• Home
  • About
    • Contact
    • Client Survey
  • Services
    • Health Care Reform Navigators
    • Strategic Benefits Planning
    • Employee Benefits >
      • Group Private Exchange
      • Group Medical Plans >
        • Fully-Insured Health Plans
        • Self-Funded Plans
        • Consumer-Driven Plans
        • Cafeteria Plans
        • SHOP Plans
        • RKA Benefits Blend
      • Group Life Insurance
      • Group Disability
      • Group Dental Plans
      • Group Vision Plans
      • Group Voluntary Benefits >
        • Value-Added Services
      • RKA Benefits Blend
    • PEOs - HR Outsourcing
    • Pricing
  • Get Quote
  • Benefits Edge
  • "Bill Please!" Forum
  • Employee Solution
    • Calculators
Rylan Klaseen & Associates
909-243-4886

Benefits Edge

From our team to yours.

Contact Rylan
Rylan Klaseen & Associates

Update: It's Official - IRS Blocks Employers From Moving Employees to Exchanges

6/3/2014

 
Picture
Well – we won’t say “Told You So” – but hope you heard us say “Don’t Do It!”  
Update:

Well – we won’t say “Told You So” – but hope you heard us say “Don’t Do It!” 

It is now official.  The IRS will slap a $36,500 per employee penalty for any employer dumping their sick employees into the health exchanges, whether or not the employer is paying the premium.

The Obama administration has just squelched the idea, stating that such arrangements do not satisfy the health care law.

Under a central provision of the health care law, larger employers are required to offer health coverage to full-time workers, or be subject to penalties.

“I don’t think that an employer-based system is going to be, or should be, replaced anytime soon,” President Obama said recently, when asked if the law might speed the erosion of employer-sponsored insurance.

The Affordable Care Act is designed to build upon the current system of employer-based health insurance.  The administration, like many in Congress, wants employers to continue to provide coverage for workers and their families.

Many Employers – some that now offer coverage and some that do not – had concluded that it would be cheaper to provide each employee with a lump sum of money to buy insurance on an exchange, instead of providing coverage directly.  And in our previous post, we highlighted the fact that many employers were also eyeing dumping their sickest employees into the exchanges to reduce their healthcare costs.

Employer contributions for employee coverage, averaging more than $5,000 a year per employee, are not counted as taxable income to workers.  But the IRS said employers could not meet their obligations under the new health care law by simply reimbursing employees for some or all of their health premium costs.

Christopher E Condeluci, a former tax and benefits counsel to the Senate Finance Committee, said the ruling was significant because it made clear that “an employee cannot use tax-free contributions from an employer to purchase an insurance policy sold in the individual health insurance market, inside or outside an exchange.”
“The IRS is going out of its way to keep employers in the group insurance market and to reduce the incentives for them to drop coverage.”
Mr. Condeluci pointed out that if an employer wants to help employees buy insurance on their own, they would need to give them higher pay in the form of taxable wages.  But then the employer and the employee would owe payroll taxes on those wages, and workers could view the change as reducing a valuable benefit.

Andrew R Biebl, a tax partner at CliftonLarsonAllen, a large accounting firm based in Minneapolis, said the ruling could disrupt a long-standing arrangement in many industries.

“For decades,” Mr Biebl said, “employers have been assisting employees by reimbursing them for health insurance premiums and out-of-pocket costs.  The new federal ruling eliminates many of those arrangements by imposing an unusually punitive penalty.”

The IRS has deemed these arrangements as “employer payment plans,” saying “These employer payment plans are considered to be group health plans,” but they do not satisfy requirements of the Affordable Care Act.

Under the law, insurers may not impose annual limits on the dollar amount of benefits for any individual, and they must provide certain preventive services, like mammograms and colon cancer screenings, without co-payments or other charges.

The administration points out that employer payment plans do not meet these requirements.

Richard  K Lindquist, the president of Zane Benefits in Park City, Utah, a software company that helps employers reimburse workers for health insurance costs, said, “The IRS is going out of its way to keep employers in the group insurance market and to reduce the incentives for them to drop coverage.”

See the Q&A or dig into the details of IRS Notice-2013-54, click here.

Source: Pear, Robert. New York Times, “I.R.S. Bars Employers From Dumping Workers Into Health Exchanges,” May 25, 2014 http://www.nytimes.com/2014/05/26/us/irs-bars-employers-from-dumping-workers-into-health-exchanges.html

Comments are closed.

    RSS Feed

    Picture
    Rylan Klaseen

    Rylan Klaseen & Associates

    Serving Southern California:
    Tailored Benefits Delivery
    316 W 2nd Street
    Suite 500

    Los Angeles
    CA 90012
    Cell: (909)243-4886

    Archives

    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013

    Categories

    All
    About Rylan Klaseen & Associates
    Affordable Care Act
    Consumer Driven Health Care
    Employee Benefits
    Healthcare Costs
    Healthcare Quality
    Recruiting
    Retention
    Voluntary
    Workplace Wellness

    Stay informed! Subscribe to our mailing list

    * required

    RSS Feed

    Insurance Agents Rancho Cucamonga
    Tweets by @RylanKlaseen
Rylan Klaseen & Associates          Tailored Benefits Delivery          Serving Southern California
316 W 2nd Street, Suite 500, Los Angeles, CA 90012 Cell 909-243-4886