Breaking Up Small Group

SamIam

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I'm about to breakup this small group. He has 37 employees but only 17 take the insurance. He wants to give them $80.00 bucks a month to get their own coverage. My question is this if he gives $80.00 doesn't he have to give to all employees he only wants to give it to employees who are getting individual coverage not to the employees who are getting coverage through their spouses. Can he do that?

Appreciate your help?
 
The correct answer to this question:

"I don't think so. However, I am not a tax advisor and just to make sure you don't have any IRS issues, I would prefer you ask your CPA for confirmation."
 
Since employers can no longer give that $80 to an employee tax free, through some sort of health benefit plan (like an HRA), it must be given to the employees in the form of a higher salary.

Since it's in the form of higher pay, they can give anyone they want a higher amount without risk of discrimination (since it's not through a tax favored health benefit plan).

I'm not a CPA, just a rational thinking person.
 
Since employers can no longer give that $80 to an employee tax free, through some sort of health benefit plan (like an HRA), it must be given to the employees in the form of a higher salary.

Since it's in the form of higher pay, they can give anyone they want a higher amount without risk of discrimination (since it's not through a tax favored health benefit plan).

I'm not a CPA, just a rational thinking person.

But why as an agent do you set yourself up for an issue? We aren't tax advisors. That's my point.
 
But why as an agent do you set yourself up for an issue? We aren't tax advisors. That's my point.

I get asked these questions all the time - tax advisor or not, you do have to be able to offer guidance that will protect them. In the case of defined contributions toward individual insurance, the IRS came out with a fairly strong statement a few months ago about this & listed some pretty severe penalties that could be imposed on the employer if they ignore the rules. So, I think even though we are not tax advisors (I always tell my clients to consult with theirs), it is our responsibility to be able to offer factual guidance so that they can make their own decisions.

As an agent I don't "set myself up" for these questions - the healthcare law did a nice job of that for me. Just my two cents . . . .
 
Actually I didn't give him any advise on the matter I was curious. He stated that's was what he is going to do. I was just thinking that didn't sound legal and I was curious.
 
Actually I didn't give him any advise on the matter I was curious. He stated that's was what he is going to do. I was just thinking that didn't sound legal and I was curious.

Well, if you're going to be the writing agent on the individual policies and have knowledge that he's non-compliant by giving a defined contribution to his employees, you may want to have documentation that you did advise that he is not allowed to do that . . . .He violates ERISA by giving an allowance to purchase insurance, and that is a "benefits" related issue - not a tax issue. Again, just my 2 cents, but I think that it's our responsibility to at least know the rules and convey those if possible.
 
Well, if you're going to be the writing agent on the individual policies and have knowledge that he's non-compliant by giving a defined contribution to his employees, you may want to have documentation that you did advise that he is not allowed to do that . . . .He violates ERISA by giving an allowance to purchase insurance, and that is a "benefits" related issue - not a tax issue. Again, just my 2 cents, but I think that it's our responsibility to at least know the rules and convey those if possible.

Knowing the tax code and advising on the tax code are two different things.
 
I'm about to breakup this small group. He has 37 employees but only 17 take the insurance. He wants to give them $80.00 bucks a month to get their own coverage. My question is this if he gives $80.00 doesn't he have to give to all employees he only wants to give it to employees who are getting individual coverage not to the employees who are getting coverage through their spouses. Can he do that?

Appreciate your help?

Sam,
Once a 37-person small group is disbanded, there are no participation rules to follow. The employer just gives every employees who "say" they want to buy a health plan an $80 per month raise in their pay. He can't tell them what to do with the $80, or even force these employees to prove that they bought health insurance with it.

One day, employers with less than 50 Full-Timers will be required to offer health insurance. I don't know when that day of reckoning is scheduled to arrive however.
-ac

p.s. Consider this my official reply to your P.Msg, Sam.
 
Sam,


One day, employers with less than 50 Full-Timers will be required to offer health insurance. I don't know when that day of reckoning is scheduled to arrive however.
-ac

Huh? I thought everything in ACA referring to group mandates are 51+

Or you're thinking that's where we are headed?
 
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