Did You Know?
Q Are monthly Long Term Disability (LTD) claims subject to taxation to the employee?
A If the LTD premium has been paid 100% by the employee and on a post tax basis, the employee will not have the monthly benefit taxed. If the employer pays any or all or the monthly premium, unless the benefit is grossed-up under IRC 162(a), then whatever portion of the premium the employer pays will be taxed. For example, if the employer pays 100% of the LTD premium for the employee, unless the plan was set up under IRC 162(a) guidelines, the monthly claim benefit will be taxed and will likely result in approximately 50% of the anticipated monthly benefit amount a nasty surprise to the employee and also to the employer as well.
Q Why does the group medical plan anniversary date have to be the same as the Section 125 pre-tax program plan date?
A IRC 125 identifies an open enrollment period, usually the 30 days prior to the plan date, in which an employer can offer/make changes to the medical plan (and any other eligible benefit) and subsequently set up the participating employees benefit premiums on a pre-tax basis. Any enrollment or changes outside of the open enrollment period as defined in an employer's plan document, unless initiated by a status event (birth, death, adoption, marriage, divorce, loss of job/benefits, etc.) will result in a violation of the regulations and therefore subject to penalties to the employer.
Q Does a small business have to offer COBRA to terminating employees?
A A business with less than 20 employees is not subject to COBRA. Instead, the medical benefit is subject to state continuation which has a continuation period of 6 months, compared to the normal 18 months with COBRA.
|
