Tag Archives: Taxing health benefits

Tax-free benefits under the microscope – this time it’s serious

9 Mar

Keep an eye on your employee benefits when you hear rhetoric about balancing the federal budget and dealing with the deficit.

If you were charged with the tough job of balancing a humongous budget with the goal of spreading the pain and assuring no large group benefited more than another, what would you do? I suspect you would look at your largest expenses first and at those expenses that are spread among the most people.

Remember these numbers:

$1,012,000,000,000 and $727,000,000,000

Those numbers (combined $1.7 trillion) are the tax expenditures for the federal government between 2013 and 2017 for exclusion of employer contributions for insurance premiums and medical care and exclusion of employer sponsored pension plan contributions and earnings (includes 401k plans).

That “exclusion” by the way is exclusion from your taxable income … Bingo!
 It is only a matter of time. Watch what happens with tax reform and deficit reduction later this year.

Why tax-free health benefits may be in jeopardy; your 2012 W-2. It’s not only the wealthy who benefit from the tax code

31 Jan

2012 is the beginning of reporting the value of employer-provided health benefits on form W-2 and it may also be the beginning of the end of this tax benefit.  There is little logic to continue this massive revenue loss.

Read more on Health Insurance Illuminated.

Reporting value of employer-provided health benefits on W-2 effective January 2012 … Is taxation of health benefits far behind?

30 Nov

Starting in 2012 employers will be required to report the  cost of employer-provided health care benefits in box 12 of your form W-2.  The amount will use code “DD”.

The amount shown on the W-2 is for information purposes and is not taxable . .  . for now.  However, do not lose site of the fact that the tax-free status of health benefits is the single largest revenue loser for the federal government.  The Simpson-Bowles Commission recommended a gradual phase out of this tax break.

Employer Provided Health Care Insurance: Exclusion capped at 75th percentile of premium levels in 2014, with cap frozen in nominal terms through 2018 and phased out by 2038; Excise tax (on high cost plans) reduced to 12%.

Given the failure of the super committee of Congress to accomplish anything, this employee tax benefit is a prime target for dealing with the federal deficit.  A change is unlikely to come all at once and it may be income sensitive, but it is hard to see how this plum will be left on the tree for much longer.

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