The President signed the 21st Century Cures Act on December 13, 2016. This law allows small businesses with fewer than 50 full-time equivalent employees to use health reimbursement arrangements (HRAs) after 2016. HRAs allow employers to pay or reimburse employees for qualified medical expenses. Employers can deduct the expense on their business tax returns but employees generally do not have to include the expense in their income.
Employers must offer the arrangement to all employees and distribute a written notice to all employees at least 90 days before the beginning of each tax year. For 2017, a notice must be distributed before March 13. The amount of the expense may not exceed $4,950 ($10,000 for family) per year.
No mention was made on how to treat 2% owners of S corporations.
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