456 / What are the consequences if an employer reimburses its employees for the cost of individual health insurance premiums outside of a permissible HRA arrangement?

As a result, these arrangements will typically violate the ACA prohibition on annual benefit limits and provision of preventive care without employee costs, and will cause the employer to be subject to a $100 per day penalty per employee.¹ This penalty is subject to the guidance provided in IRS Notice 2015-17 and the 21st Century Cures Act, which provide relief to small employers who are not applicable large employers subject to the employer mandate and to S corporations in regard to their shareholders.

1.     IRS FAQ, Employer Health Care Arrangements, updated October 23, 2023, available at http://www.irs.gov/Affordable-Care-Act/Employer-Health-Care-Arrangements. See also IRC § 4980D.