Can a company reimburse an employee for their Medicare premium-need kind of quickly

In My Humble Opinion
1

My company had a policy of reimbursing those of us long in the tooth who’d signed up for Medicare, the cost of their premiums, whilst removing that employee from the company health care plan.

We’re now being told that practice is illegal?

Can someone please advise with cites? I am about to go into a meeting that may be contentious.

2

I’m afraid the answer is “it depends.” Under the ACA, employers are basically prohibited from dumping their employees on the individual market (including the market for Medicare parts B and D) because of the federal subsidies. It’s not illegal but the employer may be subject to an additional tax (and probably will be subject to the tax in subsequent years.) Whether your employer is subject to the tax depends on its size, the exact reimbursement formula, and other factors.

ETA: I’m reporting this for a forum move since it is requesting legal advice (goes in IMHO.)

3

Legal advice is best suited to IMHO.

Colibri
General Questions Moderator

4

This really isn’t an issue of dumping people on the market. At 65, you get Medicare. The end. The employer can pay for a supplemental/advantage policy as a normal insurance policy.

However, paying for Medicare premiums is probably not allowed at all. A recent IRS update on this allows it for 2% shareholders of S corporations, IF there is health coverage for other employees. Traditionally, this reimbursement was allowed for these shareholder-employees regardless of how other employees were covered.

It used to be allowed for other employees under HRA plans (Health Reimbursement Arrangements, in which actual expenses could be reimbursed as well as insurance premiums). Recent changes seem to suggest that paying for any insurance policy, including Medicare, would be disallowed (with $100 per day per employee penalty!)

All of this is very recent. I think the IRS’s latest guidance on it is just a month old at this point, and they’ve given companies until June to get it figured out. I think your company is right that the practice is not permitted any longer, but they should make sure they’re relying on an expert in the field.