On May 13th, the IRS issued a set of Frequently Asked Questions (FAQs) addressing the subject of Employer Health Care Arrangements. Although brief, this latest publication – in particular the entry below – seems to have sparked quite a buzz in the marketplace.
Q1. What are the consequences to the employer if the employer does not establish a health insurance plan for its own employees, but reimburses those employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace)?
Under IRS Notice 2013-54, such arrangements are described as employer payment plans. An employer payment plan, as the term is used in this notice, generally does not include an arrangement under which an employee may have an after-tax amount applied toward health coverage or take that amount in cash compensation. As explained in Notice 2013-54, these employer payment plans are considered to be group health plans subject to the market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing. Notice 2013-54 clarifies that such arrangements cannot be integrated with individual policies to satisfy the market reforms. Consequently, such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code.
After a thorough review of this recent guidance by both our Corporate Compliance and Governmental Affairs Departments, TASC remains confident in its position and continues to stand behind the NESP / NEFSA Plan design by providing an Audit Guarantee* to all enrolled employers and participants. If all procedures and parameters are adhered to, TASC will assume financial responsibility for any penalty and/or interest charged as the result of an audit.
Full FAQ text available at http://www.irs.gov/uac/Newsroom/Employer-Health-Care-Arrangements.
* Applies to AgriPlanNOW / BizPlanNOW, DirectPay, and FlexSystem