On May 13, 2014, the IRS issued FAQs (IRS: Employer Health Care Arrangements) addressing the consequences for employers that reimburse an employee for individual insurance plan premiums, also known as “Employer Payment Plans.” Employer payment plans are arrangements in which employers reimburse employees on a pre-tax basis for individual insurance premiums.
As an employer, you may be either paying the premium for an employee’s Medicare Supplement or reimbursing them for the expense. My interpretation of this most recent announcement from the IRS is that this practice is prohibited going forward.
Please understand, this announcement is to ensure that employee’s are not paying premiums for individual health plans without a taxable event. According to the IRS, the only health plans that are eligible for a pre-tax benefit are qualified group plans.
Considering every employer has different circumstances, Landmark Benefits recommends consulting with your corporate tax professionalon how to proceed with reimbursement for these premiums.