Post-tax reimbursement for employee medical benefits

I would recommend against that approach.  This would be what I refer to as a "taxable HRA".  That's basically an oxymoron, but I don't know what else to call it. 

Any employer reimbursement of medical expenses with an ongoing administrative scheme is a group health plan.  Other than for purposes of determining whether the §105(h) rules apply, it doesn't matter whether those reimbursements take advantage of the otherwise available §105 exclusion from income.

That means this arrangement still needs to deal with:

• ERISA
• ACA
• COBRA
• HIPAA
• HSA (eligibility issues)

So I would recommend you create an HRA to address this since a) it's already a group health plan, and therefore b) might as well get the tax advantage.

If it's employees moving to a spouse's plan, this is what generally is referred to as a Spousal Incentive HRA (SIHRA).  

• Here's an overview of the SIHRA compliance considerations: https://www.newfront.com/blog/ten-spousal-incentive-hra-compliance-considerations

Outside of that, here's my more general take:

https://www.newfront.com/blog/addressing-employee-health-plan-exception-requests-part-vi

Solution #2: Avoid Creating a Group Health Plan

The employer can always provide additional taxable cash compensation to employees that is not conditioned in any way on the employee’s actual medical expenses incurred.  For example, the employer can provide an employee experiencing unexpected medical expenses with a standard raise/bonus/stipend that is taxable and subject to withholding and payroll taxes.

These payments cannot be a direct or indirect reimbursement of any medical expenses incurred (taxable or non-taxable).  In other words, the employer could not determine the amount of the payment based on the actual medical expenses incurred by the employee, nor could the employer condition the additional payment on the employee’s submission of medical receipts. Any such form of reimbursement would trigger a group health plan and the issues outlined above.

• Note: Employers often question why they cannot simply reimburse medical benefits on a taxable basis to avoid application of the group health plan legal restrictions. However, reimbursement of medical expenses on a taxable basis would still be a group health plan subject to all the group health plan laws described above (with the exception of the §105(h) nondiscrimination testing requirements), and therefore it is also not a viable solution. That taxable reimbursement approach would no longer be an HRA because it would not be designed as a tax-advantaged vehicle under IRC §105 and §106, although some refer to the approach as a “taxable HRA” because it would still be a (non-tax advantaged) defined contribution group health plan arrangement.

...

Relevant Cites:

ERISA §733(a):

(a) Group health plan.
For purposes of this part— 


(1) In general. The term “group health plan” means an employee welfare benefit plan to the extent that the plan provides medical care (as defined in paragraph (2) and including items and services paid for as medical care) to employees or their dependents (as defined under the terms of the plan) directly or through insurance, reimbursement, or otherwise. Such term shall not include any qualified small employer health reimbursement arrangement (as defined in section 9831(d)(2) of the Internal Revenue Code of 1986).


Slide summary:

2024 Newfront Fringe Benefits for Employers Guide