[Congressional Record Volume 161, Number 103 (Thursday, June 25, 2015)]
[Senate]
[Page S4652]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself and Ms. Heitkamp):
  S. 1697. A bill to provide an exception from certain group health 
plan requirements to allow small businesses to use pre-tax dollars to 
assist employees in the purchase of policies in the individual health 
insurance market, and for other purposes; to the Committee on Finance.
  Mr. GRASSLEY. Mr. President, over the past year and half or more, 
many small business owners have discovered they could be subject to 
punitive penalties simply for helping their employees purchase health 
insurance. This is the result of a little understood provision in the 
Affordable Care Act, ACA.
  Farmers, ranchers, and small business owners frequently do not have 
the resources to offer a traditional group health plan to their 
employees. However, many still want to help their employees obtain 
health coverage. They have frequently done this by reimbursing their 
employees on a pre-tax basis for the cost of health insurance the 
employee purchases on the individual market.
  However, as a result of so-called market reforms in the ACA, small 
business owners who want to help their employees purchase insurance on 
the individual market could be subject to a $100 a day per employee 
penalty.
  This fails to meet the common sense test. These businesses have no 
obligation under the ACA to offer any form of insurance. However, they 
would like to do what they can to help their employees obtain coverage. 
This is a practice that should be commended, not penalized.
  I have had a number of farmers, small business owners, and 
accountants reach out to me over the past year explaining how this 
penalty has the potential to be devastating. Just as examples, I want 
to read excerpts from a couple emails I have received from Iowans.
  The first is from a constituent who is a dentist in Sioux City, IA:

       Help! . . . I am a small business owner--7 employees. I 
     have been helping to subsidize my employee's health insurance 
     for 20 years. I just found out that the Market Reforms of the 
     ACA have made that illegal. . . . Now all of my employees 
     will have to pay taxes on the money I gave them for Health 
     Insurance. They all live paycheck to paycheck and won't be 
     able to come up with the taxes on this money. They also most 
     likely won't qualify for the exchanges and any government 
     subsidy. They are caught in the middle. I can't subsidize 
     their Health Insurance because I risk a $100/day/employee 
     penalty . . . Please hurry and do something to help the 
     millions of middle class small business employees who are 
     caught between a rock and a hard place.

  This next one is from an accountant in Zwingle, IA:

       I recently completed two classes for CPE credit for my CPA 
     license. These classes covered the Affordable Care Act and 
     the presenters were adamant that we contact our senators and 
     representatives on behalf of small businesses. I do have a 
     client that this affects that could potentially be put out of 
     business.
       Businesses that have section 105 plans or that provide 
     additional salary to employees for the employees to purchase 
     health insurance privately or through the government 
     marketplace can be fined $100 per day per employee. That is 
     $36,500 per employee per year!
       I'm trying to help my client to figure out how to stop the 
     payments to the employees and not be destroyed by the 
     potential fines. This could be absolutely devastating.

  No doubt, there are countless other small business owners who have 
similarly been caught off guard. In fact, due to widespread confusion, 
the IRS granted penalty relief earlier this year. However, this penalty 
relief runs out at the end of this month. Legislation is necessary to 
eliminate this unfair and potentially devastating penalty once and for 
all.
  Toward this end, I have been working with Senator Heitkamp, along 
with Representatives Charles Boustany and Mike Thompson in the House, 
on bipartisan, bicameral legislation. Today, we are pleased to 
introduce this legislation.
  This common sense legislation will permit small businesses to 
continue offering a benefit to their employees that many have provided 
for years--namely reimbursing their employees for the cost of health 
insurance purchased on the individual market.
  According to the National Federation of Independent Business, around 
18 percent of small businesses last year reimbursed employees or 
provided other financial support to workers who bought individual 
insurance plans. Many others responded that they would be interested in 
such an option. Our legislation ensures this option is, and continues 
to be, available by eliminating the potential for devastating 
penalties.
  This legislation should be a no brainer for anyone who supports small 
business. I hope that my colleagues on both sides of the aisle will 
join in this effort.
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