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May 2014 Newsletter

The Harrison Group
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The Harrison Group
Our Mission
The Harrison Group’s mission is to provide exceptional products and services that are flexible and responsive which enable our clients to offer their employees the best possible employee benefit plans.

Richard H. Miller,  Jr.
President
Telephone:
  610.853.9075
Toll Free:
  855.222.5727
Fax:
610.853.9079

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Black Stripes
May 2014
Issue No. 6

Recently there has been some confusion as to whether employers can provide for individual health coverage through an employer payment plan.  We have been advising brokers and employers that an employer can’t.  The IRS issued the following FAQ guidance last Friday, May 23, 2014, which affirms our previous advice.

Q1.  What are the consequences to the employer if the employer does not establish a health insurance plan for its own employees, but reimburses those employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace)?

Under IRS Notice 2013-54, such arrangements are described as employer payment plans. An employer payment plan, as the term is used in this notice, generally does not include an arrangement under which an employee may have an after-tax amount applied toward health coverage or take that amount in cash compensation. As explained in Notice 2013-54, these employer payment plans are considered to be group health plans subject to the market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing.  Notice 2013-54 clarifies that such arrangements cannot be integrated with individual policies to satisfy the market reforms.  Consequently, such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code.

Q2. Where can I get more information?

On Sept. 13, 2013, the IRS issued Notice 2013-54, which explains how the Affordable Care Act’s market reforms apply to certain types of group health plans, including health reimbursement arrangements (HRAs), health flexible spending arrangements (health FSAs) and certain other employer healthcare arrangements, including arrangements under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy.

DOL has issued a notice in substantially identical form to Notice 2013-54DOL Technical Release 2013-03, and HHS will shortly issue guidance to reflect that it concurs with Notice 2013-54. On Jan. 24, 2013, DOL and HHS issued FAQs that addressed the application of the Affordable Care Act to HRAs.

Sincerely,

Richard H. Miller, Jr., CPA, CFP

President

3 Raymond Drive, Suite 201, Havertown, PA 19083

Phone: 610-853-9075   ·   Toll Free: 855-222-5727  ·   Fax: 610-853-9079