The 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
