…when the Employer reimburses the Employee for health insurance costs
This is not a joke. It is from IRS Notice 2013-54, in reference to a long-held practice whereby employers could simply reimburse employees for health insurance secured directly by the employees. Prior to 2014, such an arrangement was an acceptable alternative for smaller employers for whom group coverage was impractical. The employee secured the insurance and the employer either paid the premiums directly, or reimbursed the employee for the premiums.
The tax consequences were favorable. The employer got a deduction just as if it were regular group health insurance, but the employee did not recognize income. (A similarly beneficial arrangement was in place for S-Corp owners.)
