Blog for John Sweeney - Elder, Wills, Estates, Trusts, Special Needs, Business, & Tax Lawyer in CT and NY

Reimbursing Employees for Health Insurance They Buy on their Own

Posted by John Sweeney | Jun 19, 2014 | 0 Comments

With the advent of Obamacare and all the changes in the health insurance markets, sometimes the easy thing for the employer is to tell his employees is, "I'll give you $2,000, you should get your own health insurance".

In the past, you couldn't do this because it was difficult to get insurance on an individual basis.  In addition, if the employees buy it on their own, they can get the subsidies from the insurance exchanges (only low income would qualify).

Seems like an easy and an elegant solution?

Normally, health insurance purchased by the employer is tax-free to the employee.  In addition, the employees contributions generally reduce his taxable income too, so they aren't taxed either.

So why wouldn't money given to the employee to purchase his own insurance be tax free too?

The answer is in the convoluted rules of the IRC and the Affordable Care Act.  But the bottom line is that it is not.

That means you would give the employee $2,000, he would pay payroll and income tax on it, and with the $1,200 he has left he can buy the insurance.  Elegant solution not.

There is a good article in the New York Times on this issue.  But practical solutions do not abound in health insurance.

About the Author

John Sweeney

John is an experienced lawyer who helps you solve your problems. He practices Elder, Wills, Estates, Trusts, Special Needs, Business, & Tax Law in Fairfield County CT and Westchester County New York. He brings a wealth of experience in law, business, tax, insurance, and finance to arrive at practical solutions with compassion and care. Honest, direct and practical, he is focused on you and your problems. He also brings a wealth of personal experience from his own large family and aging parents.


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Elder, Wills, Estates, Trusts, Special Needs Tax & Business Law; Attorney John Sweeney

Sweeney Legal, LLC, provides legal, practical, and business counsel to Seniors, families, and businesses in the Fairfield, Connecticut area, including the communities of Bridgeport, Bethel, Brookfield, Danbury, Darien, Easton, Fairfield, New Canaan, Newtown, Norwalk, Redding, Ridgefield, Stamford, Weston, Westport and Wilton. John is also licensed in New York serving Westchester County including the towns of Bedford, Lewisboro, Mount Kisco, North Salem, Pound Ridge, and Somers.