As most of us have figured out, health care in the United States is undergoing very significant change. It has been fairly common for employers to reimburse individuals for health insurance purchased through COBRA or other sources. It is time for a full stop, or at least a good hard look at the practice.
IRS Notice 2015-17 prohibits employer reimbursement of individual health insurance, whether this reimbursement is on a pre- or post-tax basis. The consequences are pretty dire: a $100 per day penalty per infraction so if an employer pays for a year for individual coverage for two employees, those payments could give rise to a $73,000 non-deductible excise tax. Under FAQs published by the IRS, DOL and HHS, these reimbursements are considered group-sponsored health plans that do not comply with ACA.
