Category Archives: Employer Penalties

Don’t Reimburse Employees For Individual Health Insurance

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.

Don't Reimburse Employees For Individual Health Insurance

 

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Employers Dilemma- Early Renewal or Not?

A follow-up to this story was published in October can be be read here. Many insurance brokers (and insurers) are suggesting that Employers re-date the plan anniversary (aka “Early Renewal”) to delay certain aspects of Obamacare Affordable Care Act rules and possible penalties (see our related story). Is this a good idea?  Are there pros and cons to using a “plan anniversary date change” strategy?

At Coverage California, we present alternative points of view. The following article came from Benecomplink.com, which argues that merely changing the renewal date of the insurance policy, does not necessarily change the plan anniversary date under ERISA:

“Changing the renewal date on an insurance policy with the plan’s carrier does not change the plan year. Changing a renewal date to December may be allowed by the insurance company, but if the plan sponsor/employer does not change the plan year, their plan year may continue to be a calendar year. From a legal perspective, “plan year” is the year designated in the plan document. Plan years are set by board resolutions and reinforced by plan documents and the filing of 5500 forms.. ” [Full article available at Benecomplink]

 

Employer Plan administrators should seek professional advice from their advisors.  For a limited time, we offer a limited number of free Q&A sessions.  For details, refer to the Eventbrite invitation at this link::  Reserve Q&A time.