As you continue to grapple with the effects of coronavirus upon our businesses and livelihoods, we hope to bring you encouraging news in the form of various aid packages from the government. One piece of good news is an employee retention provision within the CARES Act, that offers a tax credit to employers who continue paying the health insurance premiums of furloughed employees.

In the unfortunate event that you do need to lay off or furlough employees, you might not be able to continue paying their salaries. But if you do continue to make payments toward their healthcare plan premiums, in absence of any other wages, the IRS will allow you to treat that expense as qualified wages.

In order to qualify for this special treatment, the premiums must have been paid between March 12, 2020 and December 31, 2020 (if the pandemic lasts for longer than expected and the IRS extends this time period, we will be sure to notify you).

Some limitations do apply. The qualified health expenses paid for each employee cannot include amounts that the employee paid with after-tax contributions. If an employee participates in more than one healthcare plan offered by the same employer, the expenses for each plan are aggregated for that employee. The expenses are limited to $10,000 per employee for all calendar quarters of this year.

This is at least a piece of good news during an otherwise difficult time. If you are forced to take the unfortunate step of laying off employees, know that the government is putting provisions into place that should help you continue their small group healthcare plan. Now is no time for anyone to be without health insurance if we can all prevent it. And of course, employees with a valuable health insurance plan are loyal employees.

For more information on this tax credit, give us a call. We can explain more about the CARES Act and how it relates to your healthcare plan.