Back in November of 2014, the DOL issued FAQ Part 22, which directly addresses some recent efforts by employers to reimburse employees for participation in the exchange through Code Section 105, or through some type of other arrangement. The gist of the FAQs, consistent with Notice 2013-54, was that employers could not offer employees cash to reimburse the purchase of an individual market policy. This type of arrangement would fail to comply with the market reforms and would subject the employer to a penalty.

Fortunately, some additional guidance has been issued that provides some transitional relief for employers who have been using such an arrangement. IRS Notice 2015-17 still adheres to the proposition that giving employees money to pay for coverage in the individual market or on a health insurance exchange will not be considered to be an employer plan satisfying ACA’s employer mandate. But it also gives some transitional relief that allows for some avoidance of the $100 a day penalty that these arrangements would create for employers.

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