Before 2014, employers could pay or reimburse employees for their own health insurance premiums and the payments were tax-free to the employees. Starting in 2014, this type of employer payment does not meet the market reform guidelines and will be subject to a penalty of $100 per day for each employee. To avoid this penalty, employers must treat the payments and reimbursements as taxable compensation to the employees and subject it to Federal Income Tax and FICA withholding.
Just recently, the Department of Labor has gone one step further and determined that employers are not allowed to reimburse employees for individual health insurance plans. Large employers are mandated to provide health insurance coverage. Both large and small employers that provide health insurance coverage for employees must verify their plans meet reform guidelines.
If you have any questions, please contact your Alerding CPA Group Tax Advisor.