Recently, the IRS issued a Frequently Asked Questions (FAQ) list that reiterates earlier guidance disallowing pre-tax employer reimbursements for employee health care premiums. The FAQ also calls attention to the $100 per day, per employee penalty for non-compliance.The initial guidance from last fall indicated that pre-tax employer reimbursements for healthcare premiums would be categorized as group health plans and, thus, would not be permissible as they would not comply with the requirements for group health plans under the Affordable Care Act. Since that time, however, many people have attempted to find alternate solutions in order to continue the practice of reimbursing employee premiums in lieu of providing a full health plan.This latest FAQ and penalty announcement clarifies that the IRS is serious about disallowing this arrangement. We recommend that employers who still utilize a pre-tax health care premium reimbursement benefit discontinue this practice. Any advice that employers have heeded with regard to these benefits still being allowed, should be carefully reexamined in light of this most recent guidance and penalty reminder.
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