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Rules and Regulations >> Can employers reimburse employees for the cost of personal policy premiums?
Can employers reimburse employees for the cost of personal policy premiums?
HRA's are qualified ERISA- and HIPAA-compliant group health benefits plans--employees in the same class must receive the same HRA allowances. However the medical items (including personal health policy premiums) on which each employee chooses to spend their HRA allowances, are not part of a qualified group health benefits plan. That's why HRAs are allowed in every state to reimburse employees tax-free for their personal policy premiums or prescriptions, even though employees typically pay different amounts for personal policy premiums or pharmacy purchases.
Employers are allowed to use HRAs to reimburse employees tax free for personal health insurance premiums, similar to the way employers contribute on a tax free basis to group premiums. This has been clarified with the release of numerous U.S. Treasury and State publications spelling out how employers can use HRAs for tax-free reimbursement of the premiums paid for personal health insurance policies. See "Insurance Premiums" in IRS Publication 502. Also see IRS Publication 969.
There are specific HIPAA and ERISA regulations governing the distribution of personal health insurance policies at the workplace--basically restricting employer involvement with the sale or administration of employee Personal health policies. ZaneHRA (patented) is the only employer health benefits administration platform that automatically ensures employer, agent, and insurance carrier compliance with these regulations (See Legal 2 of 2 on ZaneHRA Sign-up demo).
This document has been prepared solely for the purpose of providing information based on legal and tax advice provided to Zane Benefits, Inc. However, it is not meant to provide legal or tax advice for entities other than Zane Benefits. No representation is made as to the completeness or accuracy of the information herein. As such, it should not be used as a substitute for consultation with professional employment law specialists, tax accountants, attorneys, or other advisors. To comply with U.S. Treasury Regulations, we inform you that, unless expressly stated otherwise, any tax information contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code.
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