Regulations federal prohibit companies from paying directly for health insurance premiums for employees outside of a section 105 scheme of reimbursement of medical expenses (eg, a health arrangement repayment or health care reimbursement scheme ), or other IRS / HIPAA / ERISA qualified vehicle tax free (eg, section 125).
Some companies might want to pay directly for an employee individual health insurance plans without using a Section 105 Plan ERISA and HIPAA, but it can put the company in accordance with the regulations federal and may increase (and employee) the company's tax debt.
2 Reasons not to pay for employees to individual health insurance premiums directly
There are two main reasons an employer should never pay for employees of individual direct insurance health plans:
- paying for individual health insurance without a qualified employer Plan Causes of "Approve" insurance plan -health individual
- paying for individual health insurance without a plan causes Payments Become taxable income employees
When an employer directly pays a health insurance plan individually, they approve effectively personal insurance plan for each employee as part of a group offering health benefits sponsored by the employer. In other words, under federal law, the employer treats the individual level through a system of welfare benefits for employees regulated by ERISA. Because most individual health insurance plans do not meet the minimum requirements of ERISA benefit plan, the employer is out of compliance.
Moreover, an employer has no right to know the details of employees HIPAA protected medical expenses. Because most individual health insurance costs are based on the health of an employee, the health insurance details must be HIPAA protected. Where an employer pays for the individual policy, they can violate HIPAA privacy requirements because they know the details of a HIPAA-protected personnel expense.
The federal government has guidelines for employers who want to contribute to individual employee health insurance premiums without violating HIPAA and ERISA regulations. An ERISA plan, and ensure HIPAA compliance with federal law.
Moreover, if an employer were able to technically comply with HIPAA and ERISA to pay for health insurance premiums, payments would be taxable income to employees unless they have reimbursed by an HRA or other vehicle free of IRS-trained tax. Using an HRA an employer can give employees effectively up to twice as health benefits through tax savings if the employee had to pay for these costs themselves. The IRS requires that documents of the legal regimes established for employees to deduct the different health insurance premiums from taxable income on the annual W-2
An IRS plan consistent ensure deductibility tax special employee health insurance premiums
editor's note ..: This post has been updated with the latest information on health insurance. The article was published in May 2012. 
What questions do you have to pay for health insurance premiums? Leave a comment below!
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