Is this C-Corp. subject to ACA rules?

[RJPCPA]

My client is a C-Corporation with 50% of the shares owned by one individual and the other 50% owned by his spouse. The individual and his spouse are also the only two employees of the C-Corporation. The individual is full-time and his spouse is part-time. In the past the Corporation utilized an HRA (Health Reimbursement Arrangement) and reimbursed the employee's health insurance premiums, out-of-pocket medical expenses, dental & vision expenses, etc. The ACA rules put a stop to the reimbursement of employees health insurance premiums. However, the ACA rules do not apply if the company has only one employee. I am not sure if a husband and wife would be counted as one for this exception? Or since only the husband is full-time, would this corporation be considered as having only one employee? I basically need to know if they should start a group health insurance policy for the company to pay the premiums and deduct them or if the company can continue to reimburse them for each of their individual policies. And under either scenario can the company still deduct non-premium expenses as part of the HRA?

[spanel]

My client is a C-Corporation with 50% of the shares owned by one individual and the other 50% owned by his spouse. The individual and his spouse are also the only two employees of the C-Corporation. The individual is full-time and his spouse is part-time. In the past the Corporation utilized an HRA (Health Reimbursement Arrangement) and reimbursed the employee's health insurance premiums, out-of-pocket medical expenses, dental & vision expenses, etc. The ACA rules put a stop to the reimbursement of employees health insurance premiums. However, the ACA rules do not apply if the company has only one employee. I am not sure if a husband and wife would be counted as one for this exception? Or since only the husband is full-time, would this corporation be considered as having only one employee? I basically need to know if they should start a group health insurance policy for the company to pay the premiums and deduct them or if the company can continue to reimburse them for each of their individual policies. And under either scenario can the company still deduct non-premium expenses as part of the HRA?

I have always been told to count a husband/wife as one person. (IE you can always get a policy for husband that also includes the wife)


Chris

[TaxGuyBill]

I think it is two employees, and subject to the ACA rules. However, as Chris mentioned, one spouse can probably turn down the HRA option and then you only have one "participant" (which is not subject to the penalty).

https://www.law.cornell.edu/uscode/text/26/9831

I know that some people claim the Husband and Wife are considered as one person. I have read A LOT of the Code, Regulation, and Rules about the ACA, and I have not seen this. Also, when I've asked some of these people for their support that Husband and Wife are considered as one, they have not been able to produce any support (at least for ACA purposes).

If you get a group policy, yes, an HRA can be "integrated" with the group policy (see link for details).

https://www.irs.gov/pub/irs-drop/n-13-54.pdf#page=7

However, make sure the taxpayers compare the prices. From what I've read, small 'group policy' plans can be quite expensive. Make sure the pre-tax group plan would be better than after-tax individual plans.

[Burke]

I know that some people claim the Husband and Wife are considered as one person. I have read A LOT of the Code, Regulation, and Rules about the ACA, and I have not seen this. Also, when I've asked some of these people for their support that Husband and Wife are considered as one, they have not been able to produce any support (at least for ACA purposes).

I think the conception stems from the IRS attribution rules for other things. They have a Tax Topic on this at www.irs.gov. It does not deal with ACA.

[TaxGuyBill]

I think the conception stems from the IRS attribution rules for other things. They have a Tax Topic on this at www.irs.gov. It does not deal with ACA.

I agree, that's where the ideas come from. I've read A LOT of the ACA Code and Regulations, and I haven't seen anything that refers to the Code sections that have the attribution rules (I specifically have looked).