Looking for Farm Health Insurance Reimbursement Options in 2017?

Under current law large employers with over 50 employees have to provide health insurance or pay a penalty, but for small employers under 50 employees with no health insurance mandate there are still tax efficient options available to provide and deduct health insurance premiums.

In 2017 agribusinesses can still rely on the previous year one employee exception rules for reimbursing an employee for individually acquired health insurance without having a ‘written plan’ in place and without having to offer to other employees, relying on previous IRS Notice 2013-54.  No 3rd party to administer is required if the farm is reimbursing only one employee.

If the farm wants to reimburse multiple employees, under new qualified health reimbursement arrangements $4,950 single and $10,000 family, then it needs a written plan as discussed in the following article. http://www.claconnect.com/resources/articles/new-aca-law-offers-small-employers-relief-from-reimbursement-penalties.

Under both options if the employees reimbursed are going to state exchanges for their insurance and are receiving a subsidy they should disclose to the exchange the agreement and the exchange will decide if the premium tax credit is prevented if certain conditions are met.

So under the one employee exemption the farm could reimburse an employee for their health insurance or a portion of their health insurance and save on payroll taxes and the employee would save on their part of the payroll and income taxes on their compensation. (Payroll taxes are 15.3% so if the farm went this route then why not reduce the employee’s wages by the entire amount of their health insurance and then reimburse them for 100% of their health insurance premium costs, that would save more on payroll taxes, but may require the farm to advance more cash sooner vs later under this arrangement.)

If the farm chooses a more formal arrangement to offer reimbursement to all employees under the new 2017 rules then there’s more hoops to jump through, nondiscrimination, hiring a 3rd party administrator, notifying employees, limits on the reimbursement amounts, etc.

These are the options for 2017 currently, they likely will change in future years.

Special thanks to Joe Duda for today’s post.

  • Principal
  • CliftonLarsonAllen
  • Yakima, Washington
  • 509-823-2920

Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a partner with CliftonLarsonAllen in Yakima, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. In fact, Paul drives combine each summer for his cousins and that is what he considers a vacation.

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