The Internal Revenue Service has clarified that employers will not escape taxes and penalties under the Affordable Care Act if they choose to send their employees to the exchanges and reimburse them with tax-free dollars for premiums in lieu of offering an employee-sponsored health insurance plan.

In a frequently-asked-questions post to its website this month, the IRS now says such arrangements are considered, under IRS Notice 2013-54, employer payment plans that qualify as group health plans and are subject to the market reforms. The IRS has also clarified that such arrangements cannot be integrated with individual policies to satisfy the employer mandate.

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