IRS: Employers Can't 'Dump' Workers on Health Care

Large businesses still have to pay employee health costs

By Neal Colgrass,  Newser Staff

Posted May 26, 2014 1:35 PM CDT

(Newser) – The IRS has sent a message to employers—that they can't just hand workers cash and "dump" them into insurance exchanges. Spelled out in a Q&A document, the ruling says employers will be taxed an extra $100 a day for each worker sent into the marketplace to buy their own insurance. The decision seems aimed at larger employers, who, under ObamaCare, must provide full-time workers with health care (average cost: $5,000 a year per employee) or be subject to penalties, the New York Times reports.

Many employers decided to save money by taking the "dumping" route—which the IRS still allows, but will tax sums given to employees on both ends (while employer-provided health care is non-taxable). Reacting negatively, a partner at a large accounting firm said the ruling eliminates health-care-reimbursement arrangements that employers have had with workers "for decades." Employers aren't the only ones seeking a health-cost workaround, the Times notes: Hospitals have begun cutting back assistance to needy patients, hoping to push them into buying low-cost plans under ObamaCare.

This file photo shows the headquarters of the IRS in Washington.
This file photo shows the headquarters of the IRS in Washington.   (AP Photo/J. David Ake, File)
  (Shutterstock)
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