This is a common [1945007?] challenge of small business - you want to help employees with the cost of health care, but the basic traditional employment insurance is not in the cards. If this sounds familiar, your company probably asked "Can we give employees money for health insurance?"
The answer is yes, although there is a right way - and wrong way - to go about it. This article describes two options conform to give employees money for health insurance, how these two options work, and the basic rules to follow. 
2 options to give employees money for health insurance
There are two main options to give employees money for health insurance:
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A taxable allowance
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arrangement free tax refund
How does a taxable Stipend work?
With a taxable allowance, employees receive a fixed, taxable allowance to buy health insurance. Essentially, the company is the extrapolation of wages or provide taxable increases.
With a taxable allowance, employees receive money or not they actually buy health insurance and monthly employee contributions are usually added to his paycheck. At the end of the year, employees receive a form stating the amount of their allowance they must report as income on their tax on personal income.
How an arrangement Working Tax Free refund?
With a formal arrangement, tax free, employees are given a fixed amount of the allowance to buy health insurance, but only receive money if they actually buy health insurance.
employees buy their own individual health insurance policy and provide proof of their employer (or the third party supplier of the employer). Employees receive their monthly repayments amount of the allowance, which are generally added to their paycheck franchise tax.
To implement this type of arrangement, employers use a section 105 health plan reimbursement (HRP) .
to learn more about these options, download our free guide, The Small Business Guide to Health Insurance reimbursement individual.
Can I pay for health insurance for employees directly?
There are three main reasons why you, as an employer, should not pay for health insurance premiums for employees directly.
We have written about it extensively (read more here ). In short, pay for individual health insurance without a qualified repayment plan (eg Section 105 Medical Reimbursement Plan) causes the employer to "approve" the individual health insurance plans, which can lead to ERISA violations. It also causes the payments become taxable income for employees.
In addition, to pay for individual health insurance directly is considered a type of payment of employer's plan. Because the payment of employer plans are not consistent with the new reforms Affordable Care Act, employers face penalties for non-compliance from this year .
Conclusion
For most small businesses, traditional insurance group health is out of reach. But that does not mean health benefits are not feasible. Alternatively, small businesses are adopting formal Medicare benefits or programs refund tax free to help with the cost of employee health care.
Do you have questions about how to give employees cash for health insurance - the right way? Leave a comment and we'll help you answer them.
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