Many executives have long enjoyed perks like free health care and better health benefits for themselves and their families. But under a little noticed anti-discrimination provision in the federal health law, such advantages could soon trigger fines of up to $500,000.
Employers “should be more concerned about this than anything else” in the law, because many are in violation and the penalties can be stiff, says Jay Starkman, chief executive of Engage PEO in St. Petersburg, Fla., which offers human resources services and advises clients on the health law.
The provision says that employers who offer more generous benefits to highly paid workers could face fines of $100 a day for every worker who doesn’t get the perks....
It applies to employers who buy benefit packages for their firms from insurers. Those who self-fund their coverage, who tend to be larger firms, already face similar restrictions under Internal Revenue Service rules which pre-date the law.
To make sure his own small company complies with the law, Starkman began paying $600 in premiums toward his family’s coverage last month, putting him on an even playing field with his 60 employees.
He says the rule makes sense, noting that executives are likely to get little sympathy from the public.
“The right way to handle it is to have the same benefits for everyone,” he says, noting that firms can increase wages to managers or executives to cover their additional costs. ...
The anti-discrimination provision is technically in effect now, but the IRS says it will not impose penalties until it completes regulations and issues guidance about how the provision will be enforced. ...
The IRS rule offers guidelines explaining who is a highly paid employee, and says a plan discriminates if it favors such workers in terms of eligibility or benefits. ...
In seeking comments, the IRS asked employers and others how to define “benefits.” Do they include, for example, not just the coverage provided, but how much employees pay toward those costs? Some firms, for example, charge executives less than other employees – or nothing at all – toward coverage. Would that count as being discriminatory? ...
