Employers Payment Plans Now Subject to Excise Taxes

Additional IRS guidance has been provided on health insurance arrangements where employers reimburse employees for individual health insurance policies or pay individual policy premiums directly. These types of arrangements, called employer payment plans, are disallowed by the ACA and are subject to steep excise taxes.

In Notice 2015-17, the IRS made some transitional relief available for certain situations:

  • Affordable Care ActExcise taxes will not be asserted on small employers (defined by the ACA as no more 50 full-time and full time equivalent employees) who have employer payment plans until June 30, 2015. After June 30, 2015, such employers may be liable for these taxes. Note that this relief applies to employer payment plans, but doesn’t apply to medical expense reimbursements or HRA’s.
  • S Corporation shareholders who own more than 2% of the stock of an S Corporation have relief. Prior tax guidance pertaining to the deductibility of health insurance benefits for such owners conflicted with the requirements of the ACA.
  • Prior guidance that providing taxable reimbursements rather than pre-tax reimbursements doesn’t make otherwise impermissible reimbursements permissible still stands.
  • Relief was also made available for employers who have reimbursed Medicare Part B or Part D premiums in certain situations.

If this new IRS guidance is confusing to you, please do not hesitate to contact me with your tax questions so that we can assist you in filing your taxes properly.

For more information, see Notice 2015-17.


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