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Business and Policy Areas
Business and Policy Areas

IRS Issues Transitional Relief for Graduate Student Health Coverage

February 22, 2016

Internal Revenue Service Notice 2016-17, published February 5, provides temporary transition relief to colleges and universities that subsidize health care coverage for graduate students under a Student Health Insurance Plan (SHIP).

Last year, the IRS raised questions about whether SHIP subsidies are employer payment plans that violate the Affordable Care Act (ACA), as interpreted in IRS Notice 2013-54. The IRS views student health insurance as individual coverage, which may create complications under the ACA that need to be addressed. The higher education community disagrees with the IRS' interpretation and has requested guidance from the Treasury Department and the IRS on this issue to remove uncertainty and any future liability for institutions. 

Notice 2016-17 asserts, without providing any specific examples or information, that there are certain circumstances where institutions might run afoul of the ACA by subsidizing SHIP coverage. However, the same notice offers institutions temporary transition relief, allowing institutions to offer subsidies during a plan or policy year beginning before January 1, 2017. The matter is still being reviewed by the IRS and Treasury. 


Mary Bachinger
Director, Tax Policy