4.1. ERMUSR 05-12-2009 - Laserfiche WebLink

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Accident and Health Benefits This exclusion applies to contributions you make to an accident or health plan for an employee, including the following. • Contributions to the cost of accident or health insur- ance including qualified long-term care insurance. • Contributions to a separate trust or fund that directly or through insurance provides accident or health benefits. • Contributions to Archer MSAs or health savings ac- counts {discussed in Publication 969, Health Sav- ings Accounts and Other Tax-Favored Health Plans). This exclusion also applies to payments you directly or indirectly make to an employee under an accident or health plan for employees that are either of the following. • Payments or reimbursements of medical expenses. • Payments for specific injuries or illnesses (such as the loss of The use of an arm or leg). The payments must be figured without regard to any period of ab- sence from work. Accident or health plan. This is an arrangement that provides benefits for your employees, their spouses, and their dependents in the event of personal injury or sick- ness. The plan may be insured or noninsured and does not need to be in writing. Employee. For this exclusion, treat the following individu- als as employees. • A current common-law employee. • A full-time life insurance agent who is a current stat- utory employee. • A retired employee. • A former employee you maintain coverage for based on the employment relationship. • A widow or widower of an individual who died while an employee. • A widow or widower of a retired employee. • For the exclusion of`contributions to an accident or health plan, a leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Exception for S corporation shareholders. Do not treat a 2°~o shareholder of an S corporation as an employee of the corporation for this purpose. A 2% shareholder is someone who directly or indirectly owns (at any time dur- ing the year} more than 2°% of the corporation's stock or stock with more than 2°i° of the voting power. Treat a 2°0 shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder. Exclusion from wages. You can generally exclude the value of accident or health benefits you provide to an employee from the employee's wages. Exception for certain long-term care benefits. You cannot exclude contributions to the cost of long-term care insurance from an employee's wages subject to federal income tax withholding if the coverage is provided through a flexible spending or similar arrangement. This is a benefit program that reimburses specified expenses up to a maxi- mum amount that is reasonably available to the employee and is less than five times the total cost of the insurance. However, you can exclude these contributions from the employee's wages subject to social security, Medicare, and federal unemployment (FUTA} taxes. S corporation shareholders. Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the value of accident or health benefits you provide to the employee in the em- ployee's wages subject to federal income tax withholding. However, you can exclude the value of these benefits (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. Exception for highly compensated employees. If your plan is aself-insured medical reimbursement plan that favors high-y compensated employees, you must in- clude all or part of the amounts you pay to these employ- ees in their wages subject to federal income tax withholding. However, you can exclude these amounts (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes. A self-insured plan is a plan that reimburses your em- ployees for medical expenses not covered by an accident or health insurance policy. A highly compensated employee for this exception is any of the following individuals. • One of the five highest paid officers. • An employee who owns {directly or indirectly) more than 10°'° in value of the employer's stock. • An employee who is among the highest paid 25% of all employees (other than those who can be ex- cluded from the plan). For more information on this exception, see section 105(h) of the Internal Revenue Code and its regulations. COBRA premiums. The exclusion for accident and health benefits applies to amounts you pay to maintain medical coverage far a former employee under the Com- bined Omnibus Budget Reconciliation Act of 1986 (CO- BRA). The exclusion applies regardless of the length of employment, whether you directly pay the premiums or reimburse the former employee for premiums paid, and whether the employee's separation is permanent or tem- porary. Achievement Awards This exclusion applies to the value of any tangible personal property you give to an employee as an award for either length of service or safety achievement. The exclusion Page 6 Publication 15-B (2008)