ObamaCare Loophole?! IRS Puts Stop to Employers Dumping Workers into…

The Obama administration is still working hard on getting the balance right on Obamacare. In what could be a possible loophole for employers looking to put some tax-free dollars to work, the Internal Revenue Service (IRS), tweaked their rules, and now prohibit employers from giving workers tax-free money for them to buy their own insurance plan, such as Obamacare, in lieu of them providing health insurance for their employees.

Under IRS Notice 2013-54, posted in the IRS’s “Questions & Answers” portion of their site, “such arrangements are described as employer payment plans. An employer payment plan, as the term is used in this notice, generally does not include an arrangement under which an employee may have an after-tax amount applied toward health coverage or take that amount in cash compensation.  As explained in Notice 2013-54, these employer payment plans are considered to be group health plans subject to the market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing.”

Employers who choose to look the other way, and continue with business as usual, are in for quite a shock when the IRS comes calling, a $100 a day, per employee shock. IRS Notice 2013-54 further states, “Consequently, such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code.

So what do business owners and companies need to know?

•    If an employer has less than 50 workers, then there is no penalty under the health law for not offering health insurance to employees or for dropping health coverage altogether.

•    However, businesses and companies with more than 50 employees, that don’t offer any sort of health insurance, may be liable for fines of $2,000 – $3,000 per worker, starting next year.

o    This is in addition to the $100 a day fine, per worker if an employer gives their workers, tax-free money to buy their own insurance.

•    No matter how many workers you employ, you cannot, under any circumstances give them tax-free money for them to purchase their own affordable health insurance plan. If this is what you’ve grown accustomed to, those days are over!

So, what do you think of the new rules set by the IRS? Sound-off in the comments section below.