does payment of health insurance premium by company = employee compensation

Nov 10, 2006 3 Replies
T

I am joining a startup that included coverage of my healthcare costs as part of my offer. Due to the startup nature of the company, I doubt there is a formal benefits plan in place. I have an individual health insurance policy that I will likely keep until a formal benefits plan is operating that includes company health insurance. Questions:



1) can the company pay my individual insurance premiums, and


2) if so, for tax purposes, is it considered employee compensation or can it be considered a reimburseable business expense?



Thanks in advance for your advise.



Travis



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H

Yes

Employee compensation

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E

Yes the company can pay anything for you. It is either deductible to them and not taxable to you (as a tax deductible benefit), or it is not deductible to them and taxable to you (as wages).

Paying your health insurance is NOT considered employee compensation, it is a tax-free health insurance benefit to you and therefor deductible by the corporation.

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T

I located the answer to my own question in IRS publication

15 - "Employer's Tax Guide". As per pub 15: "If you pay the cost of an accident or health insurance plan for your employees, that may include an employee's spouse and dependents, your payments are not wages and are not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding."
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