The Wagner Law Group
Wagner Law Group, A Professional Corporation, is a nationally
recognized ERISA & employee benefits, estate planning,
employment, labor & human resources practice.
in 1996, The Wagner Law Group has 22 attorneys engaged
exclusively in employee benefits, estate planning and
employment law. Six of our attorneys are AV rated by
Martindale-Hubbell as having very high to preeminent legal abilities
and ethical standards. The firm is among the largest ERISA boutiques
in the country. Our practice is national in scope, with clients in
more than 40 states and several foreign countries.
Wagner Law Group
Fax: (561) 293-3591
7108 Fairway Drive
Palm Beach Gardens, FL 33418
East Kennedy Boulevard
Tampa, FL 33602
Francisco, CA 94104
100 South 4th Street, Suite 550
St. Louis, MO 63102
April 7, 2016
Health and Welfare Law
IRS Guidance on Employer
Reimbursement of Individual Health Insurance Premiums
has released additional guidance on employers' ability to reimburse
premiums for employees' individual health insurance policies on a
tax-free basis. In Information Letter 2016-0019, the IRS confirms
that it considers such employer payment plans to be group health
plans that are subject to the Affordable Care Act ("ACA")
market reform rules.
Background. While the ACA does not directly modify the tax
treatment of employers' reimbursements of employee medical expenses,
it does implement certain market reform rules for group health plans.
These market reform rules include a prohibition on annual or lifetime
dollar limits on "essential health benefits" and a
requirement that certain preventive services be provided without
cost-sharing. The ACA's market reform rules apply to
employer-provided health coverage regardless of the size of the
employer and regardless of whether the employer is subject to the
ACA's employer mandate provisions.
Guidance. The IRS confirms in
the Letter that it views an employer's agreement to reimburse health
care insurance premiums up to a fixed amount as a group health plan
with an annual limit on essential health benefits, thereby violating
the ACA's market reform rules.
rules provide that where an employer offers group health coverage
that satisfies the ACA's market reforms along with a separate
arrangement to pay for other medical expenses, the pair can be
combined to satisfy the ACA market reform rules. (See the Alert
of 10/17/13 for further information.) However, the Letter clarifies
that where an employer does not offer an employee group health
coverage and its employees obtain "other" group health
coverage (such as through an individual health insurance policy), a
separate, arrangement cannot be integrated with the other group
coverage to satisfy the ACA market reform rules. As a result, the
separate arrangement would violate the ACA's market reform rules and
thereby expose the employer to excise tax liability.
Letter also clarifies that an agreement to reimburse individual
health insurance premiums on an after tax basis would not violate the
ACA as long as the reimbursement can be used by the employee for any
purpose. This would, for example, prevent the employer from making
premium payments directly to the insurer or Insurance Marketplace.
Amount. The excise tax imposed
on employers for violating the ACA's market reform rules can cost up
to $100/day per applicable employee. (See 26 U.S.C. §4980D.)
This excise tax is generally not deductible for employers, which
makes this penalty even more significant.
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