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Q&A

  • Q: Who benefits from this tax treatment?

  • A: This expanded health care tax benefit applies to various workplace and retiree health plans. It also applies to self- employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return.

  • Q: May employees purchase health care coverage for their adult child on a pre-tax basis through the employer’s cafeteria plan?

  • A: Yes. In addition to the exclusion from income of any employer contribution towards qualifying adult child coverage, employees may pay the employee portion of the health care coverage for an adult child on a pre-tax basis through the employer’s cafeteria plan – a plan that allows employees to choose from a menu of tax-free benefit options and cash or taxable benefits. The IRS provided in recent guidance [(Notice 2010-38)] that the cafeteria plan could be amended retroactively up until December 31, 2010 to permit these pre-tax salary reduction contributions.

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