Guest John Schmidt Posted January 20, 2001 Share Posted January 20, 2001 I understand 2% shareholders of an S corporation are not eligible to participate in a 125 plan sponsored by the corporation. I believe spouses are excluded as well because of stock attribution rules. My client has a premium only plan for its employees' health insurance. Is the adult child of the shareholder, who is a bonafide employee, eligible to participate in the 125 plan for health insurance premiums? Link to comment Share on other sites More sharing options...
BeckyMiller Posted January 22, 2001 Share Posted January 22, 2001 The tax beneficial fringe benefit limits for S corporations are found in IRC Section 1372. The definition of a 2% shareholder is in part (B) which uses the attribution rules of IRC Section 318. Here ownership is attributed up and down the line - parents, grandparents, children and grandchildren of the direct shareholder. Link to comment Share on other sites More sharing options...
Guest John Schmidt Posted January 22, 2001 Share Posted January 22, 2001 OK, so the child can't participate in the 125 plan. If the S corporation pays the full premium outside of the cafeteria plan does it have to add the cost of the insurance to the child's W-2 as it does for the shareholder? Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now