BASE FOLLOWUP ON PREMIUM REIMBURSEMENTS

[Lee B]

As 2015 quickly approaches, BASE® wants to make sure that all of your clients are in compliance with the Affordable Care Act's regulations regarding premium reimbursement plans.

 

On November 6, 2014, the Department of Labor clarified that not only is it prohibited to allow pre-tax reimbursement arrangements, but also post-tax reimbursements of individual health insurance premiums. This regulatory change not only alters premium reimbursement plans, but it also prohibits Partnerships and most S-Corporations from taking the Self-Employed Health Insurance Deduction on the Form 1040.

 

Many employers are unaware of the changes and are exposed to risk of the $100 per employee per day ACA penalty.

If you have clients:

• With one employee, they can utilize a Section 105 HRA as they are exempt from the provision of ACA. Call 1-888-386-9680 for more details.
•  
• With two or more employees and they are reimbursing health insurance premiums on a pre or post-tax basis, they are at risk for ACA penalties.

 

[jklcpa]

 

 regarding premium reimbursement plans...

 

On November 6, 2014, the Department of Labor clarified that not only is it prohibited to allow pre-tax reimbursement arrangements, but also post-tax reimbursements of individual health insurance premiums. This regulatory change not only alters premium reimbursement plans, but it also prohibits Partnerships and most S-Corporations from taking the Self-Employed Health Insurance Deduction on the Form 1040.

 

 

I went to the DOL site to look and didn't come up with anything easily.  Do you have any additional reference or link that you could provide where it addresses this about the partnerships and S Corps?  Thanks

[Lion EA]

DOL Technical Release 2013-03 and IRS Notice 2013-54 and DOL 6 November 2014 guidance.

[Lee B]

IN DEPTH ARTICLE FROM IOWA STATE UNIVERSITY:

 

Updated! Health Reimbursement Plans Not Compliant with ACA Could Mean Exorbitant Penalties

Kristine A. Tidgren

November 10, 2014

This article discusses the significant impact the Affordable Care Act has had on employer healthcare reimbursement options, including the significant penalties faced by plans violating the ACA's market reforms. This article has been updated to explain a new set of crucial Questions and Answers that were posted by the Department of Labor on November 6, 2014.

 

Overview

As we settle into the second half of 2014, it is imperative that farmers, ranchers, and other small employers evaluate their health reimbursement plans to ensure that they comply with Affordable Care Act (ACA) requirements. As of January 1, 2014, a number of long-time options became illegal under the ACA. Lest employers are tempted to ignore this issue, they should know that offering noncompliant plans subjects them to a possible excise tax of $100 per day per employee per violation. ACA violations are no small matter.

ACA Market Reforms

Beginning January 1, 2014, the ACA implemented a number of “market reforms,” which dictate the types of coverage any valid group health plan must offer. Included in these reforms are the requirements that a group health plan impose “no annual dollar limits” on essential health benefits and that that the plan provide preventive health services (such as colonoscopies and mammograms) without any out-of-pocket costs.

Noncompliant Plans Face Big Penalties

What surprises many is that these requirements apply not only to traditional group health plans but also to employer health reimbursement plans. This is because under the Internal Revenue Code, employer reimbursement plans are considered to be “group health plans.” Consequently, if an employer reimburses its employees tax free for the cost of acquiring health insurance on the individual market, the employer has established a “group health plan” subject to ACA market reforms. Because such a plan imposes an annual dollar limit up to the cost of the individual market coverage purchased, it violates the “no annual dollar limits” requirement of the ACA. Similarly, because standalone employer payment plans do not provide preventive services without cost-sharing in all instances, they violate the preventive services requirements of the ACA. In IRS Notice 2013-54, issued last fall, the Treasury Department and the Department of Labor made clear that such plans are no longer allowed. This prohibition applies to a number of long-used standalone health care reimbursement plans that are not integrated with an ACA-compliant group health care plan. Although some exceptions apply, the ACA has made the following types of reimbursement plans illegal (subjecting their sponsors to the possible $100/day/employee/violation penalty tax):

• Standalone §105 medical reimbursement plans (including Health Reimbursement Arrangements (HRAs))
• Employer payment of individual health insurance premiums on a pre-tax basis
• Standalone §125 salary-reduction plans for employee health insurance premiums

Exceptions to ACA Requirements

There are some exceptions to these ACA reforms. Specific exemptions from the ACA requirements include:

• Plans with fewer than two participants who are current employees
• Plans that provide only ancillary benefits, including:
  • Accident-only coverage
  • Disability income
  • Certain limited-scope dental and vision benefits
  • Certain long-term care benefits
  • Benefits under an employee assistance program, if the program does not provide significant benefits in the nature of medical care or treatment 

Because of the above exceptions, HRAs reimbursing only dental or vision expenses, for example, are still allowed. Furthermore, a sole proprietor with a single employee can continue to offer an HRA to that employee without also providing a group health care plan. A sole proprietor farmer, for example, can employ his wife and have the family medical expenses reimbursed through her HRA. Add another employee, however, and the plan is noncompliant. 

 

The ACA does allow employers to offer HRAs if they are integrated with an employer-provided group plan offering ACA-compliant coverage. The integration rules are complex, but to offer an integrated plan, the employer must offer group health care coverage to all employees eligible for the HRA, and the employees must be covered under a compliant group health care plan (although that plan may be offered through another provider (such as the employee’s spouse)). An HRA can never be integrated with a health care plan purchased through the online Marketplace or on the individual market.

 

Similar to integrated HRAs, Healthcare Flexible Spending Accounts offered through a §125 cafeteria plan are acceptable under the ACA if (1) the employer also offers other group health insurance coverage and (2) the maximum benefit payable to the employee does not exceed the greater of two times the employee’s salary reduction election for the year, or $500 plus the amount of the participant's salary reduction election.

Compliant Plans

Small employers (fewer than 50 full-time employees) should remember that they are not required to provide health insurance to their employees under the ACA. If they do, however, the plan must be ACA-compliant. The following types of plans are still allowed under the ACA: 

• ACA-approved group health plans
• ACA-approved high-deductible health plan (HDHP) (great option when coupled with a Health Savings Account)

Note: A qualifying HDHP is a healthcare plan that satisfies certain requirements with respect to minimum deductibles and maximum out-of-pocket expenses. An HDHP would cover, on average, at least 60% of the cost of all benefits.

• Group health plans acquired through the SHOP exchange (This SHOP plan may then allow for §125 salary- reduction arrangements and may also qualify the employer for the small employer health insurance premium credit.)
•  
• Employer payment plans where an employee's premiums are paid with salary deductions on an after tax basis (the employer is just performing the administrative function of forwarding the employee’s premium to the insurer at the employee's request).

Health Savings Accounts

One option that remains attractive in light of the ACA is the health savings account (HSA). Individuals and their employers can contribute pretax dollars to an HSA, in which the contributed amounts can grow tax free. As long as the HSA funds are used to pay qualified out-of-pocket medical expenses, they are never subject to federal income tax. It is not necessary for a person to have earned income to contribute to an HSA. For more detailed information regarding HSAs, see this article.

 

To qualify for an HSA, an individual must:

 

1.         Be covered under an HDHP,

2.         Have no disqualifying health coverage,

3.         Not be enrolled in Medicare,

4.         Not have received Veterans Administration (VA) medical benefits within the prior three months, and

5.         Not be eligible to be claimed as a dependent on another person’s tax return.

 

In 2014, the contribution limits to an HSA are $3,300 for an individual and $6,550 for a family.

Employer Alternatives and New Department of Labor Guidance

On November 6, 2014, the Department of Labor issued new Q & A's restricting employers' choices beyond the restrictions made evident by Notice 2013-54. According to the Q & A, an employer cannot give an employee cash to purchase insurance coverage on the individual market, even if the employer treats the cash as wages, withholding income tax and FICA/FUTA taxes. Essentially, the Department has directed employers to stay out of the health insurance arena completely unless purchasing group health plans for their employees. Notice 2013-54 had specified that employers could forward post-tax payments to private health insurance companies at the request of their employees for the purchase of the employees' individual health insurance. The Notice referred to this as a "payroll practice" that was still acceptable. The most recent Q & A (reprinted here) clarifies that this "payroll practice" exception is very narrow.

Q1: My employer offers employees cash to reimburse the purchase of an individual market policy. Does this arrangement comply with the market reforms?

No. If the employer uses an arrangement that provides cash reimbursement for the purchase of an individual market policy, the employer's payment arrangement is part of a plan, fund, or other arrangement established or maintained for the purpose of providing medical care to employees, without regard to whether the employer treats the money as pre-tax or post-tax to the employee. Therefore, the arrangement is group health plan coverage within the meaning of Code section 9832(a), Employee Retirement Income Security Act (ERISA) section 733(a) and PHS Act section 2791(a), and is subject to the market reform provisions of the Affordable Care Act applicable to group health plans. Such employer health care arrangements cannot be integrated with individual market policies to satisfy the market reforms and, therefore, will violate PHS Act sections 2711 and 2713, among other provisions, which can trigger penalties such as excise taxes under section 4980D of the Code. Under the Departments' prior published guidance, the cash arrangement fails to comply with the market reforms because the cash payment cannot be integrated with an individual market policy.⁽⁶⁾

The Q & A also shuts down certain plans that have been marketed by several benefits companies as an acceptable alternative in the wake of the ACA. The Q&A states:

Q3: A vendor markets a product to employers claiming that employers can cancel their group policies, set up a Code section 105 reimbursement plan that works with health insurance brokers or agents to help employees select individual insurance policies, and allow eligible employees to access the premium tax credits for Marketplace coverage. Is this permissible?

No. The Departments have been informed that some vendors are marketing such products. However, these arrangements are problematic for several reasons. First, the arrangements described in this Q3 are themselves group health plans and, therefore, employees participating in such arrangements are ineligible for premium tax credits (or cost-sharing reductions) for Marketplace coverage. The mere fact that the employer does not get involved with an employee's individual selection or purchase of an individual health insurance policy does not prevent the arrangement from being a group health plan. DOL guidance indicates that the existence of a group health plan is based on many facts and circumstances, including the employer's involvement in the overall scheme and the absence of an unfettered right by the employee to receive the employer contributions in cash.

Second, as explained in DOL Technical Release 2013-03, IRS Notice 2013-54, and the two IRS FAQs addressing employer health care arrangements referenced earlier, such arrangements are subject to the market reform provisions of the Affordable Care Act, including the PHS Act section 2711 prohibition on annual limits and the PHS Act 2713 requirement to provide certain preventive services without cost sharing. Such employer health care arrangements cannot be integrated with individual market policies to satisfy the market reforms and, therefore, will violate PHS Act sections 2711 and 2713, among other provisions, which can trigger penalties such as excise taxes under section 4980D of the Code.

It appears from these Q&As that if an employer provides or has provided post-tax cash to an employee with the requirement that the money be used for health care coverage, it will be considered a group health plan subject to ACA reform requirements. The payroll practices exception appears to apply only to the scenario where the employee has requested the money be forward to his or her insurance issuer.

This set of Q&As is problematic for employers who did not modify their non-compliant plans prior to January 1, 2014. The prevailing wisdom has been that employers could gross up wages, pay taxes, and remedy the problem retroactively. This new guidance casts doubt on that "solution."

Steps to Compliance

So now that it's November, what do employers do about existing non-compliant plans?  At $100 per employee per day, few will enthusiastically pay the penalty.

 

Taxpayers are supposed to self-report any penalties on Part II of Form 8928.  The form instructions say:

 

No tax is due for any failure... if it is established to the satisfaction of the Secretary of the Treasury that no one liable for the tax knew, or exercising reasonable diligence would have known, that the failure occurred. Additionally, no tax is due if the failure... was due to reasonable cause and not due to willful neglect and the failure was corrected during the 30-day period beginning on the first date anyone liable for the tax knew , or exercising reasonable diligence would have known, that the failure existed.

 

Practitioners whose employer-clients have ineligible plans should document their efforts to notify their clients of the problems. Once the practitioner tells the client, the 30-day period begins to run. Practitioners should have a recommended solution for the client, probably including immediate termination of any non-qualified plans and notice to affected employees. And remember that any corrective plan must be completed in 30 days.

 

Should the employer then report the violation on Form 8928? The form offers an option of entering "0" for the tax due if taxpayers believe they qualify for exemption. Failure to report likely makes it more difficult to claim the exemption if the IRS discovers the problem on its own. It's likely the IRS will be generous in allowing exemptions in this first year of the problem. Unfortunately, it's never good to have to count on IRS generosity. We will continue to keep you posted regarding any new guidance in this area.

Impact on Employees           

Small employers weighing their options for 2014 and beyond should also consider the impact their health care offerings will have on their employees. Employees without access to employer-provided minimum essential coverage that is affordable can now purchase health insurance on the federal or state health care exchange. For those with incomes falling between 100% and 400% of poverty-level, they will be entitled to a premium tax credit (PTC) to offset the cost of their premiums. These PTCs can make the cost of health insurance very affordable. If an employer offers health coverage to its employees (including an excepted standalone HRA to a single employee), that offering will make their employees ineligible to purchase insurance on the health care exchanges and will prevent them from receiving PTCs[1].

 

If the employer decides instead to forego health benefits altogether and increase wages to account for the lost benefit, the employee will pay increased FICA and income taxes and will likely receive a reduced PTC on the health care exchange because of the higher wage. In other words, there is no way for such employers to put their employees in the same position as they were before the ACA without increasing their costs significantly.

Conclusion

Given the steep penalties accompanying ACA violations, small employers must ensure that their 2014 reimbursement plans line up with ACA requirements. Those with questions should seek professional guidance immediately, while there’s still time to make adjustments

[Lee B]

ANOTHER ARTICLE FROM IOWA STATE UNIVERSITY:

 

 

 

Updated: ACA’s Thorny Impact On More-Than-2% S Corporation Shareholders

Kristy S. Maitre and Kristine A. Tidgren

 

November 10, 2014

 

This article (updated November 6, 2014) discusses the Affordable Care Act's impact on more-than-two percent shareholders of S Corporations. Discussed is the ACA's impact on FICA and the IRC section 162(l)(5) self-employment health insurance premium deduction.

 

This article also addresses the potential wide-ranging impact of new DOL Q&As.

Overview

The issue of reimbursing health care premiums for more-than-2% S corporation shareholders in the wake of the ACA was an issue we addressed briefly during the case studies at our August 22, 2014, Affordable Care Act (ACA) Seminar.  Because this issue has sparked a number of questions, we wanted to follow-up with additional information. was an issue we addressed briefly during the case studies at our August 22, 2014, Affordable Care Act (ACA) Seminar.  Because this issue has sparked a number of questions, we wanted to follow-up with additional information.

 

Note:  This area of the law is not well-defined and the IRS has not specifically addressed the issue.  Instead, practitioners have been left to sort out the ACA fallout for these more-than-2% shareholders by reading and applying the relevant statutes and revenue rulings in light of known ACA requirements.  The American Institute of Certified Public Accountants has requested formal guidance on the issue from the IRS.  Until formal guidance is issued, we recommend advising your clients to err on the side of caution.

 

  It is also important to point out that the background law has not changed:

Background Law

To thoroughly analyze this complex issue, a review of the applicable background law is necessary:

Taxation of Fringe Benefits Generally

• Employer-provided fringe benefits are taxable and must be included in the recipient’s pay unless the law specifically excludes them.
•  
• Taxable fringe benefits are generally included in an employee’s wages in the year the benefit is received pursuant to IRC §451(a). Taxable fringe benefits are reported as W-2 wages for an employee, or as a Form 1099-MISC payment for an independent contractor.

Exclusion from Income for Employer-Provided Health Benefits Generally

• Under IRC §105, amounts received as reimbursements by employees under an accident or medical insurance plan, and under §106, employer-provided health benefits (including reimbursement and insurance) are generally excluded from the income of employees.

Included as “Wages” for More-Than-2% Shareholder-Employees of S Corporation

• Where health insurance premiums are paid by an S corporation, however, IRC §1372(a) requires that the S corporation be treated as a partnership and that any “more-than-2% shareholder-employees” be treated as partners..
•  
• Thus, health insurance premiums paid by the S corporation would be deductible by the S corporation as compensation to the more-than-2% shareholder-employee and included in the more-than-2% shareholder's Form W-2 as wages.

I.R.C. §162(l) Above-the-Line Deduction

• IRC §162(l)(5) allows the more-than-2% shareholders the same above-the-line deduction for health insurance costs as self-employed individuals (even though 2% shareholder’s wages are treated as earned income), assuming that all of the other provisions of I.R.C. §162(l) are met. Under I.R.C. §162(l)(2)(B ), an above-the-line deduction is not allowed for any calendar month for which the shareholder is eligible to participate in any subsidized health plan maintained by any other employer of the shareholder or the spouse of the shareholder.
•  
• For the requirements of I.R.C. §162(l)(5) to be met, I.R.C. §1372 (partnership taxation rules detailed above) must apply. In order for I.R.C. §1372 to apply, the S corporation must “establish” a “plan providing medical care coverage.” If the shareholder purchases his or her own health insurance with his or her own funds, a plan has not been “established” by the S corporation, and an I.R.C. §162(l) deduction would not be allowed.
•  
• In late 2007, the IRS issued Notice 2008-1, which sets forth the criteria for more-than-2% shareholder-employees to qualify for the I.R.C. §162(l)(5) deduction. The Notice provides that a “plan providing medical care coverage” is “established” by the S corporation (and thus allows the shareholder to take the §162(l)(5) deduction) if:
  • The S corporation makes the premium payments for the accident and health insurance policy covering the 2-percent shareholder employee (and his or her spouse or dependents, if applicable) in the current taxable year; or
  •  
  • The 2-percent shareholder makes the premium payments and furnishes proof of premium payment to the S corporation and then the S corporation reimburses the 2-percent shareholder-employee for the premium payments in the current taxable year.

Note: If the accident and health insurance premiums are not paid directly by the S corporation or reimbursed to the employee by the S corporation and included in the 2-percent shareholder-employee’s gross income, a plan providing medical care coverage for the 2-percent shareholder-employee is not established by the S corporation and the 2-percent shareholder employee is not allowed the deduction under §162(l).

 

FICA

 

Although the health insurance premiums paid by an S corporation on behalf of its more-than-2 % shareholder-employees are included as “wages” for income tax purposes, the value of these premiums has long been excluded from “wages” for FICA purposes. IRS Announcement 92-16 clarified that accident and health payments “made under a plan to benefit employees” are exempt from FICA tax, pursuant to I.R.C. §3121(a), which states as follows:

 

(a) Wages. For purposes of this chapter, the term "wages" means all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash; except that such term shall not include—

 

(2) the amount of any payment (including any amount paid by an employer for insurance or annuities, or into a fund, to provide for any such payment) made to, or on behalf of, an employee or any of his dependents under a plan or system established by an employer which makes provision for his employees generally (or for his employees generally and their dependents) or for a class or classes of his employees (or for a class or classes of his employees and their dependents), on account of—

 

 (B ) medical or hospitalization expenses in connection with sickness or accident disability.

 

This statute thus exempts from FICA tax liability those payments “made to employees generally” “under a plan or system established by an employer” on account of “medical or hospitalization expenses…” Announcement 92-16 states, “For this exclusion to apply, the payments must be made under a plan or system for employees and their dependents generally or for a class (or classes) of employees and their dependents. Thus, whether amounts of this type are actually subject to social security or Medicare tax depends on whether in the particular case the taxpayer satisfies the requirements for the exclusion.”

ACA Impact

The above background law has not changed. What has changed is the ability of S corporations to reimburse their employees (including more-than-2% shareholder employee) for health insurance premiums used to purchase an individual health insurance policy without running afoul of ACA market reforms. As detailed in the seminar and in this article, employer premium payment plans (used to purchase insurance other than employer-provided group health care insurance) are considered group health plans that violate the market reforms of the ACA, thus subjecting their sponsors to potential fines of up to $100 per day per employee per violation.  That could amount to $36,500 per year per employee per violation.

 

Note:

 

It is important to remember that if an employer (including an S corporation) has only one participant in a group health

plan, ACA market reforms do not apply. Consequently, a single-employee S corporation may continue to reimburse a more-than-2% shareholder-employee for health insurance premiums as before. The amount is included in wages, an above-the-line deduction is allowed to the shareholder, and FICA need not be charged. If the company has more than one shareholder, but only one is reimbursed for insurance, that shareholder’s reimbursement may also be treated the same way.

 

As was discussed at the seminar, S corporations with more than one employee (and other small businesses) that have traditionally reimbursed their employees on a pre-tax basis for their individual health care premiums must now either (1) eliminate their health benefits entirely or (2) establish group health insurance coverage for their employees.

 

Note that if the S corporation chooses to offer group health insurance coverage to its employees, the taxation rules for that benefit as applied to more-than-2% shareholders have not changed. The health insurance premiums paid on behalf of more-than-2% S corporation shareholder-employees are deductible and reportable by the S corporation as wages, the payments are included in the shareholder’s wages for income tax purposes, and the benefits are not subject to Social Security or Medicare (FICA) or Unemployment (FUTA) taxes.

 

But may an S corporation reimburse its S corporation shareholders for health insurance premiums outside of a group health plan? Do the same rules preventing this reimbursement to regular employees apply to S corporation shareholders?

The answer is that we do not know. The Departments have provided no guidance on this issue. We can only set forth what is known at this point (which is ever-changing).

New Department of Labor Q & A Creates New Concern

Although they don't reference S corporations or their more-than-two percent shareholders at all (no guidance on this issue has done so), Department of Labor Q & A's released on November 6, 2014, raise concern that the act of reimbursing more-than-two-percent shareholders (outside of an employer-provided group health insurance arrangement) in the manner required under 2008-1 for a section 162(l) deduction may be viewed by the Department as establishing a group health plan subject to ACA market reforms. The Q & A at issue reads:

Q1: My employer offers employees cash to reimburse the purchase of an individual market policy. Does this arrangement comply with the market reforms?

No. If the employer uses an arrangement that provides cash reimbursement for the purchase of an individual market policy, the employer's payment arrangement is part of a plan, fund, or other arrangement established or maintained for the purpose of providing medical care to employees, without regard to whether the employer treats the money as pre-tax or post-tax to the employee. Therefore, the arrangement is group health plan coverage within the meaning of Code section 9832(a), Employee Retirement Income Security Act (ERISA) section 733(a) and PHS Act section 2791(a), and is subject to the market reform provisions of the Affordable Care Act applicable to group health plans. Such employer health care arrangements cannot be integrated with individual market policies to satisfy the market reforms and, therefore, will violate PHS Act sections 2711 and 2713, among other provisions, which can trigger penalties such as excise taxes under section 4980D of the Code. Under the Departments' prior published guidance, the cash arrangement fails to comply with the market reforms because the cash payment cannot be integrated with an individual market policy.

 

This Q & A makes clear that the Department is not basing its determination of the existence of an illegal employer payment plan on whether the reimbursement is made on a pre-tax or post-tax basis. What seems to matter to the Department is simply whether the employer is reimbursing the employee under an arrangement that could meet the definition of a "group health plan." I.R.C. §5000(B )(1) (which sets forth the applicable definition under I.R.C. §9932(a)) defines a "group health plan" as:

 

a plan (including a self-insured plan) of, or contributed to by, an employer (including a self-employed person) or employee organization to provide health care (directly or otherwise) to the employees, former employees, the employer, others associated or formerly associated with the employer in a business relationship, or their families.

 

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.

Conclusion

Please let us know if you have any follow-up questions regarding this information. It is a thorny issue that will evolve. We will keep you informed of any further communication we receive concerning the issue. As we know, it is of great importance to you and your clients as you move forward to comply with the ACA provisions. We are hopeful that IRS will issue clarifying guidance in the near future.

 

Copyright 2014 Center for Agricultural Law and Taxation. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without express written permission

[Jack from Ohio]

Ok, lets simplify...

 

No company can reimburse an employee for costs of health insurance in any pretax manner. 

 

If a company gives an employee money instead of paying for a group plan, this must simply be added as wages in boxes 1,3 & 5 of the W-2. The employee can deduct costs on Schedule A.

 

If a person is a single member corp, his "reimbursement" will only be included in box 1 of W-2 and can be deducted as self-employed health insurance above the line on 1040.

 

No money paid by the employer to the employee is lieu of providing group health insurance qualifies in any manner for meeting the employer mandate that begins Jan. 1, 2015.

 

These rules were all effective Jan. 1, 2014 and lots of 4th quarter 941 forms will need to reflect the necessary payroll changes for companies that have been asleep at the wheel.  The rules were published by IRS in 2013.  I saw them at the June 2013 IRS Nationwide Tax Forum. 

 

I would say there are a lot of preparers that have also been asleep at the wheel....