Insurance premiums - compensation or not?

Question

I work for a very small company (5-7 people) which can not afford group medical insurance. However one of the unwritten perks is the company will pay 75% of an indiviual policy.

The company does NOT pay this directly to the carrier, but instead cuts a check monthly to the employee after the employee presents the bill.

Obviously the employee can do whatever they want with this check.

My question is since this is handled in this manner should it be considered comopensation in addition to wages and shown on W2's and taxed?

Also if on unemployment, or as in our case, on a workshare program with the state, should this money be declared as other compensation/income. This is a specifically asked question on the forms.

Thanks, Lynda

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Lynda

Stuart A. Bronstein · Accepted Answer

Yes, it's taxable compensation to the employee, if the employer doesn't pay it directly.Without knowing all the details, I will say, probably.

removeps-groups · Answer

Yes. And the 100% of medical premiums that the employee pays is deductible on their Schedule A, but because of the 7.5% of AGI limit (only the amount of medical expenses above 7.5% of your AGI, or 10% of your AGI if in AMT, which will rise to 10% and 12.% under the health care bill) the deduction is worthless for most people. The company needs to invest in a group plan, which will save their employees money by making the employee's effective 25% tax-deductible in full, and the employer's 75% not subject to social security and medicare tax. Plus, the health care law has a provision where the government will help the employer with their portion of their employee's health insurance for a limited time.

ira smilovitz · Answer

Not to mention that 100% of a group policy premium could be less expensive than

75% of 5-7 individual policies - especially if the employer specifies the level of coverage in the group policy.

Ira Smilovitz

Route101ÃÂ© · Answer

Isn't the employer supposed to report all compensation on the W-2? If so, the OP should verify whether it has been included already.

Insurance premiums - compensation or not?

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