Health Reimbursement Arranagement

[MarkM]

I am trying to get some information on employer health reimbursement plans for a small S-Corp.

 

The S-Corp has one employee and that employee needs medical coverage (the owner of the S-Corp does not need health coverage). We are looking at two scenarios:

 

1) Employer payment plan - Basically the employee gets her own individual coverage and the corp reimburses her. This setup used to be deductible by the corp and non-taxable to the employee. But it is now my understanding that the amount must be taxed as wages to the employee and the employee can use those funds however he or she sees fit. It is also my understanding that this applies to ALL employers regardless of size, # of employees, form of ownership, etc. Is that correct?

 

2) Health Reimbursement Arrangement (HRA) - Employer sets funds aside to reimburse employees for medical expenses and is cannot be funded via salary reductions or a 125 plan. The rub on these under the ACA is that these arrangements will not meet the annual dollar limits or the preventative service requirements under the ACA.

 

So my question is this: Does the HRA restriction apply to ALL employers or only those subject to the ACA (over 50 employees)?

 

Thanks.

[Jack from Ohio]

All employees regardless of company size.

 

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