Tuesday, April 7, 2015

Pre and Post Tax Health Insurance Reimbursements

Recently the IRS released guidance on the practice of employers reimbursing employees for health insurance premiums. It is not surprising that the IRS ruled that pre-tax programs are no longer allowed (see guidance about transition relief). 

What was surprising is that employers cannot reimburse employees for health insurance premiums with post-tax dollars. Post tax dollars means exactly that, the IRS has already gotten its share of taxes.   

Why would the IRS care where money is spent after it has been taxed?