IRS – Illegal for employers to dump employees into Exchange

On May 16, 2014, the Internal Revenue Service (IRS) issued an FAQ response to clarify whether employers can provide added compensation to employees, so they may purchase individual health coverage.

The IRS FAQ answer says it is illegal for an employer that does not establish health coverage for employees to simply pay for individual coverage through a qualified health plan or a state marketplace (or the federal marketplace). It is also illegal for an employer to provide added cash compensation to an employee to pay for individual coverage. 

An employer that takes part in such an arrangement will be subject to an excise tax of $100 per day or $36,500 per year per employee.

You can link to the full IRS FAQ here.

This does not apply if an employee chooses to pay for individual health insurance with after tax income