Total Team Solutions Blog

Are Employers aware of potential insurance reimbursement penalties?

By: Rob Lynn

New guidance from the IRS explains that when an employer does not establish a health insurance plan for its own employees, but instead decides to reimburse employees for part or all of the premiums the employee pays for individual health insurance, that there will be significant penalities for such arrangements. 

Handling employee reimbursement is described as "employer payment plans" which are considered group health plans that would be subject to the Affordable Care Act's market reforms.   Employer payment plans also include arrangements under which an employer uses its funds to directly pay the individual's health insurance premium.  This arrangement generally does not include  the option whereby the employee may choose either cash or an after-tax amount to applied toward health insurance coverage.

The new guidance from the IRS that employer payment plans can't be integrated with individual policies to satisfy the Affordable Care Act market reforms.  Such arrangements fail to satisfy the ACA reforms and may be subject to $100 per day excise tax per applicable employee.

Since 1988, Total Team Solutions has been working with our clients to provide cost effective employee benefits.

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