1. 5527 POINTS
    Marlin McKelvy
    President, Consumer Directed Benefit Solutions, Memphis, Tennessee
    This has been a controversial area for several years as I presume you are asking about how to reimburse employees for the cost of individual health insurance.  There had been a lot of activity which was embraced by a number of employers in past years to reimburse their employees for the cost of individual health insurance through the use of a Health Reimbursement Account (HRA) and making it a deductible business expense no different than an employer contribution to a group health insurance plan.

    In early 2013 the DOL and IRS issued statements that virtually every benefits professional recognized as being definitive in stating that this practice was not allowed.

    If an employer does not want to offer a group health insurance plan but wants to assist their employees in purchasing individual health insurance then the only practical way to do this appears to be by grossing up their pay by some amount.  Of course, this is no different than giving the employees a pay raise from a tax perspective because that is exactly what you are doing.  Also, this well intentioned action by the employer may have the unintended consequence of reducing or eliminating the amount of the Advanced Premium Tax subsidy that the employees might qualify for in the government health insurance marketplaces. 

    But it is now clear than any employer support for employees purchasing their own health insurance can only be done on a post-tax basis.  Depending upon a given group's circumstances this may be a viable option to consider and is being done by some employers.

    This is an approach that needs to be handled with care and you should seek guidance regarding the applicability of this approach to your company's specific situation.  If you would like to learn more please feel free to contact me.
    Answered on May 8, 2014
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