Employer reimburses employee for health insurance payment that employee pays. Still tax free benefit to employee?

Forum|Forum|6 years ago
December 6, 2019
20 replies
80 views

New job so employer not willing to put employee on insurance for 6 months but has agreed to reimburse him monthly until then. Employer reimburses employee for health insurance payment that employee pays. Still tax free benefit to employee?

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Best answer by TaxGuyBill

Yes, it should be tax free to the employee.

However, whether or not this arrangement is ACA compliant for the employer is another matter. It is quite possible it is not, which could subject the employer to gigantic penalties.

T

TaxGuyBillAnswer

Yes, it should be tax free to the employee.

However, whether or not this arrangement is ACA compliant for the employer is another matter. It is quite possible it is not, which could subject the employer to gigantic penalties.

itonewbie

Level 15

Excludable from taxable wages under §106(a) provided it is an accountable reimbursement and encashment is not an option.

It was also clarified that this type of arrangement is not ACA-compliant and may, therefore, be subject to substantial excise tax.

---------------------------------------------------------------------------------Still an AllStar

itonewbie

Level 15

My worry is that whether retroactive changes to a fully executed employment agreement at this point would pass muster and substituting the reimbursement for other types of payment now could be taken as form over substance.

Any change should be considered in conjunction with §4980D(c) which provides that the excise tax may not apply so long as certain conditions are met and that the correction is made within a narrow window. This must also overcome the hurdle of reasonable cause and willful neglect which could prove challenging.

---------------------------------------------------------------------------------Still an AllStar

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