One of our favorite colleagues, Fred Cartier, provided some useful content regarding the relief offered to some small employer groups.
The Internal Revenue Service, Department of Labor and Department of Health and Human Services have each issued frequently asked questions stating that employer payment plans (sometimes referred to as premium reimbursement plans) for individual health insurance coverage fail to comply with the Affordable Care Act. Employers that violate this rule are subject to an excise tax of up to $100 per day ($36,500 per year) for each affected employee. While small organizations are not subject to the ACA’s “shared responsibility” employer mandate to provide coverage or pay a penalty, if they do provide health coverage it must meet a range of ACA coverage requirements.
IRS Notice 2015-17 Issued on Feb 18, 2015, provides transition relief for small employers that used premium payment arrangements for 2014; small employers also will not be subject to penalties for providing payment arrangements for Jan. 1 through June 30, 2015. These employers must end their premium reimbursement plans by that time. Small employers are employers that are not Applicable Large Employers under § 4980H (generally less than 50 full time and full time equivalent employees in prior year). Relief was not given for large employers (those with 50 or more full-time employees or equivalents). Large employers are required to self-report their violation on the IRS’s excise tax form 8928 with their quarterly filings.
Higher pay in lieu of offering health insurance is permissible, as long as the money is not specifically designated (required) to be used to pay for premiums. However, doing so increases the employees taxable income. To offset the tax implications It may be possible that an employer can use a payroll vendor to set up post-tax payments to carriers for monthly premiums. However, the best option may be to implement a group health plan accompanied by a Sect 125 POP plan.