Can an Employer Pay for an Employees Individual Health Plan?

No – You cannot and here’s why.

Per the ACA (Affordable Care Act), an employer may no longer pay for individual employees medical plans.  According to the ACA, paying for these individual plans somehow is considered an employer plan and therefore must comply with ACA regulations.  This is a head scratcher for most employers, especially small employers who just want to help out their employees.

Last month the IRS released Notice 2015-17 which allows for transition relief.  There seems to be a lot of that going around where the ACA is concerned.  According to this notice, employers CAN pay for the individual employee premiums from Jan 1, 2015 through June 30, 2015 without paying a penalty.

Please note that this transition relief does not include stand alone HRA’s (Health Reimbursement Accounts).

The relief may be small but the penalties are large.  The IRS penalty for employers who continue to pay the individual health premiums after the June 30, 2015 transition relief period will face fines of $100 per employee per day!  If you have 10 employees at $100 per day -this is a substantial penalty.

The good news is that Retiree Only plans are not subject to the ACA.  An employer can still pay for Medicare Part B or Part D premiums through the company.

So beware if you are one of those employers paying for individual policies – it is time to wind it down or be prepared to pay the penalties.

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