IRS Penalty on Employer Reimbursements for Health Insurance is Eliminated

by: Smith and Howard

December 9, 2016

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Earlier this week, the Senate passed legislation that will eliminate IRS penalties on employers who reimburse employees for the cost of health insurance premiums. Included in a wide-ranging package of healthcare legislation called the 21st Century Cures Act, this element negates the ability of the IRS to penalize businesses that elect to help employees with the cost of health insurance premiums by reimbursing them directly. Those penalties, which the IRS had begun levying in 2015, meant that employers who violated the rule could be fined up to $100 per day for each employee, or up to $36,500 a year – 18 times more than the penalty imposed on larger employers that don’t offer insurance to workers.

President Obama has indicated support of the legislation.

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