Health Care Reform Update for Employers

Important News You Can Use:

On May 16, 2014, the Internal Revenue Service (IRS) issued a FAQ clarifying that it is illegal for an employer to pay for individual health coverage for employees inside or outside of the Marketplace with pre-tax dollars despite those who claim there are loopholes available that make such offerings permissible.

The IRS FAQ specifically clarifies that an employer who offers such an arrangement will be subject to an excise tax of $100 per day or $36,500 per year per employee.

A webinar last week by the law firm of Alston & Bird, LLT, put on at the request of our national professional association NAHU, scared me enough that I want to let all of you know that even if an employer raises the taxable wages of an employee to cover the cost of an individual plan with after tax dollars, the employer should not implicitly or explicitly indicate that the wage increase is attached to the health plan in any way, shape, or form. IRS is very serious about this.

So, please be aware of communications you may receive indicating you can avoid providing group coverage and save premium costs by sending your employees to purchase an individual plan and pay for their premiums on a pre-tax arrangement: health reimbursement account, medical reimbursement account, or some such thing. IRS is very explicit that this not allowed, and the fines are quite hefty.

~ Carolyn

For detailed information see: IRS Notice 2013-54 and the IRS May 16th FAQ. DOL has issued a notice in substantially identical form to Notice 2013-54, DOL Technical Release 2013-0, and HHS will shortly issue guidance to reflect that it concurs with Notice 2013-54. On Jan. 24, 2013, DOL and HHS issued FAQs that addressed the application of the Affordable Care Act to HRAs.