The Affordable Care Act has far-reaching mandates and penalties, one of which includes severe penalties to plan sponsors who improperly reimburse or pay premiums to employees for individual health insurance policies. However, under its new guidance, IRS Notice 2015-17, the Internal Revenue Service has issued temporary relief for certain employers to continue to offer the reimbursement until July 1, 2015 without penalties.
Under the ACA guidelines, employers must provide similar compensation to all employees and cannot specify it has to be used for health insurance premiums. That means if employers give money to employees for coverage in the individual market or in a health insurance exchange, the plan will not be considered to be an employer plan that satisfies the ACA employer mandate—and that can become costly.
In issuing the temporary relief from the massive excise tax, the IRS is responding to the concern expressed by small businesses which are transitioning from premium reimbursement to ACA-compliant coverage. Those who qualify for the safe harbor have one of the following payment arrangements:
- Sponsored by an employer (with 50 or fewer employees) that is not an “applicable large employer” subject to the ACA’s employer mandate
- A Medicare premium reimbursement arran gement
- A health care arrangement sponsored by an S-corporation for 2% shareholder-employees
- A TRICARE-related health reimbursement arrangement
The safe harbor from enforcement is good from 2014 through June 30, 2015. After July 1, 2105, employers continuing to offer premium reimbursements contrary to the ACA mandates could be subject to the excise tax, which could reach as high as $36,500 per covered life. The original Notice 2013-45 includes the original warnings, as well as frequently asked questions specific to S-corporation coverage, employer reimbursement of Medicare premiums and TRICARE-related HRAs.
If you currently pay for or reimburse your employees for individual medical insurance policy premiums, Medicare or TRICARE, you should immediately review your situation to determine whether you qualify for the temporary relief. If you do not qualify, you will need to take immediate action to comply with ACA rules.
Marsh & McLennan Agency formerly Benefits Resource Group can provide assistance and guidance for determining the financial impact of the ACA mandates for businesses as well as health insurance solutions and strategies to comply with the final regulations.
Are you up-to-date with the ever-changing compliance regulations? We can help you make sure. Click here to request a free audit report of your company’s health care compliance.
We also encourage you to contact Ross W. Farro, principal with Marsh & McLennan Agency formerly Benefits Resource Group, who specializes in assisting clients with their health and wellness needs. You can contact Ross by phone at 216-393-1820 or by email at firstname.lastname@example.org.