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Avoiding the $100 a Day per Employee Penalty for S-Corporations

· S-Corporations

You may have wondered why an S-Corporation can pay for or reimburse a solo owner-employee’s individually purchased health insurance without worrying about the $100-a-day penalty.

The answer is that the S-Corporation’s payments of the solo shareholder-employee’s individual health insurance premiums are exempt from the $100-a-day penalty.

The exemption does not apply to health coverage for the rank-and-file employees. For the rank and file, you need either:

  • a qualified small-employer health reimbursement arrangement (QSEHRA), or
  • group health insurance.

If you have questions about this strategy or would like our team to review your health coverage for compliance with the tax rules, please do not hesitate to reach out to your team at Luster Tax Consulting to work through this with you. Please use the following link to book your complimentary strategy call with your team at Luster Tax Consulting.

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