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Reimbursements of pre-tax health insurance contributions are taxable.

Publication: The Tax Adviser
Publication Date: 01-MAY-02 		Format: Online - approximately 746 words
Delivery: Immediate Online Access

Article Excerpt
In January 2002, the IRS ruled in Rev. Rul. 2002-3 that a company's reimbursement of an employee's pre-tax salary reduction used to pay for health insurance was not excludible from gross income under Sec. 106(a) or 105(b) and was subject to withholding and employment taxes.

In the ruling, an employer designed its health plans so that an employee paid all or a portion of the health insurance premium through pre-tax salary-reduction contributions. That would reduce the employee's FICA and FUTA wage base on which Federal payroll taxes are assessed. The employer then reimbursed the employee for a portion of the contributions.

Example: Employer Z provides health coverage for its employees through...

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