Under the Affordable Care Act (ACA), employers with 50 or more full time equivalent employees are required to offer affordable health coverage options to those full time employees and their dependents. Failure to comply will result in hefty penalties.
In an attempt to work around the system, some employers have determined that, instead of offering employer sponsored coverage, it would be more cost effective to provide employees with non-taxable reimbursements, which they can then use to purchase private coverage. The IRS has recently released specific guidelines in a question and answer document relating to this and has determined that such an arrangement does not comply with the ACA’s requirements.
