Health Benefit Options for your Household Employee

Providing health benefits for your nanny or caregiver is an excellent way to retain a valued employee.  There are four main paths that household employers usually take.

Contribution to Individual Health Insurance

Employer pays employee’s individual health insurance premiums directly.  Health insurance premiums are not wages, and therefore not taxable https://www.irs.gov/businesses/small-businesses-self-employed/employee-benefits#:~:text=If%20an%20employer%20pays%20the,or%20federal%20income%20tax%20withholding.

There may be a couple of advantages for having your employee purchase health insurance directly for which you pay the premium.  The first is that your employee might be able to access a less expensive individual plan than a group employer plan accessible to employers.  Next, it might take an administrative hassle off your shoulders to have your employee be the contact with the insurance company rather than yourself.  Employees can get started here https://www.healthcare.gov/.  For tax purposes, the best policy is to pay the insurance company yourself and make sure to keep a record of your payments.

Contribution to Group Health Insurance

As an employer, you can access group health insurance plans available to other small business owners at https://www.healthcare.gov/small-businesses/get-coverage/.

A possible advantage to offering group health insurance is that you as the employer can select the plan offered.  And some employers qualify for significant tax credits.  These credits are available not only to small businesses but also to household employers https://www.irs.gov/newsroom/small-business-health-care-tax-credit-questions-and-answers-who-gets-the-tax-credit.  You may want to see if you qualify for this credit before deciding between an individual or group policy.

Health Care Reimbursement via QSEHRA (Qualified Small Employer Health Reimbursement Arrangement

You, the employer, set aside a specific amount for each employee to use on qualified medical expenses, including health insurance premiums.

A QSEHRA offers Tax advantages for both employers and employees

One con is that there are contribution limits that don’t apply to the next type of HCR

Also, a QSEHRA cannot be combined with a group health plan.

Health Care Reimbursement via ICHRA (Individual Coverage Health Reimbursement Arrangement)

You, the employer, set aside a specific amount for each employee to use on qualified medical expenses, including health insurance premiums.

These plans do not have contribution limits.

An ICHRA can be combined with a group health plan

 

Both the QSEHRA and ICHRA plans are administered by businesses with platforms set up to handle contributions and payments.  You, as the employer pay a set fee, usually a combination of platform/employee fee that often costs around $60/month.  This may seem a bit pricey but it may still work out as your best option when placed against the cost of purchasing an individual or group health insurance policy.  It may also alleviate some of the hassle of being directly involved with providing insurance coverage.  Obviously it will depend on your circumstances.

Where is the best place for a household employer to obtain a QSEHRA or ICHRA policy? You can look online.  Savvy Nanny Payroll Services is in the process of finding you the best option with an in-house discount for Savvy clients.  Stay tuned!