Congress Eliminates IRS Penalty on Employer Reimbursements for Health Insurance

The Senate passed legislation revoking a tax penalty on employers who reimburse employees for the cost of health insurance premiums. The IRS began enforcing the penalty last year and it was not part of the Affordable Care Act.

Employers who reimbursed employees were accruing fines up to $100 per day for each employee, or up to $36,500 a year. This penalty was 18 times higher than the penalty large employers received that failed to offer insurance to workers.

Under Section 18001 of the 21st Century Cures Act, business owners are permitted to reimburse employees for the cost of individual insurance premiums or medical visits. This legislation will help protect small business owners from accumulating excessive IRS fines.

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