Q&A Avoiding the $100 a Day per Employee Penalty for S Corporations

Ernie Neve, CPA

February 11, 2019

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 would like me to review your health coverage for compliance with the tax rules, please call me on my direct line at 888-275-6383 or email us at eneve@nevegroup.com.


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