Publication 15b |
2000 Tax Year |
Accident & 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
insurance.
- Contributions to a separate trust or fund that provides
accident or health benefits directly or through insurance.
- Contributions to medical savings accounts (discussed in
Publication 969,
Medical Savings Accounts (MSAs)).
This exclusion also applies to payments you make (directly or
indirectly) 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 absence 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 sickness. The plan may be insured or noninsured and does not need
to be in writing.
Employee.
For this exclusion, treat the following individuals as employees.
- A current common-law employee.
- A full-time life insurance agent who is a current statutory
employee.
- A retired employee.
- 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% shareholder of an S corporation as an employee of
the corporation. A 2% shareholder is someone who directly or
indirectly owns (at any time during the year) more than 2% of the
corporation's stock or stock with more than 2% of the voting power.
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 maximum amount that is reasonably available
to the employee and is less than 5 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 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 the employee in the employee'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 federal unemployment taxes.
Exception for highly compensated employees.
If your plan is a self-insured medical reimbursement plan that
favors highly compensated employees, you must include all or part of
the amounts you pay to these employees 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 federal
unemployment taxes.
A self-insured plan is a plan that reimburses your employees 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 excluded from the plan.
For more information on this exception, see section 105(h) of the
Internal Revenue Code and the related regulations.
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