Employee Benefits Blog

Posts tagged Individual Health Insurance Policies

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Individual Health Insurance Policies and the ACA: IRS Issues Additional Guidance

On February 18, the IRS issued Notice 2015-17 to provide yet more guidance on the applicability of the “market reform” provisions of the Affordable Care Act to arrangements under which an employer pays for, or reimburses the cost of, some or all of the cost of an employee’s individual health insurance premiums.  This guidance is the latest in a series of pronouncements issued by the IRS and the Department of Labor over the past couple of years.  (We previously wrote about the prior guidance here.)

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Employers Can’t Reimburse the Cost of Employees’ Individual Health Policies on an After-Tax Basis

As we discussed in a previous post, the IRS issued Notice 2013-54 in September 2013 to discuss the application of the “market reform” provisions of the Affordable Care Act (ACA) to certain employer healthcare arrangements, including, among others, arrangements under which employers pay for employees’ individual health insurance policies, either by paying the insurance company directly or by reimbursing the employee.

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IRS Notice 2013-54 and S Corporation Shareholder-Employees

In a previous post we discussed IRS Notice 2013-54, in which the IRS reversed its previous position by indicating that, when an employer pays for an employee’s individual health insurance policy premiums, the benefit can no longer be provided on a pre-tax basis and must now be treated as taxable wages.  We encountered a situation recently which led us to conclude that, while it is not free from doubt, it appears that S corporation owner employees who directly or indirectly own at least 2% of the shares may now potentially be in a more favorable position than owner-employees of C corporations.

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Individual Health Insurance Policies Can Now Be Provided to Employees Only On After-Tax Basis

On Friday, September 13, the IRS issued Notice 2013-54 to discuss the application of the “market reform” provisions of the Affordable Care Act (ACA)  to certain employer healthcare arrangements, including, among others, arrangements under which employers pay for employees’ individual health insurance policies, either by paying the insurance company directly or by reimbursing the employee. The Notice, which mirrors substantially identical guidance issued by the DOL, also covers health reimbursement accounts under Section 105 and health flexible spending arrangement under Code Section 125.  The “market reform” provisions include the requirements to provide certain preventive services with no cost-sharing and to refrain from imposing a lifetime cap on benefits.  There are many aspects to this Notice, but this post will focus only on its impact on employers’ subsidies of employees’ individual health insurance policies.