When it comes to putting together a benefits package for a full-time nanny, quality health insurance is one of the most important things parents can offer. Health insurance benefits not only make certain job listings stand out among the rest, but they indicate to potential nannies that families are looking for a long term employee and are invested in taking care of their employee’s needs. Despite the importance of healthcare benefits, many parents and nannies are confused about the different options that are available. That’s why we talked to Ned Dickert, a Marketing Manager at HomeWork Solutions, to break down the must-know information about establishing healthcare plans for nannies.
For families with a single employee, Dickert says the best option is to establish a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). The QSEHRA was established in December 2016 as a part of the 21st Century Cares Act, and it gives small employers the ability to reimburse healthcare costs to a single employee, like a nanny, completely tax free to both parties. It’s simple to use but there a few important factors that parents and nannies should understand.
To establish a QSEHRA, the nanny first needs to find a health insurance plan and notify their employer of the monthly cost. When choosing a healthcare plan, it’s important for nannies to notify insurers up front that they are going to be reimbursed for a portion of the cost. The reason for this is that, when looking for health plans through the healthcare marketplace, nannies may be offered subsidized plans if they don’t meet a certain income threshold. But employer reimbursements eliminate the need for such subsidies, and a nanny could be penalized at tax time if her W-2 shows that she received both reimbursements and a subsidy.
Once a nanny has found a health plan and notified her employer, the employer needs to fill out a plan document declaring how much money they’ll be reimbursing to the employee.There are limits to how much can be reimbursed. For an employee with an individual health plan, Dickert says employers can reimburse up to $5,150 per year, or $429 per month. For an employee with a family health plan, employers can reimburse $10,450 per year, or about $850 per month.
It’s important to note that employers cannot reimburse more money than the amount declared in the plan document. If they do, the overage will be taxed, even if the total amount reimbursed is still less than the federal limit. For example, take the limit for reimbursements to an individual, which is $5,150. If an employer declares that they will pay $3,600 in reimbursements for the year, but then they end up paying $4,200, the additional money they reimbursed will be subject to taxes, even though it is still under the $5,150 federal limit. For that reason, Dickert says HomeWork Solutions encourages employers to declare that they’ll be paying up to the federal limit, and then if they end up paying less, there is no penalty for that.
For each reimbursement, employees should submit a reimbursement request to their employer. The reimbursement can then be included in their next paycheck and declared on their W-2 form at the end of the year.
For families with more than one employee, a better healthcare option is the Small Business Health Options Program (SHOP). With this option, the employer chooses healthcare plans to offer to their employees. Under this type of plan, employers may cover different types of healthcare for different employees at a discounted rate, and it functions more like traditional insurance at any other business, with a specific amount being deducted from the employee’s paychecks each month for health insurance.
Because these plans are more specific to the needs of individual employers and employees, the terms can vary. California residents can get quotes and establish small business plans through Covered California.
Healthcare is a major expense for employees and employers alike, and that may make some families hesitant to offer help with coverage. But a full-time employee having the ability to visit the doctor when they’re sick is a big deal, and it’s vital to their success as an employee. The great thing about an option like QSEHRA is that it helps make health coverage more suited to individual needs. Even if full reimbursement isn’t a possibility, offering at least some help with the cost of healthcare is invaluable and will go a long way towards securing fantastic care from a great nanny.