S/o: reimbursing health insurance premiums no longer allowable per irs
![[Post New]](/nanny-forum/templates/default/images/icon_minipost_new.gif){kind=icon}
Anonymous
|
I just posted on this in the SHOP thread but since no one seems to realize that the irs has changed the rules te health premium reimbursements in a way that dramatically affects that dramatically affects nanny employers, inthoight is start a more general thread;
http://mobile.nytimes.com/2014/05/26/us/irs-bars-employers-from-dumping-workers-into-health-exchanges.html?referrer=&_r=0 |
Anonymous
| (Sorry for all the typos.) |
Anonymous
| It says larger employers |
Anonymous
|
This does not pertain to household employees, unless the household staff numbers in the dozens.
Know your facts before you start ranting (or expecting others to panic along with you.) |
Anonymous
| Does anyone have any official links or information? I'll search later if I can. But my reading of this was that larger employers are required to offer insurance. And, to avoid an incentive for them to shift employees to the health care exchange, now no employer can pay for an outside policy with pretax dollars. So the implication for nannies is that their health care premiums are now taxed. |
Anonymous
You're misreading / misunderstanding the article. The reference to "larger employers" concerns those who have 50 or more employees and who are thus mandated by the ACA to provide group insurance. That is not what we're talking about here. Unless I'm misreading something the IRS recently ruled that employers large AND small can no longer reimburse individual premiums: http://www.dol.gov/ebsa/faqs/faq-aca22.html http://www.irs.gov/uac/Newsroom/Employer-Health-Care-Arrangements http://www.usiaffinityex.com/pba-ind/medical/health-care-reform/content/downloadables/USIA-exchange/news/July_2014_HCR_Article.pdf http://boss.blogs.nytimes.com/2014/11/18/regulators-warn-against-reimbursing-employees-for-health-premiums/ anyone know more? |
Anonymous
| So it is not legal for me to pay for my nanny's health insurance with pre-tax dollars even if I pay the insurer directly? I, and she, have to pay tax on those premiums? |
Anonymous
| Does this also mean that I can't pay for the health insurance exclusively? That is, make it taxable income, but she doesn't get it if she doesn't buy insurance with it? I just have to give her the money to do whatever she wants with if I want to help pay health insurance? |
Anonymous
If she has to declare it as income, and pay taxes on it, I'm not sure how it would be legal to direct how that income is spent. You could spell out in your contract the amount of her paycheck that is for health insurance, so as not to confuse her hourly rate. What you are suggesting would be along the lines of dictating that a certain amount of her income is for her car insurance, or phone bill, calling it a benefit, and forcing her to spend her income on it. |
Anonymous
That's what I want to do; make it a benefit. It looks like the only legal way to do that now is through SHOP? The premiums are so much higher (even higher than last year), that I'm not going to be able to do it. I know she won't pay the additional herself if I pay a percentage. She'll just go without. |
Anonymous
Have you factored in the tax deduction for SHOP purchases? ( I haven't done the math myself yet as I live in Maryland and SHOP here is a total mess.) |
Anonymous
webbkathy
Member Offline
Member Offline
|
Sadly, it is true that only insurance the employer purchase through the SHOP remains non-taxable. If your nanny bought her policy in the individual marketplace, and you reimburse all or part, that reimbursement is taxable income.
From the horses mouth: http://www.irs.gov/uac/Newsroom/Employer-Health-Care-Arrangements There was a lot of confusion and push back about this through the early part of the year because the IRS ruling at the end of last year kept referring to large employers. More guidance was issued this fall. However, it applies to ALL employers. The intention was to keep employers from ditching their group plans (get out of offering health insurance) and instead establish a reimbursement plan to provide employees a fixed contribution, tax free, and let them buy what they wanted. Good idea in theory, the practice has in fact meant that small employers who have never had a group plan and have historically provided premium support tax free, can no longer continue on that path legally. Here is what was clarified in November: http://www.dol.gov/ebsa/faqs/faq-aca22.html To quote: "The Departments' guidance further clarifies that such employer health care arrangements will not violate these market reform provisions when integrated with a group health plan that complies with such provisions. However, an employer health care arrangement cannot be integrated with individual market policies to satisfy the market reforms. Consequently, such an arrangement may be subject to penalties, including excise taxes under section 4980D of the Internal Revenue Code (Code)." Sorry to be the bearer of bad news. |
Kathy Webb
HomeWork Solutions Inc.
http://www.HomeWorkSolutions.com
800.626.4829
Simplifying Nanny Tax Compliance Since 1993
HomeWork Solutions Inc.
http://www.HomeWorkSolutions.com
800.626.4829
Simplifying Nanny Tax Compliance Since 1993
Anonymous
|
The secondary question, though, is whether or not it's legal to only give the employee that money with "strings." That is, is it legal to give someone taxable income that can only be used for one thing, or must it be unrestricted?
I am taking this afternoon to figure out which is more cost effective and offers the better policies: going through SHOP with higher premiums but tax credits, or going through the exchange with a taxable reimbursement. The thing is, I am not going to give her money to do whatever she wants with; I am only willing to pay this extra amount if it goes to health insurance. That may mean SHOP is the only option. |
webbkathy
Member Offline
Member Offline
I cannot give you legal advice on this (my disclaimer!); however the conventional wisdom is that you cannot pay wages and require that the wages by used for a specific purpose. There is a discussion about this online at the NYT: http://boss.blogs.nytimes.com/2014/09/29/can-a-company-reimburse-employees-who-buy-their-own-health-insurance-maybe/?_r=0 There is a lot of bad advice written earlier this year online; the IRS' original ruling referred to "large employers" and many interpreted the ruling to only apply to the large (>50) employers. In November the US DOL's FAQ clearly stated this ruling applies to ALL employers. Like many things ACA, there is a lot of confusion in the marketplace. HWS is now firmly convinced that the only tax advantaged way to contribute to an employee's health insurance premium is via the employer SHOP. The theory is that employees who purchase individual policies may be eligible for premium support via their income taxes, so only "after-tax" wages may be used to pay for these policies. It is ugly, but sadly true. |