Supplemental insurance premiums

[Guest jim williams]

Can anyone confirm whether premiums paid under Aflac supplemental income policies for health related occurrences are permitted as pre-tax benefits under a Section 125 plan?

[leevena]

Yes they are. An issue with these types of voluntary plans (AFLAC, Colonial, and others) is the tax issue. For example, if I have a monthly premium of $50 for disability insurance and I run it through the plan pre-tax I will not be taxed on the benefit, which is larger than the premium.

[GBurns]

I think you meant that the benefit will be taxed if you paid the premium pre-tax through the section 125 plan. This applies to disability insurance not the other items.

For the other items such as Cancer first occurrence, Heart & Stroke, Sickness & Accident and Critical Illness you might want to look at Private Letter Ruling 200339015 and Technical Advice Memorandum 19936046.

[leevena]

Woops, I wrote that wrong. THanks GBurns.

Yes, the benefit would be taxed. Sorry.

[jmor99]

Just as an add in, apparently some of Colonial's new plans no longer meet the requirements for pre-tax eligibility and are being sold as an after-tax benefit. I've not seen the latest AFLAC benefits so don't know if they're still eligible or not. Basically, anything that defers compensation (exceptions being HSAs and 401-ks)

cannot be pre-taxed. Jim, your local AFLAC rep should know, or if you don't trust his answers, call the Colonial rep!

[GBurns]

Do you know which plans? Or is it only in a particular environment such as a PEO?