Sn 300-00 Health Ins. Taxation In The U.s.

Front 1

FEDERAL TAXATION OF EMPLOYEE BENEFITS

Back 1

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

Front 2

* “Qualified” means:

Back 2

 benefit does not duplicate Medicare
 guaranteed renewable
 no cash value
 dividends used for benefit impvmts

Front 3

TAXATION OF CAFETERIA PLANS (FLEX BENEFIT PLANS)
Qualified Benefits

Back 3

 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

Front 4

Advantages of Pre-Tax-Qualified benefits (to ER and EE)

Back 4

 substitute for wages, but not taxed
 ee satisfaction
 er plan attractiveness

Front 5

Disadvantages:

Back 5

 compliance with all the rules
 elections can’t be changed during year
 except on marriage, new child, etc.
 non-discrimination regulations

Front 6

Non-Qualified Benefits

Back 6

 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

Front 7

Impermissible benefits

Back 7

 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

Front 8

TAXATION OF INSURANCE COMPANIES
Federal
State

Back 8

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.