If you have already renewed your group health insurance plan in 2014, you may have received a premium *rebate check for employee premiums. If your company pays 100% for all employee and all dependent premiums, then the company can keep the rebate (although it must be used toward the benefit of those enrolled in the health plan). However, if employees pay for any portion of premium, then those who pay employee premiums either need to receive a credit towards future payments or be paid the rebate as an increase in wages.
Here are some options of how to redistribute the money to employees:
1. Apply the rebate towards the next month’s premium.
Providing a credit towards employee premiums would avoid the rebate being treated as taxable income.
2. Apply the rebate towards next year’s premium.
Again, providing a credit towards premiums would avoid the rebate being treated as taxable income. However, you may want to only provide the credit to those who were enrolled in the plan when the credit was received – and that can become more complicated with a new plan year and new enrollees.
3. Refund current enrollees on the medical plan.
A straight-up refund will be viewed by the IRS as an increase in wages – and, as such, will be treated as taxable income.
Please contact our certified experts with any questions you may have with your premium rebate, or in regards to the ACA in general.
*There’s a provision in the ACA that mandates health insurance companies to spend at least 80% of your premium dollars on medical care or else send a rebate for any excess money collected.