ACA eligiblity

ACA Obamacare experts please help.

Client is the owner (100%) of a S-corp. He obtains his coverage from Obamacare. And his S-corp pays for his premiums. The S-corp follows the rule to put the premiums on his W-2. He then claims it as self-employed health insurance premium deduction in his tax return.

I believe there is a rule about ACA Obamacare eligibility is that the insured person should not be offered an affordable coverage by his employer. Client is an employee of his S-corp and so his S-corp is technically his employer. Now if his S-corp pays for his Obamacare policy premiums, would they consider the S-corp (his employer) has 'offered' him the policy and therefore it violates the 'affordable coverage' eligibility requirement?

No...the s-corp hasn't paid his premiums. They've provided him increased taxable compensation (via reimbursement). They also haven't offered him coverage via a health plan. That's what the exchange has done.

There is nothing in violation of ACA as you've described the scenario above.

But the complication is that the payroll has been processed as in a way that the 'extra bonus' was health premiums. While the amount was included in box 1 of the W-2, it was not included in box 3 and box 5. Also, in box 14, the amount was noted as "2%HI". Would it be a catastrophic mistake?

What you are describing is not a "complication". It is proper and correct reporting of the facts you've presented.

I am thinking that if it was reported on the W-2 in that way, the amount paid by the S-corp was 'health premiums' but not 'extra bonus'. If it was 'extra bonus', the amount should go onto box 3 and box 5 too. Is my thinking incorrect?

Any advice as to what should be done about it?

Or everything is fine and nothing needs to be done (hopefully)?

I'm not sure how to say this any differently.

It is proper and correct reporting of the facts you've presented.

Thank you Captcook.

I am just curious. is it because those payments are still considered extra bonus even if they were processed as insurance payments in the payroll?

They are insurance premium reimbursements. For >2% SH/EEs, insurance premium reimbursements are considered compensation and not employee benefits. That is why they are included in Box 1 and not deducted by the company as employee benefits. To say it differently, this treatment of the reimbursement specially allocates that expense to this SH via wages.

Thank you CaptCook