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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.

Kaizen CPAs works with auto repair shops across the country. We know running a successful shop takes more than keeping the bays full. We help shop owners understand their numbers, stay ahead of taxes, and build stronger, more profitable businesses. Auto repair is at the heart of what we do, but we bring the same practical, hands-on approach to businesses in other industries, too.

YPD HCM is part of the Kaizen CPAs family. YPD HCM helps small businesses manage payroll, HR, and compliance with the right tools and personal, human support—from payroll and tax filings to onboarding, employee management, and more. It’s practical help for the people side of your business, from a team that’s there when you need them.

The information in this article is provided for general educational purposes and reflects conditions as of the publication date. It is not legal, tax, accounting, payroll, HR, or compliance advice. Every business is different, so talk with a qualified professional about your specific situation.

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