Another question regarding Medical Insurance Premiums......

[Guest Magilla91]

My husband's company recently switched from a C corp to an S corp. All along he has paid 100% of his employees medical insurance premiums. He wants to begin have the employees pick up some of the costs by offering a premium only plan and a medical benefits flex plan. In reading information about these plans it seems to me that because he didn't have a formal plan in place before that the "value" of the benefit he was providing to his employees by paying their insurance premiums was suppose to be included in their gross income and they were required to pay taxes on this amount. Is this true? Or am I reading too much into this?

Thanks again for any help?

[papogi]

It is my understanding that protections afforded by Sections 105 (amounts received from a health plan) and 106 (contributions by the employer to the health coverage) would still be available to him. Those amounts should not be taxable income. Anyone with other thoughts?

[mroberts]

Employers have every right to pay for 100% of medical premiums and this amount is not taxable to employees. If he was additionally reimbursing his employees for any medical expenses incurred without setting up a formal section 105 plan, then that amount would be taxable. But from what you posted, that doesn't seem to be the case.

[Guest Magilla91]

Thank you! That's what I hoped to hear. I think I was just reading too much into it and it made me a bit nervous. Too bad it has to be so complicated!

Thank you again! :)