First there was no prob­lem.  Then the ACA was passed.  Still no prob­lem.  Then some­one real­ized that employ­ers and employ­ees may be tak­ing advan­tage of exist­ing rules that allowed a tax exemp­tion for the pay­ment or receipt of indi­vid­ual health insur­ance.  So on Sep­tem­ber 13, 2013 the IRS and DOL issued “guid­ance” (inter­pre­ta­tion) about what was going to be allowed…and what was not.  The new rules basi­cal­ly said that an HRA could not be used to pay for indi­vid­ual health insur­ance pre­mi­ums, Flex­i­ble Spend­ing Accounts could not be used for the same rea­son, and any pre­mi­um paid direct­ly by an employ­er for an employ­ee would be a tax­able event.  Not so good…but they weren’t done.  Now the Depart­ment of Labor has gone fur­ther (and why?) and issued two new FAQs in this regard…
Under the newest new rules, even where an employ­er offers employ­ees the cash to reim­burse for the pur­chase of an indi­vid­ual mar­ket pol­i­cy, it is now in vio­la­tion of ACA mar­ket reforms.  In oth­er words, it is not only a tax­able event, but is con­sid­ered a part of a plan and thus must meet require­ments under ERISA and thus Pub­lic Health Ser­vice laws…which means that vio­la­tion of the law now also means the pay­ment of an excise tax.

In a fur­ther note, the DOL has made it clear that an employ­er who offers an employ­ee with high risk claims the choice between enroll­ment in its stan­dard plan and cash is in vio­la­tion of the Afford­able Care Act, HIPAA, and ERISA…a triple threat.  It con­sti­tutes dis­crim­i­na­tion (no kid­ding)  “In the Department’s view, cash or cov­er­age arrange­ments offered only to employ­ees with a high claims risk are not per­mis­si­ble benign dis­crim­i­na­tion”  The dis­crim­i­na­tion rule applies whether the cash pay­ment is pre or post tax, the employ­er is involved in the selec­tion or pur­chase of a prod­uct or not, or even if the employ­ee obtains any indi­vid­ual health insurance.