IRS’ Position on Employer Payment Plans

The Internal Revenue Service (IRS) has reaffirmed its position on “employer payment plans,” or arrangements in which an employer reimburses its employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace). 

The IRS considers these arrangements to be group health plans, which are subject to Patient Protection and Affordable Care Act (PPACA) provisions, including the prohibition on annual limits and the requirement to provide certain types of preventive care benefits without cost-sharing. These arrangements cannot be combined with individual health insurance policies to comply with PPACA.

Employers found in violation of this IRS ruling could face penalties up to $100 a day per employee.

In addition, the IRS requires that any Health Reimbursement Arrangements (HRA) be paired or “integrated” with a group health plan that is compliant with PPACA.


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