Welfare Benefit Plan ERISA News
December 2014

 
If It Sounds Too Good to Be True
... It's Probably Not True!
"Much like locusts, vendors appear every few years claiming they can save employers huge amounts of cash by implementing a Section 105 plan. In the past, these were "double-dipping" arrangements that were sold as allowing tax-free reimbursement of employees' pre-tax payments for health coverage. Needless to say, the IRS condemned these arrangements.
The Marketplaces and premium tax credits have inspired vendors to offer a new variation on the Section 105 plan. Employees obtain individual coverage, perhaps from the Marketplace and perhaps with a premium tax credit, they then present their premium receipts to the employer and are reimbursed on a tax-free basis for the premium. The vendors apparently assure the employer that the reimbursement is not a group health plan that must comply with the health reform law mandates because the employer has no role in choosing the employees' coverage.
In the new FAQs, the agencies [the Departments of Labor, Health and Human Services, and Treasury] explained that the premium reimbursement itself is a group health plan, so the employer's lack of involvement with the employee's choice of individual health coverage is irrelevant. The agencies concluded that the absence of an unfettered right to receive the reimbursement amount in cash results in the reimbursement program being a group health plan. Like the EPPs [Employer Payment Plans] described above, therefore, the arrangement is subject to, but cannot comply with, the dollar limits and preventive care benefit mandates. In addition, the reimbursement program qualifies as minimum essential coverage, so an employee participating in it could not qualify for premium assistance with respect to Marketplace coverage."
The Feds have said it one more time: individual insurance premiums cannot be paid for or reimbursed by the employer. "For employers that wish to support employees' purchase of individual coverage, it appears that the only option is providing additional taxable pay that is available regardless of whether the employee obtains coverage. In addition, the payment may not be made on a selective basis to those having adverse health status factors." Read the full White Paper by Elizabeth Vollmar, J.D., Director, Compliance Services, Locton Companies.
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© 2017 ERISAPros, LLC, All rights reserved. Information on ERISAPros' website, its newsletter, “News & Views,” and its blog, “ERISA Wonk,” is published as a general informational source. Information and articles are general in nature and are not intended to constitute legal or tax advice in any particular matter. Blog posts and comments reflect the personal views of their respective authors - not those of ERISAPros. Transmission of this information does not create an attorney-client relationship. ERISAPros, LLC is not a law firm and is not giving legal or tax advice. It does not warrant and is not responsible for errors or omissions in the content on its website or in its newsletters. ERISA is a complicated and confusing law. Summary Plan Descriptions (SPDs), Wrap Plan Documents, and Form 5500s require review and updating by qualified ERISA compliance professionals.

 

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