Important Reminder for Employers who help pay employees individual health insurance premiums
The Affordable Care Act specifically prohibits you from paying insurance premiums for your employees’ individual health plans. It makes no difference whether paid with pre or post tax dollars. The fine is stiff: $100 per employee per day. See IRS Notice 2013-54 & FAQ 4.16.15; DOL Notice 2013-13 & FAQ 11.6.14. The IRS provided “Transition Relief” to all small employers who had these types of payment arrangements from January 1, 2015 -June 30, 2015. The relief has now ended.
What can you do now to comply with this provision of ACA?
- Provide group health insurance. Premiums are a tax deductible business expense and non includable as taxable wages to your employees.
- Grossing up taxable wages is generally allowed. This is an expensive solution for both you and your staff due to the extra taxes due. This solution cannot be tied to the health plan and employees do not have to use the wage increase for insurance premiums.