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Mark Anderson
Mark Anderson, Tax Attorney
Category: Tax
Satisfied Customers: 540
Experience:  Tax attorney and accountant
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I am a benefits consultant. Another consultant guided an

Customer Question

I am a benefits consultant. Another consultant guided an employer I spoke to in a direction I do not think is in accordance with the sect 105 guidelines and unethical from a labor perspective. the group is over 50 employees, partially self-funded. They had a lay-off at a plant and one of those individuals was very unhealthy. A local charity paid to keep them on the employers cobra. the employer was told they could approach this individual exclusively since they were on Cobra and not an employee and talk about their situation. They then were told that if this person chose to go on an individual plan outside of the Marketplace, they could pay for it and all deductibles and co-insurance under a medical reimbursement arrangement . An HRA to me through sect. 105. There are several issues here as I see it. How do you pay and get a write off for a terminated employee? Can you do this to one individual when others were laid-off too? Under the ACA most all Health reimbursement arrangements were eliminated for individual policies, etc....
Submitted: 9 months ago.
Category: Tax
Expert:  Mark Anderson replied 9 months ago.

In this economy employers seem to do whatever they want. You could contact the DOL for some help. As a benefit consultant don't you have a trade organization or association that deal with benefit issues?

Customer: replied 9 months ago.
I do but had two specific questions I thought your team could help with . First are you allowed to use a health reimbursement arrangement for a Cobra employee who is not employed ? Under ACA individual typically can't be written Through this arrangement . Second is this a labor issue approaching them and offering this arrangement even though they are not employed ? The other employees , also laid off , we're not given this option .
Expert:  Mark Anderson replied 9 months ago.

Yes.

http://www.zanebenefits.com/blog/bid/97310/Does-COBRA-apply-to-Health-Reimbursement-Arrangements-HRAs

No. Given the above.

Customer: replied 9 months ago.
Well, this isn't an HRA attached to the group and I was aware how that would work. These arrangements are under Section 105 and allow an employer to deduct the premium and deductible contributions for an employee who owns coverage outside of their plan. It was common for employers to say we do not offer coverage but will pay up to a certain amount for them to get coverage. This is what the ACA said you are not able to do, since the Marketplace offers subsidies to individuals. Again, in this case this is an "individual policy" purchased outside of the group.
Expert:  Mark Anderson replied 9 months ago.

Ok. I will opt out and allow another expert to answer.

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