Question: Can employees pay for telemedicine on a voluntary basis, pre-tax? Or must it be post-tax?
Answer from the experts at HR Hero:
Generally, an employee’s payments must be post-tax, for the reasons outlined below.
A telemedicine program that’s voluntary must meet several requirements to qualify for a safe harbor so that it’s not subject to ERISA as a group health plan. Employers may want to avoid having a program become an ERISA group health plan because that brings with it all the ACA mandates, including no annual dollar limits and first-dollar preventive care.
A telemedicine program could theoretically be “integrated” with a major medical plan that does comply, but then participation could not be “voluntary” to major medical participants (or available to nonparticipants).
It’s also important to note that, depending on what the program offers, a standalone telemedicine plan may affect an employee’s HSA eligibility because the federal tax code prohibits an employee from being covered under any other health plan that is not an HDHP (except for certain permitted insurance like workers’ compensation and certain benefits like vision/dental coverage).
With these points in mind, a plan generally is considered voluntary if:
- The employer does not sponsor or endorse the plan,
- The employer does not contribute to the premiums,
- The employer does not receive any benefit from the plan
- The plan is completely voluntary.
Allowing employees to deduct premiums through a cafeteria plan will generally be viewed as an employer endorsement, therefore, employees must pay their premiums on an after-tax basis. The employer may collect the after-tax premiums paid by employees and submit the payment to the telemedicine provider.