Is it Really Necessary to Offer a Health Insurance Stipend to Your Nanny or Other Household Employee
Hiring a professional, high-quality care provider for your family requires a more sophisticated approach than calling up your neighbor’s daughter to babysit for some extra cash.
Benefits packages are just one of the many ways that you can set your nanny or other household employee position apart and let candidates know you take their work seriously. Besides vacation time and other basic benefits, health insurance is one of the most important to consider before making a job offer to your nanny, house manager, or other household employee.
Am I required to provide health insurance to my domestic staff?
You are not required by law to provide your domestic staff with health insurance or any other medical benefits. However, there are a variety of reasons you’ll want to!
Since your private service professional is a vital part of a smooth operating household and family life, keeping them healthy should be a top priority. Household employees who don’t have adequate health care may impact your own family's health as well.
Families that offer a health insurance stipend or benefit to their household employees are more likely to:
Get noticed by qualified, experienced private service professionals
Hire an individual who will be with their family over a longer period of time
Experience less job turnover
How much will a health insurance stipend or benefit cost?
“According to data from The Bureau of Labor Statistics (BLS), the average employer spends around 30% of an employee’s total compensation on benefits each month.” writes The Nannied Life.
In general, health insurance plans range from $300/mo for a high-deductible catastrophic plan to $600/mo for a plan with coverage for more regular medical needs. Some families offer to pay 50%-100% of the cost of their employee’s coverage and others offer a specific amount, usually $100-$600/mo towards their employee’s health insurance premium costs.
How do I determine what health benefits package is right for my household employee and budget?
Ask a few crucial questions to determine the specific coverage or stipend option that will work best for your family.
What is your household employee’s existing coverage?
If your domestic employee is married or under the age of 26, it’s possible that they already have health insurance coverage and this may reduce the amount you’ll need to pay them. Legally, you cannot ask your household employee about their marital status or age. However, you can ask if they already have health insurance coverage. It is still worth considering supplemental insurance options for those with existing health insurance coverage.
Your household employee may also carry their own individual health insurance plan. In this case you can determine if he or she would like to make a switch and whether a stipend would be more appropriate than paying for a new plan yourself.
What previous health plans worked well for you in the past?
It can be helpful to ask your nanny about health coverage they had with their last position to determine what they are used to and what might work well for them now. And while you can’t ask your nanny about their specific medical conditions, you can work together to determine if there is a particular insurance provider or plan that would better accommodate their needs and established care provider preferences.
Do you require coverage for any dependents or other family members?
Knowing if your nanny has dependents who will also need coverage can help you plan for the total cost of your nanny’s health insurance stipend or benefit.
Can I get a tax break for offering health insurance to my domestic employee?
When you pay a health insurance premium, stipend, or benefit the amount paid is tax-free for both you and your household employee. The only caveat is that the amount cannot be added to the employee’s regular payroll payment and cannot be more than what your employee is paying for their premium. The easiest way to set this up is through a payroll service provider like GTM Payroll.
As an added bonus, if you pay for at least 50% of your caregiver’s health insurance premiums and their wages do not exceed $53,000, you can qualify for the Health Insurance Tax Credit for Small Employers.
In the case of an audit, you’ll want to be prepared with either documentation that you are personally paying for your nanny’s health insurance plan directly or have on hand proof of your household employee's policy and documentation (such as invoices) showing they are paying for their policy.
What types of benefits can I offer as a household employer?
When you work with My Household Managed and our payroll partner, GTM Payroll, you’ll have access to expert support and guidance on exactly what health insurance stipend or benefit to offer your nanny. You’ll also have help setting up the stipend or benefit to ensure everything is documented correctly in the case of an audit.
Options for health insurance stipends and benefits include:
Catastrophic Insurance and High-Deductible Plans
Nannies and household employees typically purchase their own healthcare insurance through the marketplace on healthcare.gov.
HMO & PPO Health Insurance Plans
As an employer, it is possible to purchase a policy for your employees through SHOP.
Temporary or short-term health insurance policies
These can be cheaper than regular policies, but tend to lack coverage for preexisting conditions. =
Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
This is an account that you contribute to as an employer. Employer contributions are capped at $5,450 per year for an employee who is single and $11,050 per year for an employee with a family.
Individual Coverage Health Reimbursement Arrangement (ICHRA)
This account has no cap on contributions, but can require a qualified individual health plan. With this type of account employees must submit receipts for reimbursement to you, their employer.
FSA & HSA Accounts
FSAs are funded by the employee where HSAs can be funded by either the employee or the employer. Both accounts have annual caps on contributions.
Virtual Medical Benefits
Through a payroll service such as GTM Payroll you may be able to add virtual medical benefits to your benefit package for a low monthly rate.
Can I add my nanny or other domestic staff to our family’s health insurance plan?
This is a big, illegal, NO. Do not add your nanny to your employer’s insurance plan or to a family business insurance plan. Because nannies and other household staff are not independent contractors and are employees of the family, you cannot provide health insurance benefits through these ‘creative’ means.
You’ve got enough on your plate in your day-to-day life — let us make your life easier by handling your unique household staffing needs.
If you are a family looking to hire a nanny, household employee or other home service, submit an application with My Household Managed.
If you are a professional nanny, house manager, or other household employee looking for a job, apply at My Household Managed.