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2007, Why not keep it simple. Instead of reimbursing the cost of the
heath insurance, let the business
write out the check for the insurance. Much cleaner and you get the tax deduction.
and it wouldn't be taxable to the E'ee?
You are right to ask. If it is not a group health plan and no reimbursement plan exists, the employer's payment of the premium would be taxable compensation.
You would need to buy a qualifying HRA plan document and perform the discrimination testing. It is probably not worth the hassle if you screw up and get audited, you and the employees get taxed. If the owner/owner's spouse is the employee in question, you might be able to just buy a plan doc on the web and go it alone. However, I don't recommend it. What type of entity, Sole Prop, S Corp, C Corp, Partnership?
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I apologize if there is a duplication here. I don't see my original post.
You are right to ask. The direct payment of the premium absent a qualified benefit plan would create taxable wages to the employee.
In general, I don't recommend going it alone. If the employee is the only one who will benefit from the plan then you might be able to just buy a document online. If the owner or owner's spouse and another employee receive or will receive benefits under the plan at any time, you will probably want to pay for administration. You have to do testing to prove the plan isn't a sham to benefit the owner and stiff the other EEs.
I have a recommendation of a third party administrator that is reasonable. I have two satisfied clients and don't receive a dime from them for referrals. Well actually, they offer me a whopping $25 that I pass on to my clients.
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