Employers “reimbursing” employees for health insurance they purchase on their own, San Jose, San Francisco, CA

If you are an employer “reimbursing” employees for their health insurance plans they are purchasing on their own….you’d better be careful.  The IRS has outlawed doing that specifically, and they are not friendly to deal with…if you’re caught.  They stopped allowing that as part of the Affordable Care Act a couple of years ago.  The reasoning is that the IRS is trying to stop employers from skirting the employer responsibilities when they elect to offer coverage, or pay for some of it.  The Dept of Labor, the DOL, just like the IRS, is fee driven, which means that they are hunting for employers that have made mistakes.

The IRS and DOL (Dept of Labor) have hired additional agents to collect fees and fine employers

I’ve have made friends with some people within the Dept of Labor, and they’ve confided in me that they have hired many additional agents to hunt for employers making mistakes.  I’ve heard those stories for years, but thought it was just a scare tactic.  My inside person has confirmed this.  Honestly, I don’t really thing they’d go after employers with 10 or 12 employees, but you never know.  Why take the chance.  Besides….routing the insurance through the business, you get a tax deduction.  Reimbursing….not so much.

Having a Group Employer Health Insurance plan insures that you have a great business deduction

Offering a Group Health Plan to employees allows the employer to have a business deduction.  There are MANY more health insurance plans available with Employer Group Plans too.  Another benefit is for the employees….they can pay their portion of the premiums tax free.  That means that anything that employees pay, through an Employer Group Health Plan can be done on a tax free basis.  That includes Dental Insurance, Vision Insurance, and many other Employee Benefits offered by the company.  A HUGE savings for your employees.

Overall, offering a Group Health Plan through the business or employer has many benefits.  Reimbursing employees to purchase their own plans is not allowed.

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