A ruling by the Internal Revenue Service threatens to upend various employer-sponsored health plans and ultimately cost employees more for coverage — coverage they often won’t be using. The IRS ruling back in September negates an option that many employers with more than 50 employees were considering: canceling their plans and just reimbursing their employees with funds to go buy their own coverage on the ObamaCare exchanges.
This option, according to the IRS, would cost employers $100 per day for each employee as penalties for exercising what heretofore was not only a reasonable option but an increasingly popular one. The New York Times quoted a tax attorney who clarified that “an employee cannot [any longer] use tax-free contributions from [his] employer to purchase an insurance policy sold in the individual health insurance market, inside or outside an exchange.”
But, according to the attorney, Christopher Condeluci, a former advisor to the Senate Finance Committee, the company is free to give additional financial assistance to its employees by paying them more, but that increase would be taxable. Bottom line: Employees get to pay more for plans containing mandated benefits (such as mammograms) that they may not need or could never use in the first place.
The Times also quoted expert Andrew Biebl, a tax partner at a large Midwestern accounting firm, who said:
For decades employers have been assisting employees by reimbursing them for health insurance premiums and out-of-pocket costs.
The new federal ruling eliminates many of these arrangements by imposing an unusually punitive penalty.