Precision Payroll of America, LLC
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August 13, 2014
PPA Press
by Precision Payroll of America, LLC

Health Insurance Contribution Taxability

Are pre-tax dollars allowed for company payments for individual health coverage?

As many of us have seen, the implications of the Affordable Care Act continue to unfold and evolve. The latest IRS notices and legal interpretations to be aware of relate to pre-tax dollars relative to health insurance premiums.
At Precision Payroll, we are always exploring new programs that benefit our clients, and strive to keep you informed of recent developments. This article is intended to make you aware of the current ambiguity in IRS regulations on this topic, and expand your knowledge and ability to make informed decisions on this critical aspect of your employee benefits program.
 
“As a result of healthcare reform, employees now have options when it comes to acquiring health insurance independent from their company group plans—especially now that pre-existing condition exclusions have been eliminated.” says Leslie Day, PPA’s Director of Human Resources Consulting. “With the multitude of individual plans available through the new Exchange/Marketplace, the motivation for an individual to look outside their company’s plan is now greater.”

When this happens, companies may wish to reimburse employees for some of the cost of these individual plans. The question at hand: Is this a pre-tax payment, or is it legally income to the employee, and therefore should be taxed?

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