Excepted Benefits

Navigating the world of employee health benefits can feel like wandering through a maze, especially for small business owners and HR managers new to the scene. One term you might have come across is “Excepted Benefits.” But what exactly are Excepted Benefits, and why do they matter when you’re building or managing your employee health coverage? In this article, I’ll break down Excepted Benefits in plain English, explain their role in small business health plans, and offer insight on how they can work well alongside plans like ICHRAs provided by platforms such as SimplyHRA.

What Are Excepted Benefits?

Defining Excepted Benefits

Excepted Benefits are certain types of limited health coverage that are exempt from many of the Affordable Care Act’s (ACA) more stringent rules. These benefits are allowed to operate outside typical health plan regulations because they’re designed to supplement, rather than replace, traditional major medical health insurance.

Examples include:

• Dental and vision insurance  
• Accident-only or specified disease insurance  
• Disability income insurance  
• Long-term care insurance  
• Employee Assistance Programs (EAPs)  
• On-site medical clinics  

These benefits stand apart because they offer protection or services in specific areas and usually come with less regulatory oversight, simpler enrollment, and often, lower costs.

Why Excepted Benefits Matter for Small Businesses

Small businesses often need flexibility when offering health benefits. Excepted Benefits provide a way to add valuable perks without the administrative headaches or high premiums associated with full group health insurance plans. They allow companies to:

• Supplement employee healthcare options affordably  
• Provide coverage in areas not typically covered by major medical plans  
• Offer benefits with minimal compliance burden  

Because Excepted Benefits don’t count as minimum essential coverage (MEC), employees who rely solely on these benefits still need to secure major medical coverage elsewhere to meet federal mandates.

How Excepted Benefits Fit With Other Employer-Provided Health Plans

Excepted Benefits vs. ICHRAs

Individual Coverage Health Reimbursement Arrangements (ICHRA) are becoming increasingly popular among small employers who want to give employees the freedom to pick their own healthcare plans while controlling costs. Unlike Excepted Benefits, ICHRAs reimburse employees for premiums or qualified medical expenses tied to individual major medical insurance plans.

Here’s the scoop on how Excepted Benefits and ICHRAs coexist:

• Excepted Benefits can be offered alongside ICHRA plans and can provide supplemental coverage.  
• Employees might use Excepted Benefits for dental/vision or accident protection while using their ICHRA funds for health insurance premiums.  
• Since Excepted Benefits don't provide major medical insurance, they don't impact eligibility or reimbursements under ICHRAs.  

Compliance and Tax Implications

Because Excepted Benefits are exempt from ACA’s strict rules, they typically don't trigger penalties for employers or employees if they’re the only coverage provided. They also often qualify as pre-tax benefits, meaning employees can pay premiums or contributions for these benefits with before-tax dollars through payroll deductions, reducing taxable income.

Employers should note:

• Excepted Benefits usually require less reporting to the IRS than full health plans.  
• Offering these benefits alongside an ICHRA is compliant when done properly.  
• However, because Excepted Benefits are limited in scope, employees still need major medical coverage to avoid individual mandate penalties at the federal or state level (where applicable).  

Examples of Excepted Benefits in Practice for Small Businesses

Let’s consider how a small business might use Excepted Benefits in tandem with an ICHRA through SimplyHRA:

• Offer dental and vision insurance as Excepted Benefits to cover two important health areas without added ACA compliance complexity.  
• Set up an ICHRA to help employees pay for individual medical insurance policies of their choice, fostering flexibility and choice.  
• Provide an Employee Assistance Program (EAP) as an Excepted Benefit to support mental health and wellness at no direct cost to employees.  
• Use accident insurance as an Excepted Benefit to provide extra support for unexpected injuries.  

This combo allows employers to build a rounded, cost-controlled health benefits package that appeals to a diverse workforce while staying compliant with regulations.

Key Takeaways for Small Businesses about Excepted Benefits

• Excepted Benefits are special types of limited-scope health coverages exempt from many ACA rules.  
• They include dental, vision, accident insurance, disability coverage, and wellness programs, among others.  
• These benefits do not replace major medical insurance and must be used alongside it for comprehensive employee health coverage.  
• Excepted Benefits help small businesses offer affordable, supplemental health perks with less paperwork and fewer regulatory hurdles.  
• Platforms like SimplyHRA make it easy to combine Excepted Benefits with ICHRA plans for flexible, compliant, employee-friendly health benefits.  

Why SimplyHRA Is the Right Partner for Excepted Benefits and ICHRA Management

At SimplyHRA, we get that small business owners and HR professionals are juggling a lot, and health benefits can quickly get complicated. That's why we've designed a platform that handles everything from compliance paperwork to employee reimbursements—especially when you mix Excepted Benefits with ICHRA plans. Our easy-to-use software empowers you to offer personalized health benefits while controlling costs and simplifying administration. Employees get the freedom to pick the insurance that fits their lives, and employers get the peace of mind that comes from hassle-free compliance and dedicated support.

If you’re ready to provide your team with health benefits they'll appreciate—without spinning your wheels—reach out to SimplyHRA for a consultation. You can email us at info@simplyhra.com or schedule a call at https://www.simplyhra.com/contact. Let’s work together to build a benefits package that truly works for your business and your people.

The Regulatory Landscape of Excepted Benefits: What Small Businesses Should Know

Navigating Federal Rules and Guidelines

Excepted Benefits fall under specific federal regulations that distinguish them from traditional employer-sponsored health plans subject to the Affordable Care Act. The key regulation comes from the Employee Retirement Income Security Act (ERISA) and Internal Revenue Code (IRC) provisions, which define excepted benefits as those that are excluded from many insurance mandates. However, understanding the fine print is crucial:

• Excepted Benefits cannot be the sole health coverage an employee has if the employer aims to comply fully with ACA requirements.  
• They must meet coverage standards set forth by the Department of Labor and the IRS to qualify for excepted status.  
• Some benefits, like limited-scope dental and vision plans, qualify automatically, whereas others have specific rules around their design and offering.  

For example, a small employer can't label a major medical plan as an Excepted Benefit by calling it so; it must genuinely meet the limited scope and purpose criteria.

State-Level Considerations and Variations

While federal rules broadly govern Excepted Benefits, state insurance laws can impact how these benefits must be structured and offered. Some states impose additional requirements or consumer protections, which small businesses need to be aware of to remain compliant. Common state-level considerations include:

• Mandated coverage for certain benefits beyond the federal Excepted Benefits scope.  
• Licensing requirements for insurers and brokers offering Excepted Benefits.  
• Consumer protection laws that affect claim handling and plan transparency.  

Because these nuances vary widely, small employers should consult local regulations or expert providers like SimplyHRA, who understand the interplay between federal and state guidelines.

Business Owner and Employee Perspectives on Excepted Benefits

Why Small Business Owners Should Consider Offering Excepted Benefits

As a small business owner, balancing budget constraints with employee satisfaction is a tough act. Excepted Benefits offer a practical way to:

• Provide additional value without shouldering the full cost or complexity of a group major medical plan.  
• Increase attractiveness in competitive job markets by enhancing benefits packages.  
• Mitigate some health risks among employees through targeted coverage like accident or disability insurance.  
• Maintain predictable expenses by offering fixed-cost plans or pre-set reimbursement amounts.  

Moreover, the administrative simplicity of Excepted Benefits reduces barriers to entry, meaning smaller HR teams can manage benefits without overwhelming their workload.

How Excepted Benefits Benefit Employees

Employees also stand to gain from Excepted Benefits in several ways:

• Access to focused coverage that covers gaps in their major medical plans, like vision care or dental treatments.  
• Often lower premiums or contributions because these plans are narrowly scoped.  
• Simplified enrollment processes since these benefits do not usually trigger complex paperwork or underwriting.  
• Mental health and wellness resources through EAPs, which can be critical for overall wellbeing and productivity.  

Because employees can combine Excepted Benefits with ICHRA-funded major medical plans, they get a tailored health coverage experience that matches their unique needs and budgets.

Implementing Excepted Benefits Alongside Your SimplyHRA ICHRA Plan

Practical Steps for Small Employers

If you're considering adding Excepted Benefits to your existing health benefits, here’s a straightforward approach:

1. Identify your workforce needs – Are your employees looking for dental, vision, wellness programs, or other supplemental coverage?  
2. Select Excepted Benefits plans aligned with those needs, ensuring they meet federal and state regulations.  
3. Decide how to administer the plans – whether through payroll deductions, employer-funded programs, or combined with your ICHRA offerings.  
4. Communicate clearly with employees about how these benefits work alongside their individual health insurance plans and ICHRA reimbursements.  
5. Partner with benefits platforms like SimplyHRA that streamline compliance, administration, and support for both Excepted Benefits and ICHRAs.

Technology and Automation Benefits

Automation plays a huge role in managing benefits efficiently:

• SimplyHRA’s platform offers tools to track employee eligibility, handle reimbursements, and generate audit-ready reports.  
• Employees can submit claims quickly via mobile or web, speeding up reimbursements for allowable Excepted Benefits expenses.  
• Automated alerts and AI-driven support ensure both employers and employees stay informed about coverage and compliance updates.  

This reduces the likelihood of errors and saves HR teams precious time.

Common Misconceptions About Excepted Benefits

Let’s clear up a few frequent misunderstandings:

• Misconception: Excepted Benefits mean you don’t need major medical insurance.
  Reality: Excepted Benefits augment but don’t replace major medical coverage. Employees still need qualifying individual or group plans.
• Misconception: Excepted Benefits are only for dental and vision.
  Reality: While dental and vision are the most common, accident insurance, disability coverage, EAPs, and some wellness programs also qualify.
• Misconception: Offering Excepted Benefits exempts employers from all reporting requirements.
  Reality: While reporting is less burdensome than full health plans, some reporting and documentation are still required, especially if combined with other benefits like ICHRAs.

Clarifying these points benefits your whole team and reduces compliance risks.

The Future of Excepted Benefits and Small Business Health Plans

Looking ahead, Excepted Benefits will likely remain a cornerstone of small business health strategy, especially as employers seek cost-effective, flexible ways to attract and retain talent. Hybrid models combining Excepted Benefits with ICHRAs, as enabled by SimplyHRA, align well with a workforce that values choice and customization.

As healthcare landscape shifts continue—with new regulations or market changes—staying informed and adaptable is key. Small business owners who embrace Excepted Benefits thoughtfully will be better positioned to offer meaningful health benefits without breaking the bank.

Wrapping It Up: Your Next Steps with SimplyHRA and Excepted Benefits

Excepted Benefits offer a practical, flexible avenue to enrich your employee health coverage while avoiding the pitfalls of complicated traditional plans. Combined with innovative solutions like SimplyHRA’s ICHRA platform, they provide an empowering way to help employees take charge of their health coverage while employers manage costs and compliance.

Ready to explore how Excepted Benefits can fit into your health benefits toolkit? Reach out to SimplyHRA at info@simplyhra.com or schedule a conversation at https://www.simplyhra.com/contact. Our team is here to guide small business owners, HR managers, and employees every step of the way toward benefits that truly make a difference.

Frequently Asked Questions (FAQs) about Excepted Benefits:

Q: Can Excepted Benefits be offered to retirees or former employees?

A: Yes, many Excepted Benefits can be offered to retirees or former employees as part of post-employment health benefits. Because these benefits are limited in scope and often less costly, employers find them useful for extending some level of health-related coverage without the complexity and expense of full retiree medical plans. However, employers should verify that the specific plans meet regulatory guidelines for Excepted Benefits and comply with any applicable retiree health benefit rules.

Q: Are premiums for Excepted Benefits generally tax-deductible for employers?

A: In most cases, premiums that employers pay toward Excepted Benefits are typically tax-deductible as a business expense. Additionally, if the employer offers Excepted Benefits through a cafeteria plan, employees can pay their share of premiums on a pre-tax basis, lowering taxable income. It's important for employers to coordinate with their tax advisors or benefits professionals to confirm the exact tax treatment in their specific situation.

Q: How do Excepted Benefits affect employee eligibility for Health Savings Accounts (HSAs)?

A: Excepted Benefits generally do not disqualify employees from contributing to Health Savings Accounts. For instance, dental and vision plans or accident insurance are considered limited-scope and won’t affect HSA eligibility. It’s when an employee enrolls in general health coverage or a high-deductible health plan (HDHP) that HSA rules come into play. Employers should ensure Excepted Benefits remain truly limited in scope to avoid impacting employees’ HSA contributions.

Q: Can small businesses purchase Excepted Benefits directly from insurers, or do they need a third-party administrator?

A: Small businesses can purchase Excepted Benefits directly from insurance carriers or via brokers. However, depending on the complexity and number of plans offered, working with a third-party administrator—or benefits platforms like SimplyHRA—can streamline administration, ensure compliance, and ease employee support. These partners often handle enrollment, claims processing, and reporting, which saves time and reduces risk.

Q: Do Excepted Benefits require annual open enrollment periods like major medical plans?

A: Excepted Benefits typically have more flexible enrollment windows than major medical insurance plans. While some require annual open enrollment, many dental, vision, or accident plans allow mid-year enrollment or enrollment upon hire without penalty. This flexibility helps small businesses accommodate employees joining or leaving throughout the year. Still, employers should confirm enrollment rules with their plan providers.

Q: How do Excepted Benefits coordinate with Medicaid or other public health programs?

A: Excepted Benefits are supplemental by nature and do not affect an individual’s eligibility for Medicaid or other public health programs. Employees covered under Medicaid can still enroll in Excepted Benefits like dental or vision insurance if purchasing those plans is allowed. Importantly, these benefits usually cannot serve as a substitute for Medicaid’s comprehensive coverage and won’t affect eligibility determinations.

Q: Are wellness programs considered Excepted Benefits?

A: Certain wellness and disease management programs can qualify as Excepted Benefits if they meet specific criteria, such as focusing on health promotion without covering medical treatment costs. Examples include smoking cessation or weight management programs provided through employers. However, wellness programs that offer medical treatment or direct healthcare services may not qualify. It’s best for employers to review program details carefully to determine Excepted Benefits status.

Q: Can employees waive Excepted Benefits if they want to opt out?

A: Yes, employees can generally waive Excepted Benefits if they choose, just as they can waive other voluntary benefits. Employers should have clear policies and enrollment processes that allow employees to decline coverage without penalty. Providing thorough communication helps employees make informed decisions about whether these supplemental benefits fit their needs.

Q: Do Excepted Benefits affect an employee’s premium tax credits through the ACA Marketplace?

A: No, Excepted Benefits alone do not impact eligibility for premium tax credits on the ACA Marketplace because they are not considered minimum essential coverage. However, if an employee is enrolled in an ICHRA or other major medical plan alongside Excepted Benefits, then that coverage could affect premium tax credit eligibility. Employees participating only in Excepted Benefits remain eligible to receive Marketplace subsidies.

Q: What records should small businesses keep to document Excepted Benefits compliance?

A: Employers should maintain clear documentation including plan descriptions, enrollment records, premium payments, and any employee communications related to Excepted Benefits. These records help demonstrate compliance with IRS and Department of Labor rules if audited. Using benefits management platforms like SimplyHRA can automate much of this recordkeeping and provide audit-ready reports.

Q: Are Excepted Benefits subject to the Employee Retirement Income Security Act (ERISA)?

A: Many Excepted Benefits are exempt from ERISA’s requirements because they fall outside the definition of an employee welfare benefit plan due to their limited scope. However, certain Excepted Benefits, depending on how they are structured, may still be subject to some ERISA provisions. Employers should consult legal or benefits advisors to ensure compliance based on their specific plan design.

Q: Can employers combine multiple Excepted Benefits within one offering?

A: Yes, employers can bundle Excepted Benefits together, such as combining dental, vision, and accident insurance into a single supplemental benefits package. However, each component must individually meet the criteria for Excepted Benefits to maintain their exempt status. Careful plan design and review are essential to avoid inadvertently creating a major medical plan that would require ACA compliance.

Q: Do Excepted Benefits require minimum participation levels from employees?

A: Generally, Excepted Benefits do not have federally mandated minimum participation requirements like some large group health insurance plans. This means small employers can offer these benefits selectively or make participation voluntary, giving employees the flexibility to opt in or out without jeopardizing the benefit’s excepted status.

Q: How do Excepted Benefits impact COBRA continuation coverage obligations?

A: Some Excepted Benefits may not be subject to COBRA requirements because they are not considered group health plans under federal law. For example, limited-scope dental or vision plans often do not trigger COBRA. However, accident and disability plans might be subject to COBRA depending on plan characteristics. Employers should review COBRA obligations carefully for each Excepted Benefit offered.

Q: Is there a limit to how much employers can spend on Excepted Benefits?

A: Unlike Health Reimbursement Arrangements (HRAs), Excepted Benefits generally don’t have explicit dollar limits imposed by federal law. However, the cost and design must be reasonable to maintain Excepted Benefit status and avoid being reclassified as major medical insurance. Employers must ensure benefit terms clearly limit coverage to supplemental services or specific conditions.

Q: Can telemedicine services be included as Excepted Benefits?

A: Telemedicine offerings can qualify as Excepted Benefits if the services are limited in scope, such as stand-alone telehealth for vision exams or mental health counseling provided through an Employee Assistance Program. Broader telemedicine coverage that substitutes for traditional medical care likely would not qualify as an Excepted Benefit.

Q: Are there specific labeling or disclosure requirements for Excepted Benefits plans?

A: Yes, employers and insurers often must provide participants with clear disclosure documents that explain the benefits, limitations, and exclusions of Excepted Benefits. This helps employees understand what the coverage does and doesn’t include, reducing confusion and potential compliance issues. SimplyHRA and other benefits providers can assist employers in preparing these materials.

Q: Do Excepted Benefits influence an employer’s large employer mandate status?

A: Excepted Benefits alone do not count toward the count of full-time employees for purposes of the Affordable Care Act’s employer mandate. Since they are limited-scope and not considered major medical plans, offering Excepted Benefits won’t affect whether a business is classified as a large employer under the ACA.

Q: How often do plans offering Excepted Benefits need to be reviewed for compliance?

A: It’s a good practice for employers to review Excepted Benefits plans at least annually to ensure they comply with evolving federal and state laws. Changes in regulations or plan design can impact Excepted Benefit status. Platforms like SimplyHRA offer compliance support to keep your benefits aligned with current rules.

Q: What role do brokers or benefit consultants play in Excepted Benefits?

A: Brokers and benefit consultants help small employers understand the nuances of Excepted Benefits, select appropriate plans, and navigate compliance complexities. Their expertise can be invaluable, especially when integrating Excepted Benefits with ICHRAs or other reimbursement arrangements. Working with knowledgeable partners helps avoid costly mistakes and enhances employee satisfaction.

Partnering with SimplyHRA to Simplify Excepted Benefits and Health Plans for Small Businesses

Managing health benefits that include Excepted Benefits alongside more comprehensive coverage options can feel overwhelming—especially for small business owners and HR managers who are already wearing many hats. At SimplyHRA, we understand these challenges firsthand because we’ve been in your shoes. Our platform streamlines benefits administration, taking the complexity out of offering Excepted Benefits together with ICHRAs or other health coverage. By automating compliance, reimbursements, and employee communications, we enable you to focus on running your business rather than wrestling with paperwork.

Small business owners and HR teams using SimplyHRA have told us how much easier it is to offer flexible, personalized health benefits that their employees truly appreciate. Employees love having the freedom to choose plans that fit their unique needs while enjoying supplemental coverage like dental, vision, or accident insurance through Excepted Benefits—without confusion or frustration. Our AI-powered support answers questions anytime, and our audit-ready reporting keeps employers confident and compliant year-round.

If your small business is navigating the nuances of Excepted Benefits or looking to provide health coverage that balances cost control with employee choice, SimplyHRA is here to help. Reach out today for a personalized consultation by emailing info@simplyhra.com or scheduling a call at https://www.simplyhra.com/contact. Let’s work together to design a health benefits program that works—for you and your team.