Long-Term Disability Er Paid Premiums

Client pays for LTD benefits to its employees by paying insurance premiums every month.  They are allowed to elect to treat the employer premiums as taxable so that if they were ever disabled their benefit would be tax free (at least I believe that is the arrangement).

In any event, the Plan uses W-2 wages and this election increases Box 1 federal wages on W-2.  So this election increases their 415 wages, correct?  Yes it would be a taxable fringe benefit, but curious if others agree it is part of 415 comp.

I believe that 415 and W-2 are NEARLY identical, with the exception of non-qualified deferred comp distributions unless the plan provides otherwise, and treatment of certain stock option situations. Also maybe tips. 

A long-winded way of saying I agree that what you describe would be 415 comp.

Is there reasonable argument for treating the LTD premiums as a taxable fringe benefit? Not a ton of guidance out there on fringe benefits, but 1.414(s)-1 suggests that fringe benefits and welfare benefits are separate items, and I would think of LTD premiums as being a welfare benefit. 

The original post dealt with 415 compensation and your post references 414(s).  Not a big deal since 414(s) generally includes the 415 definitions and more.

Note that there are multiple 415 definitions and this is an example where the treatment of fringe benefits get murky.  One 415 definition includes "Medical or disability benefits as described in IRC Sections 104(a)(3), 105(a) and 105(h), but only to the extent that these amounts are includible in the gross income of the employee. Treas. Reg. 1.415-2(d)(2)(iii)".

Another definition excludes "Medical or disability benefits as described in IRC Sections 104(a)(3), 105(a) and 105(h), but only to the extent that these amounts are includible in the gross income of the employee. Treas. Reg. 1.415-2(d)(2)(iii)" as long as taxable NQSO and moving expenses also are excluded.

You may want to decide what you would like to see included or excluded and then browse the available definitions of compensation to see what comes closest to an acceptable definition.

To me it is a) taxable and b) a fringe, so the stretch is NOT calling it a taxable fringe in my view. If your base defintion of pay is W-2 (which is always my preferences since there is oodles of guidance on goes in Box 1 of W2) then this is a very easy call in my opinion.