>2% Shareholder, qualify for Subsidy

[TaxGuyBill]

I have a question, most of my payroll clients have less than 50 employees... really less than 10.

Would it be considered discrimination that the shareholders are reimbursed for health insurance but none of the employees are offered a plan?
What if only one employee gets health insurance but others do not?

I really do not know how the IRS/DHS is going to track or even be able to find out who is liable for the various penalties.

To me that seems like an extreme case of discrimination.

As far as tracking for the penalties, I agree, it's a mess. It probably will be a few years until everything is sorted out.

[TaxGuyBill]

I just posted this on one of the other threads about the penalty, and how I think it does and does not apply. However, it doesn't answer the question about the corporation reimbursing the insurance to a 100% shareholder, and if it is considered "employer" insurance or not (I THINK it is though).


This is how I read the law:

The $100/day penalty is for everyone that offers a “group health plan” that does not meet ACA standards. By dictionary definition, “group” means more than one person/employee.

A small employer (from 2-50 employees, see §4980D(d)(2) and link below) is NOT required to have a "group health plan" (defined at §5000(b)(1), see link below).

If the small employer has a group health plan through a "health insurance issuer" (defined at §9832(b)(2), see link below), the employer is NOT subject to the $100/day penalty (§4980D(d), see link below).

http://www.law.cornell.edu/uscode/text/26/4980D#d_2

http://www.law.cornell.edu/uscode/text/26/5000#b_1

http://www.law.cornell.edu/uscode/text/26/9832#b_2

http://www.law.cornell.edu/uscode/text/26/4980D#d

It does NOT say the small employer is not subject to the penalty if the employer offers a "group health plan" that is NOT offered through a "health insurance issuer". To me, that means the employer IS subject to the penalty if it offers it's own "health plan" (such as reimbursing premiums).

Again, the $100/day penalty is for offering a “group health plan” (at least 2 employees) that does not comply with ACA standards.

http://www.law.cornell.edu/uscode/text/26/4980D#a

[NotEasy]

I have a dumb question. As far as I understand, the above discussion only applies to employers who have more than 50 employees. For employers with less than 50 employees, the new rules just do not apply to them in any way and therefore they do not have to worry about the penalty at all. Please correct me if I am wrong.

[geekgirldany]

I have a question, most of my payroll clients have less than 50 employees... really less than 10.

Would it be considered discrimination that the shareholders are reimbursed for health insurance but none of the employees are offered a plan?
What if only one employee gets health insurance but others do not?

I really do not know how the IRS/DHS is going to track or even be able to find out who is liable for the various penalties.

[DaveinTexas]

Busted!

Dave, I just noticed that you posted this in Tax Almanac as well. If you are not already following it, there is another great discussion related to this.

http://www.taxalmanac.org/index.php/...ement_Post-ACA

I just had to, the board has been down for like a month. Plus I knew Chris couldn't resist to answer my question and he usually provides a cite; now I am more confused than ever. I will check out the discussion, thank you for the link.

[TaxGuyBill]

Dave, I just noticed that you posted this in Tax Almanac as well. If you are not already following it, there is another great discussion related to this.

http://www.taxalmanac.org/index.php/Discussion:Health_Insurance_Reimbursement_Post-ACA

[TaxGuyBill]

If the Company reimburses the employee in 2014 for the cost of his/her insurance now purchased on the exchange, don't we have to be concerned with the ACA $100 penalty per employee per day that could be assessed to the employer? In other words, a potential $36,500 per year penalty?

Good point.


The more I think about, the more I think it is EMPLOYER insurance. The fact that no Social Security and Medicare tax is paid for this amount confirms that it is a 'fringe benefit', which means it's employer insurance. If that is the case, the Premium Assistance Tax Credit would not apply.


If it IS employer insurance, the $100/day penalty would NOT apply. That penalty is for an employer who provides insurance that does NOT meet ACA standards, such as an HRA or FSA that is NOT in conjunction with 'regular' health insurance. If the employer insurance meets ACA standards, no penalty applies.

If it were to be determined that it is NOT employer insurance, I would think that it would be a type of HRA and that the $100/day penalty MIGHT apply.
http://www.irs.gov/pub/irs-drop/n-13-54.pdf

[ttbtaxes]

I agree, but in regards to the Self Employed Insurance Deduction, it is 'considered to be established under the business' if it's in the shareholder's name but reimbursed to the shareholder.
http://www.irs.gov/publications/p535...link1000208843

I think my second post about whether it is a 'plan' or not is WAY off base. It's still regular health insurance; it's just a matter of determining if it's EMPLOYER insurance or not.

If the Company reimburses the employee in 2014 for the cost of his/her insurance now purchased on the exchange, don't we have to be concerned with the ACA $100 penalty per employee per day that could be assessed to the employer? In other words, a potential $36,500 per year penalty?

[geekgirldany]

Yes, it is still reported in box 14.

[RightOn]

Well, if this makes any difference. On the instructions/rules for reporting health insurance on Form W-2, using Code DD, the IRS has marked No, not to report Shareholder Health Insurance as Code DD.
http://www.irs.gov/uac/Form-W-2-Repo...ealth-Coverage
So to me that is saying that it is not employer insurance.

I agree. It seems the instruction says the health insurance does not have to be reported in box 12 as employer sponsored coverage.

But does it have to be reported in box 14?

[geekgirldany]

Well, if this makes any difference. On the instructions/rules for reporting health insurance on Form W-2, using Code DD, the IRS has marked No, not to report Shareholder Health Insurance as Code DD.
http://www.irs.gov/uac/Form-W-2-Repo...ealth-Coverage
So to me that is saying that it is not employer insurance.

[TaxGuyBill]

I have seen health insurance established under the s-shareholder's name instead of the business name. Some insurance companies will not issue it under the business name of a sole shareholder s corp.

I agree, but in regards to the Self Employed Insurance Deduction, it is 'considered to be established under the business' if it's in the shareholder's name but reimbursed to the shareholder.
http://www.irs.gov/publications/p535...link1000208843

I think my second post about whether it is a 'plan' or not is WAY off base. It's still regular health insurance; it's just a matter of determining if it's EMPLOYER insurance or not.

[ATSMAN]

I have seen health insurance established under the s-shareholder's name instead of the business name. Some insurance companies will not issue it under the business name of a sole shareholder s corp.

[TaxGuyBill]

EDIT: After thinking about it, the following post may be WAY off base, but I'll leave it her just in case. It is still regular health insurance; it's a matter of determining if it's EMPLOYER health insurance or not.


On the other hand, it might not qualify as a "plan" for ACA.

http://www.law.cornell.edu/cfr/text/26/1.36B-2#c_3

The term “eligible employer-sponsored plan” means, with respect to any employee, a group health plan or group health insurance coverage offered by an employer to the employee which is—
(A) a governmental plan (within the meaning of section 2791(d)(8) of the Public Health Service Act), or
(B) any other plan or coverage offered in the small or large group market within a State.

http://www.law.cornell.edu/uscode/text/26/5000A#f_2

The term “group health plan” means an employee welfare benefit plan (as defined in section 3(1) of the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1002 (1)]) to the extent that the plan provides medical care (as defined in paragraph (2)) and including items and services paid for as medical care) to employees or their dependents (as defined under the terms of the plan) directly or through insurance, reimbursement, or otherwise.

http://www.law.cornell.edu/uscode/text/42/300gg-91#a

What do you think?

[TaxGuyBill]

What concerns me is that in order to get the self-employed insurance deduction, the insurance plan must be "established under your business".
http://www.irs.gov/publications/p535...link1000208843

If it is "established under your business", I would *THINK* it would be determined as employer insurance, and not eligible for the Premium Tax Credit.

I agree, I hope CLEAR guidance come out soon.