The Affordable Care Act (ACA), as interpreted by the Internal Revenue Service, prohibits small employers from reimbursing or paying for an employee’s individual health insurance premiums. It is possible violators could be fined up to $100 per day, per employee (which could be up to $36,500 a year). This applies whether or not the reimbursement or payment is made before-tax or after-tax. Although there is some question about whether these penalties would apply to a municipality, the IRS apparently believes they do.
A bipartisan bill entitled the “Small Business Healthcare Relief Act of 2015” has been introduced in both the House (H.R. 2911) and the Senate (S. 1697), which would allow such reimbursements or payments. The bipartisan sponsors of the bill are Senators Chuck Grassley, R-IA, and Heidi Heitkamp, D-ND, and Congressmen Charles W. Boustany, Jr., MD, R-LA, and Mike Thompson, D-CA.
If this is an issue that affects your municipality, you may wish to contact your elected federal representatives and ask them to support the Small Business Healthcare Relief Act.
You can find the history and status of the joint bills on www.congress.gov, or www.thomas.gov. Both sites have search links where you can search “hr2911” or “s1697”. The April edition of the Municipal Law Alert contained an article concerning this issue. For details, I would strongly suggest you review that article which is available on our website at http://www.bakkenorman.com/category/resources/blog/municipal-law-alert/.
On a related note, the State of Ohio has sued the federal government over a very similar, but more complex, aspect of applying ACA “taxes” to the states. If you are up for some heavy legal reading, you may want to review the Ohio Attorney General’s Opinion 2015-021, which can be found at: http://www.ohioattorneygeneral.gov/About-AG/Organizational-Structure/Opinions.aspx.