Temporary Waiver of ACA Penalties for Small Employers’ Individual Insurance Premium Reimbursement Plans

affordable-care-act-generic-graphic-hearstLast week, the IRS announced the waiver (for 2014 and the first half of 2015) of the penalty for “small” employers that reimburse employees for individual health insurance premiums. To the IRS, “small employer” means an employer that normally employs fewer than the equivalent of 50 full-time (30 hours/week) employees. You can read the entire notice here.

We have previously posted about the IRS and DOL position that employer reimbursement of employees’ individual health insurance premiums—either inside or outside of a public exchange—are “group health plans” that violate the Affordable Care Act’s insurance market reforms (links to our related posts follow this one). This latest IRS notice confirms their previously announced position, and clarifies that even a reimbursement program that treats the reimbursement as taxable gross income to employees (“after-tax”) violates the ACA if the employer makes the payment only as reimbursement for health care and not to employees who do not have those expenses.

We expect the ACA rules and deadlines to continue to evolve, so we are advising our clients to stay tuned and check in with legal counsel if in doubt over compliance requirements and non-compliance penalties.  We will continue to keep you posted as news develops.

 

 

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