Statements on Introduced Bills and Joint Resolutions

Floor Speech

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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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