Prior to tax years beginning January 1, 2017, employers who reimbursed employees for the cost of premiums for individual and family health coverage were subject to the Patient Protection and Affordable Care Act (ACA)’s excise tax. This is because the IRS took the position that group health plans that reimbursed or paid employee premiums for individual coverage were subject to an excise tax (up to $100 per affected individual per day) for violating the group plan rules. Under transition relief, small employers were temporarily exempted from excise tax from January 1, 2014, to June 30, 2015.
Under the pre-2017 rules, if an employer desired to help employees pay for health care coverage and avoid the onerous excise tax, those monies had to be paid to the employees and included in their W-2s as compensation. The employees could then use those “reimbursement” monies to pay for health care coverage or for any other purpose.
For tax years beginning after December 31, 2016, [Read more…] about Small Business Sponsored Health Reimbursement Accounts Now Allowed