On February 18, 2015, the IRS released Notice 2015-17 addressing five issues regarding employer payment plans (EPP) and providing limited transitional relief for small employers reimbursing employees for individual health insurance premiums.
Notice 2015-17 provides guidance and clarification on EPPs and the reimbursement of individual premiums. EPPs are considered to be group health plans when more than one eligible employee is entitled to reimbursement, and the Affordable Care Act (ACA) reforms apply to EPPs as group health plans.
The Five Issues Covered in Notice 2015-17:
- There is transitional relief for employers who aren’t applicable large employers (ALEs), moving the date from 2014 to June 30, 2015 so they can end the EPPs and change to group health plans compliant with ACA reforms.
- The relief is not for ALEs with 50 or more employees who still have to self-report violations on IRS Form 8928 quarterly and are still subject to the $10 per day per employee penalties.
- “S” corporation shareholders with two percent holdings can be reimbursed for their individual health insurance premiums which are treated as imputed shareholder income, as well as taking them as a 100 percent deduction from their income taxes.
- Employers can increase employee compensation to help pay for individual coverage, but the employer cannot require the additional wages to be spent on health insurance.
- TRICARE and Medicare-related supplemental premiums are permissible when the employer offers a group health plan, but not EPPs, if that health plan meets minimum value and offers more than excepted benefits.
* Reimbursement for Medicare TRICARE premiums is offered for Part A, B, D and/or TRICARE only if employees are enrolled in these plans, where EPPs limit some premium reimbursements.
Businesses still using EPPs should reach out to an advisor as soon as possible to determine the necessary steps towards compliance with the Federal requirements, as outlined in Notice 2015-17.