Today it is common for small employers to help employees in their personal health insurance - instead of contributing to a group health insurance policy. In fact, only 54% of small and medium employers (with fewer than 0 employees) offer traditional health insurance coverage.
As employers adopt more and more ways to help employees with health insurance, one approach is to give employees cash for health insurance. Can you do that? Yes. Are there rules to follow? Absolutely.
This article describes four simple rules to consider when giving employees cash for health insurance (or reimburse employees for health insurance). Follow these rules to avoid heavy penalties and costs .
Rules to give employees cash for health insurance
If you want to give employees money for health insurance, follow these two simple rules :.
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does not ask employees to submit receipts
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Treating increase as taxable income.
It is important to remember that under the new health reform rules, an employer can not directly reimburse employees for insurance personal health (outside a repayment plan in line, that is).
to give employees cash for health insurance the right way , provide an allowance for health insurance. With an insurance allowance disease, all employees in the same position receive a fixed, taxable allowance to buy individual health insurance, whether or not they actually buy health insurance. Another way to help employees health insurance is a repayment plan.
Rules to reimburse health insurance of employees
If you want to reimburse employees for health insurance, follow these two simple rules :.
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Use a formal repayment plan (as reimbursement health plan)
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ensure that the plan follows federal rules for group health plans. (Eg ERISA, HIPAA, COBRA and PPACA)
How does a repayment plan? With a repayment plan, employees are given a fixed amount of the allowance to purchase individual 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 monthly payments until the amount of the allowance.
An added bonus? Refunds are the employees and the employer deductible tax free tax
Tip - Health Reimbursement Software self-service (eg . ZaneHealth ) can make the easy administration and compliance.
Conclusion
an employer can provide employees with cash or reimbursement for health insurance? Yes, but follow these rules to avoid penalties and costly fees.
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