Health Care Reform Update: Employer Penalties for “Employer Payment Plans”
The latest Health Care Reform Q&A from the IRS outlines penalties for employers who pay for employees’ individual health insurance coverage through what’s called an “employer payment plan.” These plans were defined in IRS Notice 2013-54 (PDF) as employer-based reimbursement plans that use pre-tax dollars to pay for premiums.
The main thing to know is this: because these payment plans don't meet the federal market reform requirements, employers will be charged an excise tax of $100 per day per enrolled employee. These penalties are one way the federal regulations are being used to discourage employers from sending their employees to the individual exchange.
Funding arrangements that reimburse employees after-tax or allow them to take funds as cash are not considered employer payment plans.