IRS Issues Transition Relief for Employer Payment Plans 

IRS Notice 2015-17

In 2013, the Department of Labor and IRS issued notice prohibiting employers from paying or reimbursing any portion of an employee’s Individual health insurance premiums.  The Notice states that such arrangements violate the PPACA provision (Code § 4980D) that requires that all qualified health plans eliminate annual/lifetime limits for Essential Health Benefits (EHB).

On February 18, 2015, the IRS issued Notice 2015-17 to provide relief for employer’s who continue to reimburse or directly pay employee’s Individual policy premiums – but the relief is temporary at best.  It is important to note that there has been no change to the prohibition regarding employer payment plans, and that the relief merely postpones the excise tax penalty for failing to comply.

“Notice 2013-54 concludes that the arrangements constituting employer payment plans as described in that notice fail to comply with the market reforms and may subject employers to the excise tax under Code § 4980D. At the same time, the Departments understand that some employers that had been offering health coverage through an employer payment plan may need additional time to obtain group health coverage or adopt a suitable alternative. The SHOP Marketplace addresses many of the concerns of small employers. However, because the market is still transitioning and the transition by eligible employers to SHOP Marketplace coverage or other alternatives will take time to implement, this guidance provides that the excise tax under Code § 4980D will not be asserted for any failure to satisfy the market reforms by employer payment plans that pay, or reimburse employees for individual health policy premiums or Medicare part B or Part D premiums (1) for 2014 for employers that are not ALEs for 2014, and (2) for January 1 through June 30, 2015 for employers that are not ALEs for 2015. After June 30, 2015, such employers may be liable for the Code § 4980D excise tax.”

For additional information regarding this notice or other notices related to PPACA, please feel free to contact me at:

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