The IRS recently clarified that employer payment plans are not allowed to be used to reimburse employees for health insurance premiums on individual policies on a pretax basis. This applies to policies both in and outside the federal Health Insurance Marketplace.

Incorrect Use Could Lead to Penalties

This clarification is centered on the fact that employer payment plans are group health plans that are subject to market reforms. IRS Notice 2013-54 specifically states that these employer payment plans cannot be utilized with individual health insurance policies. If an employer uses employer payment plans incorrectly, they may be penalized up to $100 per day, per applicable employee. However, employers are allowed to reimburse employees on an after-tax basis without penalty.

Learn More

Visit the IRS FAQ to learn more about employer health care arrangements. Eide Bailly will be hosting a free Health Care Reform & Benefit webinar on July 10. You can also click here to read an article on the Impact of the Affordable Care Act on HRAs and cafeteria plans.

If you have other questions or want additional information, please contact an Eide Bailly service provider.