We have been seeing and reading so much in the media lately about this topic – most of it driven by “benefits professionals” – that we thought it would be a good idea to write a quick blog to help everyone understand the likelihood of what will – and will not – be acceptable practice by the federal government.
It stands to reason that with the advent of the widespread availability of individual coverage in all States beginning in 2014, some employers may consider whether they should help employees pay for individual health insurance policies rather than continuing to offer an employer-sponsored group health plan.
What these employers may not realize is that on Sept. 13, 2013, the IRS issued Notice 2013-54 addressing health care reform and how it applies to health reimbursement arrangements (HRAs) and other cafeteria plans, which is effective for plan years beginning on or after Jan. 1, 2014. It is clear from this notice that the government is not going to allow beneficial tax treatment for funds used in this manner.
Effective for 2014, if employers want to help employees pay their individual policy premiums, they certainly may BUT must do so on an after-tax basis. Of course, employers may continue to provide group health coverage for their employees on a tax-free basis as they always have.
Seek informed and solid advice only from those qualified to do so. We realize that this may not always be readily apparent and urge you to ask for, and expect, the highest level of engagement in health care reform from your agent advisor and/or tax professional.
For more information you can contact the VAST team at 906.228.7500 or email Pam Stewart firstname.lastname@example.org.