Can I give my employees an allowance to buy their own health insurance?

If you are a small employer (less than 50+ FTEs), you are not required by the ACA (at this time) to offer your employees insurance coverage through your company. If you would like to, you can give employees money to purchase their own insurance and/or towards their coverage on a spouse's employer's plan.

Starting in 2015, loopholes that would allow the health insurance money given to employees to be treated as non-taxable reimbursements have been closed. Going forward, these allowances must be treated as fully-taxable compensation. If you would like your employees to still receive the same net cash amount, you will need to provide additional compensation (over and above the allowance) to cover the associated taxes.

Contact DP Customer Service for more information and/or for help with these calculations.

Related article: "What is grossing up?"