IRS Notice 2015-17 provides limited transition relief from the assessment of excise taxes for small employers who reimburse, or directly pay, the premium for an employee’s individual health insurance policy.
An “employer payment plan” is an arrangement under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy, or an arrangement under which the employer uses its funds to directly pay the premium for an individual health insurance policy covering the employee. Pursuant to prior agency guidance, employer payment plans are generally considered group health plans that do not comply with certain market reforms of the Affordable Care Act (ACA), and therefore may be subject to a $100 per day excise tax per applicable employee under the federal tax code.
Note: An employer payment plan that has fewer than two participants who are current employees (for example, a retiree-only plan) on the first day of the plan year is not subject to the ACA market reforms.
The transition relief applies to employer healthcare arrangements that constitute employer payment plans if the plan is sponsored by a small employer — generally an employer with fewer than 50 full-time employees, including full-time equivalents, as determined in accordance with the “pay or play” rules.