Can an Employer take a §106 Tax Deduction when he pays for
INDIVIDUAL Health Plans, not a Group Plan?
Letting employees choose between insurance and cash makes all insurance contributions taxable, opt out, unless you have established a Section 125 cafeteria plan. The benefit cannot discriminate to employees based on “would-be” premium costs. Thus, the “cash in lieu of benefits” amount should be a single flat-dollar amount set by the employer, and should be consistently offered to all eligible employees. Furthermore, the option should not be provided to enable an employee to purchase an individual health policy.Learn More – Word & Brown * Leavitt.com *
What about just having the employees go on their own, now that they can get Covered CA subsidies and it’s all guaranteed issue?
Can employers give cash bonus to employees who waive coverage?
Health Care Reform requires that coverage must be under a GROUP health plan, not employer reimbursements or individual plans. IRS Notice 2013-54 ♦ IRS §9831 ♦ Attorney Explanation The ACA has a $100/day penalty for doing individual plans rather than a group plan Forbes 6.30.2015 ♦ Fox News 7.1.2015 ♦ Marketwatch.com 6.16.2015 ♦ IRS Notice 2015-17
Just let us know the amount you want to contribute, the number – percent of employees that will participate and we can verify if one of our Insurance Companies will take the deal.
Please note also, that under a Group Plan, the amount that employees pay for theirs and dependents premium is tax deductible when the employer sets up a Section §125 plan.
How about just giving the employees a taxable raise.
Check out Individual & Family Health Care Reform Tax Credit – Subsidy but employees won’t qualify if they have an affordable Employer plan 9.66% of employee only premium – available.
The 21st Century Cures Act, will let small businesses use health reimbursement arrangements (HRAs) to fund employees who purchase individual health plans on the open market. This legislation incorporates key elements of the Small Business Healthcare Relief Act, H.R. 2911 and creates a new type of HRA—the qualified small employer health reimbursement arrangement (QSEHRA). The legislation specifies that:
The maximum reimbursement for health expenses that small employers can provide through employee QSEHRAs is $4,950 for single coverage and $10,000 for family coverage, to be adjusted annually for inflation.
Small employers that choose to provide QSEHRAs must offer them to all full-time employees except those who have not yet completed 90 days of service, are under 25 years of age, or who are covered by a collective bargaining agreement for accident and health benefits. Part-time and seasonal workers may also be excluded.
Generally, an employer must make the same QSEHRA contributions for all eligible employees. However, amounts may vary based on the price of an insurance policy in the relevant individual health insurance market, which in turn can be based on the age of the employee and eligible family members, or the number of family members covered. SHRM.org
- §106 No Income to Employee for Employer Provided Health Insurance – Actual Text
- Employer Deduction for Medicare Premiums?
- IRC §106 FAQ’s – Individual Plan Reimbursement? Cash in Lieu of Benefits
- Tax Cut and Jobs Act 2017