Individual Medical Policy May Result in Significant Excise Tax Liability

The Employers Council on Flexible Compensation (ECFC) is an industry association made up of leading cafeteria and related benefit plan service providers and plan sponsors. In the aftermath of agency guidance, ECFC has received numerous inquiries from employer plan sponsors and member companies as to whether employers can make available individual major medical coverage to employees on a tax-free basis as part of an employer-sponsored arrangement. This practice may have significant adverse tax consequences for employer plan sponsors. This Employer Alert Bulletin is intended to direct employers, and their counsel, to authoritative guidance on the issue.

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