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8 Cards in this Set

  • Front
  • Back
FEDERAL TAXATION OF EMPLOYEE BENEFITS
U.S.A.
Tax treatment to Employee of:

Ee-paid Er-paid
premiums or contributions  MI prems above 7.5% of income are tax ded.
 qualified LTC prems tax-ded *  All exempt, except Group Term Life amounts > $50,000.

benefits  All exempt  All exempt, except DI income
* “Qualified” means:
 benefit does not duplicate Medicare
 guaranteed renewable
 no cash value
 dividends used for benefit impvmts
TAXATION OF CAFETERIA PLANS (FLEX BENEFIT PLANS)
Qualified Benefits
 can be offered on a pre-tax basis
Qualified Benefits include:
 A&H premiums;
 LTD premiums
 Medical care reimbursements
 Group Term Life premiums
 USA has “imputed income” if >$50000.
 Group Legal service premiums
 “Elective Salary Deferrals” under supplemental 401(k) and 403(b) plans
Advantages of Pre-Tax-Qualified benefits (to ER and EE)
 substitute for wages, but not taxed
 ee satisfaction
 er plan attractiveness
Disadvantages:
 compliance with all the rules
 elections can’t be changed during year
 except on marriage, new child, etc.
 non-discrimination regulations
Non-Qualified Benefits
 can only be offered on an after-tax basis
 must not defer the receipt of compensation
 must be treated as cash for tax purposes.
Non-Qualified benefits can include:
 Group Term Life > $50,000 (in the USA)
 Cash; for example:
 salary; cash advances; opt-out cash credits; cashed-out vacation days
Impermissible benefits
 Any benefits that defer compensation to future tax years (except qualified tax-deferred annuities such as under section 401(k) )
 LI with a cash value
 flex spending accounts carried over to next year
TAXATION OF INSURANCE COMPANIES
Federal
State
Federal
 Tax on Surplus
 DAC expense tax
 Tax on Interest Income
State
 Premium Tax – 2% of premiums
 supports high-risk pools and regulatory agencies
 dividends paid back to ph’s are not premium-taxed.
Done.