Reimbursing one employee for health insurance premium?

[2019shill]

I work at a small company (less than 10 employees) that's a s-corp. We provide group health insurance for our employees and pay $450 towards their premium. However, one employee would like to purchase their own insurance for 2020 and get reimbursed the $450. I don't think it would be discriminatory because this employee is not highly compensated, not an officer, and is in a department of their own (could classify this benefit based on that?). I've done a lot of research and it sounds like reimbursing one employee is allowable based on IRS notice 2015-17:

"Code § 9831(a)(2) provides that the market reforms do not apply to a group health plan that has fewer than two participants who are current employees on the first day of the plan year. Accordingly, an arrangement covering only a single employee (whether or not that employee is a 2-percent shareholder-employee) generally is not subject to the market reforms whether or not such a reimbursement arrangement otherwise constitutes a group health plan. If an S corporation maintains more than one such arrangement for different employees (whether or not 2-percent shareholder employees), however, all such arrangements are treated as a single arrangement covering more than one employee so that the exception in Code § 9831(a)(2) does not apply. For this purpose, if both a non-2-percent shareholder employee of the S corporation and a 2-percent shareholder employee of the S corporation are receiving reimbursements for individual premiums, the arrangement would be considered a group health plan for more than one current employee."

No other employee would be reimbursed for their health insurance premiums, they're all being covered through the group plan. Based on my research, it doesn't sound like this will get us in any trouble, but I'm concerned I could be missing something. I could really use some input on this.

[orlycpa]

There shouldn't be any problem with this, but in good practice you should make the benefit available to all EE's if they should choose to waive your health insurance benefits. Most don't, but some may opt to join their spouse's plan or something  & you'd ideally want to be fair to all. 

Also - that $450 would be taxable to them. Make sure they know. I hope that helps! 

[2019shill]

Thank you for the response. I'm hoping to avoid making it taxable income. I found this: 

"The 2015 Notice confirms that an EPP with less than two participants who are current employees (a “one-employee health plan”) is exempt from the ACA market reforms and, therefore, is not subject to the excise taxes imposed under the ACA.[5]  The 2015 Notice also confirms that, pursuant to Revenue Ruling 61-146, premium reimbursement arrangements for non-employer sponsored hospital and medical insurance that are not subject to the ACA market reforms can be reimbursed on a pre-tax basis.  We believe this would permit pre-tax reimbursements under a one-employee health plan and for excepted benefit coverage (e.g., limited-scope dental and vision benefits), although no express statement is made to this effect in the 2015 Notice."

I sent an email to our CPA to get their input, but haven't received a reply yet. Anyone on here know if it's possible to do this pre-tax? The market reforms and excise tax don't apply to plans with fewer than two participants, so it seems like this is possible.