From our friends at McGowen, Hurst, Clark and Smith, CPA

Many small employers had established “Reimbursement Arrangements” under which the employer would pay part or all of the cost of an employee’s individual health insurance premiums. This payment was treated as a tax-free benefit to the employee and was allowable under the “old” rules.

The IRS recently reaffirmed that such Reimbursement Arrangements are not allowable under provisions of the ACA. On May 19, the IRS published information that stated such arrangements do not qualify under the ACA. Further, the IRS clarified that employers who continue to provide tax-free reimbursement of individual health insurance premiums to employees may be subject to penalties as high as $100 per day per applicable employee. Please contact your MHC&S provider for more information.