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Employer-Provided Group Health Plans: Excise Tax


One of several new market reform restrictions established with the Affordable Care Act (ACA) is a penalty for certain employer-provided group health plans. Employer arrangements to reimburse or directly pay employee premiums for individual health insurance policies are now subject to a $100 per-employee per-day excise tax. This penalty applies regardless of whether the arrangement is treated by the employer as before-tax (tax-free to the employee) or after-tax (taxable to the employee), as stated in IRS Notice 2015-17.

Businesses with employer arrangements to reimburse or directly pay premiums for only one participating employee will not trigger the excessive penalty. IRS Notice 2015-17 also provides temporary relief of the excise tax for certain S Corporations through the end of the year (December 31, 2015). S Corporations that have set up employer payment arrangements to cover individual health policy premiums for more-than-2% shareholder-employees qualify for this relief.

Unfortunately, the same temporary exemption that originally applied to small businesses (less than 50 employees), expired on June 30, 2015. Small companies with employer payment arrangements as described above are now being hit with the $100 per-employee per-day penalty (potentially $36,500 annually per employee).

Along with other various ACA penalty provisions, the impact on small-businesses due to this specific market reform restriction has not gone unnoticed. Last month, the AICPA wrote top lawmakers in Congress urging them to enact legislation exempting certain types of HRAs from the group health insurance requirements of the ACA.

For more information about how your business may be affected by these changes, contact your Berntson Porter representative at 425-454-7990. We’re here to help!