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Are Employee paid health insurance premiums for employees on long term disability (LTD) considered imputed income in 2015?

I receive Long Term Disability benefits through my company for many years now, and one of those benefits is that they directly pay my health insurance premiums. I do not pay any premiums. Employees on regular wages have their health insurance premium deducted from their paychecks. This year is the first time that I received a letter from my employer that states that starting calendar year 2015, their contribution to my health plan is considered imputed income and that I will have to pay income taxes on it. Please advise. My health insurance policy is the same one that is offered to every other employee in the company who is on regular wages. The only difference being is that the employees who are on regular wages have their premiums deducted from their paycheck every pay period and employees who are on Long Term Disability (LTD) have those exact same health insurance premiums paid for by the company. The company's LTD policy includes their payment of the health insurance premiums for the employees on LTD who are also on the company offered health insurance plans. These are the same plans offered to all employees. In addition, the health insurance policies offered by the company are "self-funded" by the company and administered by various health insurance companies. Does this information still equate with the company paid LTD employee health insurance premiums suddenly being considered in 2015 as imputed income? I've spoken to my company's Benefits Department and the IRS, and reviewed their websites. My Benefits department cannot state what IRS or tax law they are basing their decision to consider company paid health insurance premiums for LTD participants as imputed income. I also spoke to the IRS and their ACA specialists, and they can't find any language that states that company paid health insurance premiums for LTD participants is considered imputed income. I'm not sure where or who to turn to find the real answer with the actual IRS, ACA , federal or tax law language to back it up. How do I find out the reason for the change? or the reference in tax law that would make this benefit taxable? I know my status with the company is as an "employee on leave" on "long term disability". Under IRS 2015 Publication 15-B, Section 2, page 5, it discusses discusses the exclusion rules that apply to fringe benefits and this includes accident and health benefits. I'm confused as to how the employer paid health insurance premiums are considered income when the IRS Publication considers it an excludable benefit not subject to federal in-come tax withholding. Do you have a link to or the name of the IRS, ACA, federal or tax law where it defines employer paid health insurance premiums for employees on Long Term Disability as taxable income? Please advise.

Answers

Anonymous
(CFO) |

The answer to your question in all likelihood lies with your company. A change of policy (by your company) may have triggered the change. Meaning.......the company decided as a policy that they are no longer shouldering the cost of the premiums (as a benefit) and are transferring the burden (cost of premium) to YOU.

Anonymous
(Tax/Business Consultant) |

Please seek the advice of a local tax professional in your area.
Any answers provided should not be construed as tax advice.

Having said that [disclaimer]...

"This year is the first time that I received a letter from my employer that states that starting calendar year 2015, their contribution to my health plan is considered imputed income and that I will have to pay income taxes on it."

It appears that your company changed its benefits policy.

Generally...

When someone gets disabled and receives disability payments, there's always
the question of whether or not it's taxable.

Basically, taxability depends on Who paid the disability insurance.

If the employeR paid the disability insurance and the recipient is the
employee, it's taxable.

If the employeE paid the disability insurance and the recipient is the
employee, it's non-taxable.

______________________

For example...

Employers who pay the premiums for employees’ long-term disability (LTD)
insurance may want to impute income equal to the premium amount, so that if
an employee becomes disabled, benefits received will not be taxable.

_____________________

General consideration to think about...

Not all companies offer benefits. Companies that do benefits will decide on what benefit to provide. Many employees should be aware of this!

When it comes to offering benefits to employees, companies can do the following:

1. Not offer any!

2. Provide "some" benefits (per company's discretion) and either the:
a. Company pays 100% of whatever benefit's costs or
b. Company pays a portion of whatever benefit's costs and the employee pays the difference, generally via Pre-tax deductions from their salary

3. Provide "some" benefits (per company's discretion) but does Not pay any amount.
- The employee pays 100% of the cost, generally via Pre-tax deductions from their salary

It really depends on the company!

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

There is a new rule for 2015 that health insurance premiums paid out of a Qualified Retirement Plan are taxable. You need to talk to a tax professional to help you plan for how you might mitigate the impact of this change.

https://www.federalregister.gov/articles/2014/05/12/2014-10849/tax-treatment-of-qualified-retirement-plan-payment-of-accident-or-health-insurance-premiums

Anonymous
(self) |

Hi Scott,

Thank you for the link you provided. It discussed health insurance premiums and/or long term disability premiums paid out of a Qualified Retirement Plan.

Do you know if the same applies for specifically health insurance premiums paid out a Long Term Disability program for employees?

Long Term Disability participants are not considered retired, but are considered "employees on leave" and on "long term disability".

Do you know where I can find the language and/or link to that tax rule?

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