With the January 1, 2015 employer shared responsibility deadline fast approaching, the three government agencies charged with ACA compliance (IRS, DOL and HHS) have provided recent guidance on several strategies or tactics that have been marketed to applicable large employers as legitimate ways to reduce their coverage costs and exposure to shared responsibility penalty taxes (assessable payments). Employer reimbursement of individual health insurance premiums is a common but not universal feature of these arrangements. The Internal Revenue Service ruled out pre-tax reimbursement of individual health premiums in Notice 2013-54, but more recent guidance in ACA FAQ XXII and in IRS Notice 2014-69 expands the prohibition to include after-tax individual premium reimbursements, as well as other shared responsibility cost reduction strategies. The chart attached below summarizes:
- the disallowed strategies;
- the reasons why they were disallowed;
- the penalties that may apply to applicable large employers that persist in pursuing these strategies; and
- other relevant facts and concerns.
As with all content provided on this blog, the chart is meant to serve as a general summary of legal developments and the information it contains should not be applied to any particular factual situation without first consulting experienced tax or benefits counsel.