Opting out of Er Paid Health Insurance

[austin3515]

Employer pays 100% of employee health insurance. If the Ee opts out of health insurance (let's say they are covered by their spouse's plan), employer will pay them additioinal compensation equal to 50% of what the premiums would have been.

1) I assume this is totally and completely unrelated to the deemed 125 compensation issue, correct?

2) Can these opt out benefits be considered a fringe benefit, and therefore excluded along with all other fringe benefits (assuming the document excludes fringe benefits). (I think yes, but let me know!). I just wasn't sure if there was a technical definition of fringe benefits.

[KJohnson]

Do they make this election to receive cash through a cafeteria plan? If not you might have constructive receipt issues for the employees who take the health insurance.

http://benefitslink.com/boards/index.php?s...mp;#entry100424

[cpc0506]

We had this issue come up this year when the client provided us compensation for 2010, they informed us that they have been paying employees extra if they opt out of medical coverage, but they have not been withholding 401(k) on these funds. Is this a problem? The plan defintion of compensation does include deemed 125 compensation. I think it is but I am looking for guidance.

Thanks

[austin3515]

Take a look at K Jiohnson's link, but I submitted to TAG and they indicated that this is NOT considered a fringe benefit, and therefore it is part of compensation unless specifically excluded by the document.