Thousands of small employers reimburse or “pay a little extra” to reimburse employees who purchase individual health insurance…However, beginning this month huge fines are possible…even for a small family business of 2 employees if you reimburse employees for individual health insurance.
“Illegal reimbursements can also take on more subtle forms e.g. paying a higher wage in exchange for declining health plan coverage. Some of these indirect arrangements are also illegal. If you think this affects your small company, here’s someone you can talk to for free. Time is running out.”
Tax Deductibility Is Not The Main Issue Here
This is true whether or not you take a tax deduction for reimbursing these premiums! We are referencing the latest IRS bulletin addressing the subject: Basically, the IRS argues such arrangements create the existence of a group health insurance plan…and since individual plans are not compliant with the same ACA regulations that apply to group health insurance, IRS conclusion…you are sponsoring an illegal plan! The penalties are punitive, to say the least (read further for details).
Expensive Mistake If You Reimburse Employees Improperly
I don’t think we can overstate this: it’s a mind-blowing change of policy that negatively impacts smaller employers. Recently, MarketWatch did a good job of bringing this subject to mainstream media, in this article:
“Under an employer payment arrangement, the employer reimburses participating employees for premiums paid for their individual health insurance policies or pays the premiums directly on behalf of participating employees….The penalty for running afoul of the market reform restrictions is $100 per-employee per-day, which can amount to $36,500 per employee over the course of a full year. (from MarketWatch: The full story)
If you think this affects your small company, don’t focus on the problem, focus on the solution: here’s someone you can talk to for free. Time is running out.
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