The Affordable Care Act: Potential changes to Nanny Health Insurance

ACA_logoThere is LOTS of conflicting information out there at the moment regarding the way that nanny health insurance can be handled with the changes brought by the Affordable Care Act.  We are keeping in close contact with Breedlove & Associates to figure out how to advise our clients and nannies.  Unfortunately, as of today we are in limbo on how the new Affordable Care Act will affect the way families have been handling helping their nanny with health insurance.

Traditionally families have been able to contribute toward an employee’s (self-procured) health insurance policy and it was considered non-taxable compensation to both parties.  Recently, the IRS issued an FAQ about the Affordable Care Act that said employers are no longer allowed to do that…the policies have to be purchased through SHOP (Small Business Health Options Program) or else the health insurance contribution/reimbursement would be considered taxable wages.

**HOWEVER, we have two government sources that are in conflict to that FAQ, both saying that families with less than 2 employees would not be subject to that SHOP requirement.  Breedlove is supposed to know which ruling prevails within the next two weeks or so. 

While we’re in this period of limbo, we want our families to understand that the government has sent mixed signals on this.  Therefore, the safest approach for NEW EMPLOYERS is to purchase through SHOP if you want non-taxability. Breedlove has also been assured that the IRS has no plans to pursue penalties from HH employers – since they have published contradictory information, it would not be a good use of precious enforcement resources and they seem to know it.


 

So what to do while you wait?

IF YOU ARE A NEW EMPLOYER:

Option A
Procure the policy for the caregiver through SHOP. It’ll be treated as non-taxable compensation to both parties and the family can also take the Health Insurance Tax Credit for Small Employers. The downside is the family has to procure the policy and would have to cancel upon termination (not portable).

Option B
Have the caregiver procure a policy through the exchange.  At the end of the year, she’ll use the W-2 documenting wages to verify income.  Assuming she falls within 4x the poverty level (about $47K), she’ll receive a subsidy from the federal government to help defray the cost of her policy.
Note: Under Option A, the caregiver is not entitled to a federal subsidy because she has no out-of-pocket cost for HI premiums.


 

IF YOU ALREADY HAVE A NANNY AND ARE CONTRIBUTING TO HER HI PLAN:

At this point we recommend you sit tight until we get a formal ruling from the IRS. Once we have the final information, we will send it out to you immediately.


 

Annie’s Nannies and Breedlove & Associates will continue to monitor this and will provide updated information as soon as we can.  If you have questions, please let us or Breedlove know and we will do our best to guide you.

Annie’s Nannies  206-784-8462
Breedlove & Associates  888-273-3356

 

 

 

2014-12-09T22:25:58+00:00

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