Do you reimburse employees for health insurance?

Do you reimburse employees for individual health policies? If you do, you may be in violation of a recently issued IRS guidance notice.

Until recently, it’s been unclear whether such a practice is in compliance with the Affordable Care Act (also known as Obamacare). The IRS and Department of Labor (DOL) interprets such a practice as an employer creating its own group health plan. Being a group health plan, it must not have an annual limitation on benefits. However, the amount paid for insurance is deemed to be the annual limitation and, thus, fails the requirements.

Although such an arrangement is still income-tax free, it is subject to a new penalty under §4980D. This penalty imposes an amount of $100 per day, per participant!

As you can see, the rules pertaining to insurance reimbursements are quite challenging. If you pay individual health care policies for any employees, please call us to discuss.