The Internal Revenue Service, Department of Labor and Department of Health and Human Services have each issued frequently asked questions stating that employer payment plans (sometimes referred to as premium reimbursement plans) for individual health insurance coverage fail to comply with the Affordable Care Act. Employers that violate this rule are subject to an excise tax of up to $100 per day ($36,500 per year) for each affected employee.
An employer payment plan is an arrangement in which an employer reimburses employees or pays directly for all or part of the premium for individual coverage. These employer payment plans are considered to be group health plans that do not comply with the requirements of the ACA. An employer cannot reimburse employees for the purchase of an individual market policy, regardless of whether the employer treats the payment as a tax-free benefit or as additional taxable wages to the employee.
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