Employer Medicare Reimbursements

Can I reimburse my employees for their Medicare Premiums?

The quick answer is Yes ~ BUT ONLY IF you have two or more employees on Medicare, PLUS a Group Insurance plan for your employees. See the details and four conditions below. Call me if you want to review. Be very careful ~ Transition Relief has ended. The IRS penalties are stiff under the Affordable Care Act. ~ Carolyn

Medicare Premium Reimbursement Arrangements for Employers

An arrangement under which an employer reimburses (or pays directly) some or all of Medicare Part B or Part D premiums for employees constitutes an employer payment plan, and if such an arrangement covers two or more active employees, is a group health plan subject to the market reforms.

Small Employer Transition Relief Extends to Medicare Premiums

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 Medicare Part B or Part D premiums:

  1. For 2014, for employers that qualify as small employers for 2014; and
  2. For January 1 through June 30, 2015, for employers that qualify as small employers for 2015.

After June 30, 2015, such employers may be liable for the excise tax. Eligible employers are not required to file IRS Form 8928 (regarding failures to satisfy requirements for group health plans, including the ACA’s market reforms) solely as a result of having these employer payment plans for the time periods above.

Medicare Premium Reimbursement Arrangements May Be Integrated With Other Group Health Plan Coverage to Satisfy the ACA’s Requirements

An employer payment plan may not be integrated with Medicare coverage to satisfy the market reforms because Medicare coverage is not a group health plan. However, an employer payment plan that pays for or reimburses Medicare Part B or Part D premiums may be integrated with another group health plan offered by the employer to satisfy the annual dollar limit prohibition and preventive services requirements if:

  1. The employer offers a group health plan (other than the employer payment plan) to the employee that does not consist solely of excepted benefits and offers coverage providing minimum value;
  2. The employee participating in the employer payment plan is actually enrolled in Medicare Parts A and B;
  3. The employer payment plan is available only to employees who are enrolled in Medicare Part A and Part B or Part D; and
  4. The employer payment plan is limited to reimbursement of Medicare Part B or Part D premiums and excepted benefits, including Medigap premiums.

Note: To the extent such an arrangement is available to active employees, it may be subject to restrictions under other laws such as the Medicare secondary payer provisions.

Medicare Premium Reimbursements & Federal Nondiscrimination Laws

According to an informal discussion letter from the U.S. Equal Employment Opportunity Commission (EEOC), giving eligible employees a choice between remaining on employer-provided group health insurance or receiving employer-provided payment of Medicare Part B premiums generally would not constitute an impermissible adverse action against older workers under the Age Discrimination in Employment Act (ADEA) if it creates an advantageous option available only to them.

Whether a specific plan provides advantageous options, or imposes an adverse action, is dependent on the facts and circumstances. (Note: Under the specific facts addressed in the letter, employees were also required to provide written acknowledgement that they had reviewed both options and had voluntarily chosen to withdraw from employer-provided group health insurance.)

If the Medicare Part B reimbursement plan were to create an adverse action for older workers, it would be lawful only if it met an ADEA exemption or defense. A further discussion of exemptions and defenses is available in the letter. The letter is not a formal opinion and does not address Medicare or federal tax issues.