ACA payment reimbursed by employer

[grmy2h]

My understanding is, to avoid the discrimination penalties, they'd have to reimburse the expenses for every employee:

 

http://evergreensmallbusiness.com/s-corporations-health-insurance-and-obamacare/

 

http://www.calt.iastate.edu/article/updated-aca%E2%80%99s-thorny-impact-more-2-s-corporation-shareholders

 

 

So, if they are going to pay (as opposed to reimburse tax free) the health insurance of the shareholder, the amount would be in box 1 of shareholders W-2, but not boxes 3 and 5.  So, health benefits paid to, or on behalf of, shareholders still not subject to SS and MC.  Also, note that they spell "health" incorrectly.

 

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/S-Corporation-Compensation-and-Medical-Insurance-Issues

 

"Treating Medical Insurance Premiums as Wages

Heath and accident insurance premiums paid on behalf of the greater than two percent S corporation shareholder-employee are deductible and reportable by the S corporation as wages for income tax withholding purposes on the shareholder-employee’s Form W-2.

These benefits are not subject to Social Security or Medicare (FICA) or Unemployment (FUTA) taxes. The additional compensation is included in Box 1 (Wages) of the Form W-2, Wage and Tax Statement, issued to the shareholder-employee, but would not be included in Boxes 3 and 5 of Form W-2."

Thanks for the links.......In the Q & A on the Evergreen site, the author says..."... whether or not an S corp needs a group plan to get the SEHI deduction, the answer is no… you don’t need that. You should be able to do the whole Box 14 deal… Note however that I’m not sure we’ve got good guidance from IRS about how to handle the self-employed health insurance amouunts inside Box 3 and Box 5 of the W-2."

 

I had already read the Iowa State site and it seems to imply that until more guidance is given, we do not know the correct answer.. "Given the breadth of the definition, it is arguable that employer reimbursement of shareholder premiums establishes a group health plan subject to the ACA market reforms. Again, neither the DOL nor IRS has set forth guidance relating to S corporations and their reimbursements of health insurance premiums for more-than-two percent shareholders. Arguments can be made to support the continued reimbursement of premiums to S corporation more-than-two percent shareholders so that they can receive their section 162(l) deduction. Nonethess, the stakes are high. Thus, we believe that the best guidance in the wake of this Q & A is to avoid all employer reimbursements of health care premiums outside of an employer-provided group health care plan, including those to more-than-two percent shareholders, until further guidance is issued by the Departments. This latest communication has affirmed the Administration's clear policy to eliminate such benefits."

[Jack from Ohio]

Thus, we believe that the best guidance in the wake of this Q & A is to avoid all employer reimbursements of health care premiums outside of an employer-provided group health care plan, including those to more-than-two percent shareholders, until further guidance is issued by the Departments. This latest communication has affirmed the Administration's clear policy to eliminate such benefits."

Spoken by someone who is clueless.  This is the same as the following"

 

Customer at car repair shop: "When I turn on the A/C, I hear a grinding noise."

Technician at car repair shop: "Best solution is not to turn on the A/C.

 

Very simple...  Any monies paid to employees for health insurance that is not an employer sponsored plans, must be added to gross income and is subject to SS and Medicare.  Plain and simple.  It cannot be added as pretax.  The latest regs are clear.  Sole Prop, Partnership, S-Corp, C-Corp are all the same.

[RitaB]

 

 

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/S-Corporation-Compensation-and-Medical-Insurance-Issues

 

"Treating Medical Insurance Premiums as Wages

Heath and accident insurance premiums paid on behalf of the greater than two percent S corporation shareholder-employee are deductible and reportable by the S corporation as wages for income tax withholding purposes on the shareholder-employee’s Form W-2.

These benefits are not subject to Social Security or Medicare (FICA) or Unemployment (FUTA) taxes. The additional compensation is included in Box 1 (Wages) of the Form W-2, Wage and Tax Statement, issued to the shareholder-employee, but would not be included in Boxes 3 and 5 of Form W-2."

 

 

"Page Last Reviewed or Updated: 05-Sep-2014"

 

 

 

It is taxable in boxes 1, 3 & 5.  Employee can then deduct premiums on Sched A.  Employee could also purchase HDHP insurance and establish an HSA for the tax benefits. 

 

Any money paid to the employee in lieu of the company providing insurance must be included on the W-2 as taxable income.

 

This is effective starting Jan. 1, 2014.  We are 10 1/2 months into this law change.

 

 

And it's going great so far.  /s