News & Updates
HR360, Inc.
June 10, 2015
IRS Notice 2015-17 provided limited transition relief from the assessment of excise taxes for small employers who reimburse, or directly pay, the premium for an employee's individual health insurance policy. The transition relief applies through June 30, 2015.
Prohibited Plans
An "employer payment plan" is an arrangement under which an employer
reimburses an employee for some
or all of the premium expenses incurred for an individual
health insurance policy, or an arrangement under which the employer uses its
funds to directly pay
the premium for an individual health insurance policy covering
the employee. Pursuant to prior agency guidance,
employer payment plans are generally considered group health plans that do not
comply with certain market reforms of the Affordable Care Act (ACA), and
therefore may be subject to a $100
per day excise tax per applicable employee under the federal tax code.
Transition
Relief
The transition relief applies to employer healthcare arrangements that
constitute employer payment plans if
the plan is sponsored by a small employer—generally an employer
with fewer than
50 full-time employees, including full-time equivalents,
as determined in accordance with the "pay or play" rules.
An excise tax will not be asserted for any failure to satisfy the ACA's market reforms by employer payment plans sponsored by small employers that pay, or reimburse employees for individual health policy premiums (or Medicare Part B or Part D premiums):
After June 30, 2015, such employers may be liable for the excise tax.
Additional
Information
Notice 2015-17 also clarifies that employers can
generally increase an employee's compensation to assist with payments of
individual market coverage, so
long as the payment of additional compensation is not conditioned on the
purchase of health coverage and the employer does not otherwise endorse a
particular policy, form, or issuer. Due to the potential for significant
penalties and the complexity of the law in this area, employers considering a
cash (or payroll practice) option are strongly advised to consult knowledgeable
benefits counsel to ensure full compliance with the law.
Additional information on these types of arrangements is available from the federal agencies in IRS Notice 2013-54, the ACA FAQs, and other IRS Q&As.
Be sure to visit the Cashfor Premium Payments & Other Problem Plans section of your online HR library for more.
