Fine, but make sure that you do so correctly. Many employers prefer to reimburse employees for healthcare insurance premiums rather than hassle with providing coverage under a group healthcare plan. In so doing, these employers assume that this payment is excluded from the employee’s gross income. However, this assumption is both incorrect and potentially expensive.
In light of the Patient Protection and Affordable Care Act (ACA), the Internal Revenue Service (IRS) has determined that, unless ACA requirements are satisfied, such reimbursements for individual healthcare coverage must be treated as ordinary income for the employee. This means that employers who wish to reimburse employees for health insurance must report the reimbursement payments as regular, W-2 income, subject to all applicable tax and other legal deductions. (See IRS Notice 2013-54.)
As any taxpayer knows, the failure to comply with tax reporting requirements can be expensive. In addition to the unpaid taxes, employers can be subject to a penalty of $100 per employee per day.
