Significant Penalties for Reimbursing Employees' Individual Health
Insurance Policy Premiums
As a reminder, "employer payment
plans" are considered group health plans that do not comply with the
Affordable Care Act (ACA), and may be
a $100 per day penalty tax per applicable
employee. Prohibited employer payment plans include the
- Arrangements under which an employer reimburses
an employee for premium expenses incurred for an individual health
- Arrangements under which the employer uses its
funds to directly pay
the premium for an individual health
insurance policy covering the employee.
provide employees with additional cash compensation that is not restricted
to the payment of medical expenses.
to the potential for significant penalties and the complexity of the law in
this area, employers considering a cash or payroll practice option
advised to consult knowledgeable benefits counsel to ensure full compliance
with the law.
The additional compensation would not be excluded
from employees' income and would be reported with other income and wages on
the Form W-2.
information is available from the federal agencies in
2013-03, the ACA
FAQs, and IRS