Compensation for Health Insurance Policies

[Ann H]

They can know what it's for, you just can't tie the bonus/raise to health insurance. They call it a "cash in lieu" arrangement. IRS notices 2015-87 and 2015-17 for more info.

By "tie", the IRS means:

• -Only get the bonus/raise if you had health insurance
• -Must submit proof of coverage to get the raise/bonus
• -Lose the bonus/raise if you terminate your policy
• -Raise/Bonus amount is tied to the cost of health insurance (whether it's exactly, indexed to premium raises, or varies by coverage tier)

If a company says "we're no longer offering health insurance, but we're giving everyone a $125/week raise", that's permissible.

Keep in mind, it's taxable income. The employer mandate still applies, so a large group required to offer coverage must still offer coverage or pay the penalty.

Trump has directed agencies not to enforce the mandate, and has promised to repeal it, but as of today, it's still law.

I'm going to wait for my favorite CPA spouse to jump in, but I don't think so Ray. I think its specifically NOT allowed. That's what most of us have been going on, anyway. And every CPA I know, too.

Sorry, after tax season is over I always take a few days off, so I haven't read the forum recently and I just saw this. Ray is correct, and he covered all of the bases really well. The only other two issues that I might add are 1) being non-discriminatory among classes of employees, and 2) the new rules allow you to use an HRA for IFP premiums (if you don't have a group plan), whereas in the last several years you could not use an HRA for IFP premiums at all.

 

[Bobby39]

Can I Give My Employees Bonuses Instead of Health Insurance?

 

[Bobby39]

It depends on how many employees you have.