A recent Chief Counsel Advice memo explains when an employer can reimburse employees on a tax free basis when the coverage is provided by the spouse’s employer. It follows common sense – you can only have one tax free event. Thus, if a spouse has coverage with another employer and pays the premium on an after tax basis, then the employee’s employer may reimburse the employee for the spouse’s coverage on a tax free basis. There was some doubt about whether a reimbursement was possible at all, but this allows it – ONLY where there is a taxable event on one side, erased by the tax free event on the other. This is also meant to apply to situations where a Health Reimbursement Account pays for premiums.
Clarification of reimbursement for spouse’s medical insurance
May 20, 2016