You Cannot Use Section 105 Plans and Other Reimbursement Arrangements to Purchase an Individual Plan on a Tax-preferred Basis¹
By Christopher E. Condeluci, Esq. Of Counsel, Venable LLP Washington, DC
Let’s cut to the chase: An employee cannot purchase an insurance policy sold in the individual health insurance market (i.e., an “individual market plan”) with non-taxable contributions. Period. Exclamation point. Tis includes payments from an employer to reimburse the premiums paid by an employee for an individual-market plan under a Section 105 Medical Reimbursement Plan, a Revenue Ruling 61-146 arrangement, or any other arrangement where employer dollars are being used for such reimbursements. Tis also includes the purchase of an individual-market plan with employee pretax contributions made through a Section 125 cafeteria plan.
¹Article as listed in the March 2014 of the Health Insurance Underwriter (HIU) Magazine by National Association of Health Underwriters (NAHU) http://www.hiu-digital.com/