans is the emphasis on wellness. These plans include a provision that covers many tests and screenings—including diabetes, blood pressure, cholesterol and mammography—without copays or coinsurance.
Finally, I understand how money is one of a small business owner’s biggest concerns. Since you asked about health coverage vs. bonuses specifically, consider this: unlike bonuses and overtime, employer-sponsored health coverage is tax deductible and is not subject to the 7.65% FICA tax. There’s also the fact that you can’t guarantee that your employee will use the “bonuses insurance money” to buy insurance. Any attempt on an employer’s part to enforce this will only guarantee one thing: stiff ACA penalties.
Steer clear of illegal bonusing, and let an experienced health insurance broker do the heavy lifting. He or she can cut through the complexities that you encountered on your solo search, and get you the right plan for your needs—at a rate that might just surprise you. Group health plans are less expensive than individual plans, and they send a message to your employees (and your competition) that you know how to take care of business.
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