Before the new health care law, small businesses were allowed to offer health insurance reimbursement plans, in which the company could give each employee a certain amount of money (pre-tax) that the employees could use to purchase insurance on their own. The IRS has recently clarified that these kinds of arrangements are no longer permitted. For those of you that have used a plan like this in the past, I see a couple of possible alternatives.
- Provide a company sponsored group health insurance plan
- Reimburse employees for individual health insurance plans with after-tax money (by running those amounts through payroll)
This link has a brief explanation by the IRS about these plans: Employer Health Care Arrangements.