We just wanted to make you aware of a new change in healthcare accounting for 2014. As of January 1, 2014, according to the IRS, employers will no longer have the ability to offer premium reimbursement for individual health insurance policies on a pre-tax basis to its employees. In addition, employers may not contribute tax-free toward employees individual health insurance policies. The employer is subject to a $100 per day per employee per provision penalty which could be as much as $36,500 per year per employee per provision.
Employers may extend a benefit to employees on an after-tax basis al long as the arrangement qualifies for ERISA’s payroll practice exemption.
What this means to employers, is that if you buy health insurance for all of your employees on one plan you are fine, but if you reimburse your employees for a portion or all of their individual policies, you must include the portion you reimburse on their W-2 or on a 1099.
You may call or email us to talk about how this will affect your business and what steps you want to take. You may also want to talk to your health care providers. There is a section 105 plan that some sources say can be used, but other sources disagree that it meets the new regulations.
Dana Picard, CPA