No additional guidance has been provided at this point. Sorry.

Also – can a 2 owner s corp reimburse just one of the owners for their health plan, and not the other – and thus make it a one participant plan? Or does that break other rules?

I would worry that you might be subject to the penalty, yes… so with 11 employees who aren’t shareholder-employees, you’re looking at about a $400,000 penalty. Sorry.

One of the couples is retired military and has health insurance via the military. The other owner/couple pay their health insurance and is reimbursed by the S-Corp. The reimbursement is reported as taxable income on their W-2 and they deduct the expense as self-employed health insurance above the line on their personal returns. The health insurance coverage of the policy is compliant under the HCA. No other employees are offered health insurance.

Is it your interpretation that this business would be subject to fines for non-compliance?

The question: how does an S corporation with more than one employee handle the accounting for health insurance for its >2% shareholders? The answer: at this point no one, not even the IRS (by its own admission) knows.

In Notice 2015-17 the IRS said that it would study the issue more, and until the IRS issues specific guidance on this issue, S corporations can continue to account for their shareholders’ health insurance as they’ve always done in the past. In addition, the notice points out that S corporations with one single employee don’t have to worry about the new market reform rules, since the rules apply to group health plans and there is no such thing as a group health plan of one.

Hope this helps!

Thanks Steve.

Good questions, and I tried not to be absolute in my description, tried to be a little wishy-washy… but I would worry on behalf of any clients in a situation like that described in example #1 that (a) individual plans they’re buying maybe aren’t ACA-compliant, that (b) the arrangement itself isn’t an ACA-compliant group plan because it’s obviously not, and that (c) the non-covered employees are being discriminated against. Any of these flaws, it seems to me, may trigger penalties.

BTW I think we all want to think about this stuff in the same way that probably we all understand pension plans. In order for a pension plan deduction to work and in order for the plan to not discriminate, the precise rules need to be followed. And if a small business violates the rules–even if the small business has only good intentions and nobody arguably gets hurt–both the deduction and the plan are in jeopardy.

This is way the ACA penalties work, too, sort of…

What’s especially dangerous about the ACA penalties, however, is that you’re not talking about losing deductions… you’re talking about gigantic penalties. Business-killing penalties I would argue.

Hi Jerry, I’m not sure I understand your question… but if you want to include links to blog pages from your website or in an email you send your clients, sure, that’s fine.

Any chance that can happen?