Reply to S/o: reimbursing health insurance premiums no longer allowable per irs

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[quote=webbkathy][quote=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.[/quote]

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.[/quote]

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