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Reimbursing for Health Insurance

Nina009Prior to the final Affordable Care Act (ACA) regulations, it wasn’t uncommon for employers to reimburse employees for health insurance if the employee was insured elsewhere.  Employers treated it as a benefit if they did not offer health insurance or it was used to encourage employees to find insurance elsewhere.

The final ACA regulations have clarified this is no longer an option for employers.  The only allowable pre-tax reimbursement is through the employer’s sponsored group health plans.  If you do not offer health insurance, you cannot reimburse employees pre-tax for health insurance.

Many employers who previously reimbursed for this benefit are scrambling to find ideas to compensate employees for this lost benefit.  The good news is employers can continue to pay taxable bonuses to employees.  As an employer, you can gross up the previous benefit and make your employee whole through a bonus.  You cannot require this bonus be contingent on the employee having health insurance and you cannot require the employee show you proof of insurance to receive the bonus.  Call the Ketel Thorstenson ACA Team with any questions.

Nina Braun

Nina Braun

CPA, CFE, Partner at Ketel Thorstenson, LLP
Nina's experience in the commercial audit arena commenced in the year 2000 - she has been practicing in manufacturing, construction, retail, and various other industries ever since. Nina also has extensive experience auditing 401(k) plans.
Nina Braun

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