During a heavily attended breakout session at a conference I recently attended, the focus was on the myriad government rules pertaining to qualified retirement plans like 401(k) plans.

The presenter was an attorney who had spent a good portion of his career in the enforcement division of a government agency and was now in private practice. As a young lawyer fresh out of law school, his desire was to join the government and “catch the bad guys.” But over the years, he observed a philosophical shift in how the plethora of laws and resulting regulations address violations of the rules. For many years, if he came across a business that violated a rule—missing a filing deadline or making an omission on a form or failing to make a timely disclosure—he and his colleagues would consider the context of the situation, including the organization’s history of compliance, and would provide a warning.

The presenter said the atmosphere had shifted to a “fine mentality”—legal institutions would tally violations and assess fines with little regard to extenuating circumstances. Ultimately, he felt too much of his efforts focused on raising revenue and enforcement rather than focusing on “catching the bad guys.” Needless to say, he left.

Companies today face so many regulations that it’s likely almost every business in the United States is not in compliance with some rule. A perfect example is the Affordable Care Act (ACA) requirement that organizations no longer reimburse employees for the purchase of an individual health insurance policy.

As discussed in a recent article by attorneys Carrie Herrick and Carrie Elizabeth Byrnes of law firm Bryan Cave LLP, reimbursing employees for individual health insurance policies subjects employers to hefty excise taxes. In the article, the authors point out that as per an Internal Revenue Service Notice issued in September 2013 and most recently an FAQ sheet issued by the Department of Labor (DOL) in November 2014, when an employer reimburses an employee for an individual health insurance premium or pays the premium directly to the insurer, it has (perhaps inadvertently) established a “group health plan” that is subject to the so-called Public Health Service Act mandates of ACA.

One of these mandates is that group health plans cannot impose annual dollar limitations on essential benefits, and such a reimbursement arrangement by its very nature imposes an annual dollar limit (the cost of the premiums). This arrangement cannot be “integrated” with an individual policy to satisfy the Public Health Service Act mandates. Another mandate is the requirement to provide preventive care at no cost to participants. A reimbursement arrangement such as that described here does not and cannot provide preventive care.

The consequences for violating the Public Health Service Act mandates for self-funded plans, such as a typical reimbursement arrangement, include nondeductible excise taxes of $100 per day for each affected individual. Tthat’s $36,500 per year per impacted employee. Employers must self-report these taxes to the government and face potential enforcement action by the DOL or participant lawsuits. The DOL’s November FAQ makes it abundantly clear that characterizing the payment or reimbursement as taxable wages does not “undo” its group health plan status, and thus, the arrangement can still not satisfy the Public Health Service Act mandates.

So what’s the solution? An employer can increase an employee’s wages so the employee can purchase an individual insurance policy, but this is not as advantageous from an income tax standpoint. And an employer cannot condition the receipt of those additional wages on the employee’s purchase or maintenance of such a policy, as that then becomes an after-tax impermissible reimbursement arrangement. There are no exceptions—any employer-sponsored plan subject to the ACA market reforms, meaning any plan with more than one current employee participating, is subject to this prohibition.

Independent insurance agents should ask their clients whether they truly want to “go it alone” when it comes to dealing with the variety of complicated regulations pertaining to ACA. Staying abreast of the constantly changing landscape will be crucial to avoid inadvertently going afoul of the rules.

Dave Evans is a certified financial planner and an IA contributor.