November 13, 2014 by Tony Novak
The U.S. Department of Labor issued a plain and simple written warning to employers this week: employers should NOT reimburse employees for the cost of Obamacare policies under any circumstances. It does not matter whether the reimbursement is done on a pre-tax or after-tax basis. It does not matter if the reimbursement is done on an informal basis or as part of a formal employee benefit plan. The tax penalties for any type of reimbursement are severe. The message is clear: If an employer wish to help an employee with the cost of health coverage or reimburse the cost of individual health insurance coverage, make sure that it done though an exempted policy. Exempted policies are a class of insurance deliberately excluded from most of the regulations of the Affordable Care Act.
This new information released by Department of Labor on November 6 2014 leaves no doubt about the tax problems that employers will trigger if they help employees pay for individual Obamacare policies.
The take-home message to employers in all categories is simply this:
There are other more effective strategies that employers can use to control costs and help employees manage the disruptive changes triggered by the Affordable Care Act. Make sure you know the alternatives and have weighed the options for your business. Many of these are covered in other blog posts and the other publications that I’ve authored or contributed to over the past several months. However at this late date it might be too late for online research. Instead, I invite employers who are not confident that they have a strong ACA response strategy to act quickly to schedule a telephone consult as soon as possible to explore the options and reach an effective strategy more quickly. With various tax and insurance deadlines looming, time is of the essence.
See my personal web site for details on initial consult terms and fees.