arrowThe IRS Office of the Chief Coun­sel has been busy late­ly. This time, they weigh in on indi­vid­ual plans, which have caused some con­fu­sion since the IRS first issued its new rules Sep­tem­ber 2015. In dif­fer­ent infor­ma­tion let­ters recent­ly issued, some spe­cif­ic issues were addressed:

Let­ter 2016–0023: an employ­er may pay cash (tax­able) to an employ­ee who is opt­ing out
of the group plan offered due to hav­ing oth­er cov­er­age. The amount offered may not,
bear any rela­tion­ship to the cost of the plan being offered. There must be one flat amount
for all those who opt out, regard­less of the cost of their or the employer’s coverage

Let­ter 2016–0005: An employ­er may reim­burse the indi­vid­ual health insur­ance for their
ONLY employ­ee and not vio­late health care reform rules.

Let­ter 2016–0021: An S Cor­po­ra­tion will not be sub­ject to excis­es tax­es sole­ly as the
result of a 2% or more share­hold­er-employ­ee health care arrange­ment. This affirms
exist­ing rules which say that the S Cor­po­ra­tion must include the pay­ment made on
behalf of the share­hold­er as income to that indi­vid­ual – who may then deduct it as a
“self employed health insur­ance expense” on their per­son­al tax return

Let­ter 2016–0019: An employ­er may com­bine an arrange­ment where indi­vid­ual premiums
are reim­bursed so long as it is tied to a com­pli­ant employ­er group health plan