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Can employers still reimburse employees for individual health plans under ACA as they could in prior years?

By: Rick Gossett

 

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Can employers still reimburse employees for individual health plans under ACA as they could in prior years?

Answer:
We do not know how many employees you have and the other details of your company employee health insurance reimbursement program; however, as discussed in the information below, beginning in 2014, employers can no longer reimburse employees for their substantiated premiums for individual health insurance coverage on a tax-favored basis under a benefit plan meeting the requirements of IRC Section 106 and Revenue Ruling 61-146.
While you may need to conduct some of your own in-depth tax research on the topic or consult your business lawyer, recent guidance from the Treasury Department (IRS Notice 2013-54) and Department of Labor (DOL Tech. Rel. 2013-03) clarifies that “group health plans providing tax-preferred health coverage—including, but not limited to, HRAs—cannot be integrated with individual market coverage. This means that any group health plans that facilitate the purchase of individual market coverage on a tax-preferred basis, whether inside or outside an Exchange, will not comply with the ACA’s market reforms. This includes so-called “employer payment plans” that reimburse employees’ substantiated premiums for individual coverage on a tax-favored basis, effectively ending those plans for current employees. However, as the Guidance also makes clear, an employer arrangement that pays for such coverage on an after-tax basis is usually not a group health plan and therefore is not subject to the ACA market reforms”:
Additional discussion on the topic you may find helpful:
IRS Notice 2013-54 and DOL Tech. Rel. 2013-03 can be found at:

Published: March 24, 2014
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Rick Gossett

As COO of Tarkenton Companies for more than 20 years, Rick has been responsible for business software development, unique partnerships, business educational content and consulting, and more. Rick was the originator of Tarkenton Companies’s consulting service and initially handled all of the questions himself. Prior to joining Tarkenton Companies, Rick owned and operated a private practice as a CPA. Prior to that, he was a Senior Manager at Pannell Kerr Forster in tax and audit, as well as Principal in Ernst & Young's small business advisory group.

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