Personally-owned Health Insurance have benefits that are taxed if:
Premium payments were not taxed
Premium payments on personally owned disability income policies are: (with respect to taxes)
NONdeductible
Disability income benefits are received: (with respect to taxes)
income tax free
Medical Expense insurance and long-term care insurance are only tax deductible if:
10% of their adjusted gross income is spent on unreimbursed medical expenses
Individuals over 65 qualify for a:
temporary extension
Disability Income Premiums from Employee Group Health Insurance (with respect to taxes)
Premiums paid by the employer for DII are deductible as a business expense
Disability Income Benefits from Employee Group Health Insurance (with respect to taxes)
Benefits received by the employee are counted as income and are therefore income taxable
When the employer and employee share in premium contributions, the taxes depend on:
What type of group plan
Noncontributory group plan taxation:
-Employer pays entire cost, employee has benefits income taxed
Fully Contributory group plan taxation:
-Employee pays the entire cost, so the income benefits are received income tax free by the employee
Partially Contributory group plan taxation:
Cost is paid partially by both employer/ee. Portion paid by employee is income tax free but portion paid by employer is taxed as ordinary income (included in employee's gross income)
Short-Term Disability Benefit period:
is less than 2 years.
Long-Term disability benefit period:
longer than 2 years
Benefits paid to disabled employees by way of employer's contribution are considered: (with respect to taxes)
taxable income to the employee
With respect to taxation on the premium paid by employers for group medical, dental and vision expense insurance is:
deductible as a business expense
Taxation of Long-term Care Insurance:
-Premiums may be deductible
-Daily benefits from the LTC policy are received income tax free (as long as they don't exceed daily cost of long term care)
-Benefits paid in excess of the cost of care received are taxed as ordinary income
Premiums for group accidental death and dismemberment policies are:
deductible to employer as ordinary business expense
Benefits of group accidental death and dismemberment are received:
Income tax free
Sole Proprietors and Partners may deduct ____% of the cost of a medical expense plan
100 (cannot exceed earned income for the year)
Key Person Disability income premiums are:
NOT deductible to the business
Key Person Disability Income benefits are:
Received income tax free by the business
Premiums for Buy-Sell Policy:
NOT deductible to the buisness
Benefits for Buy-Sell Policy:
Received income tax free by the business
Medical Savings Account (MSA)
Employer funded account linked to a high-deductible medical insurance plan. Employer raises the medical plan deductible and returns all or part of the funds from the MSA to cover health insurance deductibles during the year.
Amounts withdrawn from MSA that are NOT medically related are subject to:
Income tax + 20% additional tax
MSA Eligibility:
Only available to small employers with <50 employees or a self-employed person. Cannot have medicare or another health coverage that is not a high deductible plan
Coverages permitted under MSA
-Workers comp
-Specific disease or illness
-fixed amount/day of hsptlzn.
-Accidents/Disability
-Dental Care
-Vision Care
-Long Term Care
MSA Contribution Limit Types
-Annual deductible Limit
-Income Limit
Annual deductible limit (MSA)
The max amount that can be contributed to an MSA is 65% for the high deductible plan for indiv. and for families it is 75%.
Income Limit Rule (MSA)
A person cannot contribute more than what was earned for the year from the employer through whom the person has an HDHP.
Employer contributions to the MSA are
Income tax deductible to business
Distributions from the MSA to pay appropriate benefits are:
Not income taxable
Health Savings Accounts (HSA)
Feature tax deferred growth. Enable insured to pay for medical expenses with pre-tax income. Excess funds rollover. 100% tax write off.
HSA Coverage List
-Doctors/Dentist/Hospital
-Prosthetics
- Drugs
-Eyeglasses
-Chiropractic
-Lab expenses
-Nursing home costs
-Physical therapy
-Psychoanalysis
-xrays
-nursing home premiums
Health Reimbursement Accounts (HRAs)
Consist of funds set aside by employers to reimburse employees for qualified medical expenses.
With respect to taxes, HRAs allow employers to:
Qualify for preferential tax treatment. Deduct cost of an HRA as a business expense.
Key characteristics of HRA:
-Contribution healthcare plans, not defined benefit plans
-Not a taxable employee benefit
-Employers' contributions are tax deductible
-Employees can roll-over unused balances at the end of the year
-Employers do not need to advance claims payments to emp