If you are an employer and you currently reimburse employees for their Health Insurance premiums, and you do it tax free….you have a problem. The IRS and the Affordable Care Act does not allow that. Check out IRS notice 2013-54. It does not allow employers to reimburse employees for Health Insurance and then try and take a deduction for it. Previously you could take this deduction, but with the Affordable Care Act (ACA), the IRS and the Dept of Labor (DOL) are going after employers trying to do this. Many employers were doing this and pushing employees into the State Health Exchanges where they could get subsidies. This is seen as “double dipping” in the eyes of the IRS.
IRS views employers trying to reimburse employees as cheaters
With the formation of the ACA, the Dept of Labor is looking for employers that are trying to skirt the law and allow employees to obtain tax free reimbursements from the employer and then obtain subsidies from the CA Health Exchange, Covered CA. They are calling it double dipping for the employees. The IRS is saying that either the employer has to provide a Group Health Plan for the employees or decline to do so. There is no requirement for employers with under 50 employees to sponsor a Group Health Plan, and I don’t ever see that being the law. I’ve heard of employers being audited by the DOL for other reasons and then discovering that the employer had a “reimbursement program”. That’s when all hell breaks loose.
Health Insurance for employers is not as expensive as you might think
Most employers think that they have to provide Group Health Insurance for their employees and pay for the entire bill. Not so. When a company decides to install a Business Health Plan, the employer is only responsible to pay for 50% of the Employee only premium, not their family too. That adds up to about $100 a month per employee or maybe a bit more. You’d be surprised how many employers are unaware of this and when I speak to them, that’s why they tell me they have not purchased a plan for the company, they felt it would be too expensive. Brauer Insurance are the Bay Area leaders in Group Health Plans for small and medium sized companies.