Wednesday, October 27, 2010

Employer Contributions to Healthcare Insurance Costs To Be Taxed Next Year? In General, No; Unless “Excess Benefits” are Involved.,

October 27, 2010

So today, I was on the distribution list of a forwarded email which alarmingly claimed that employer contributions to healthcare insurance costs would be taxed as income - starting next year. So, I did some research to ascertain whether this was true or not, prior to my raising the alarm flag on this same issue.

Well…, at first I was unable to find the quoted document in the email: “On page 25 of 29: TITLE IX REVENUE PROVISIONS- SUBTITLE A: REVENUE OFFSET PROVISIONS-(sec.9001, as modified by sec. 10901) Sec.9002.”

As I persevered and continued to peruse through the rumor mill in self-claimed conservative blogs - which never ceased in the criticism of ‘Obama-Care,’ I found a reference that stated the source of the claim of any upcoming increase to taxable income as a result of employer healthcare costs contributions. The blog claimed that Kiplinger’s Taxation Letters and Website had initially warned of increased taxable income as a result of employer contributions to healthcare costs. See: (Note my comment at the bottom of that blog.)

So, as I researched Kiplinger’s website, I discovered that Kiplinger’s explicitly addressed any claims/credit attributed to Kiplinger that there would be a tax on employer contributions to healthcare costs. Kiplinger emphatically stated that any credit given to them for such a statement was in error. In fact, they say there will not be a tax on such employer provided benefits. See: , and see: (item number 3).

So, I was determined to find the actual document and, on the U.S. Dept. of Health and Human Services website, I did find the document: .

So, in the end and in general, the answer is no, there will not be a tax on employer contributions to healthcare benefits. Nevertheless, the employer is to include the employers’ healthcare insurance contributions as a line item on the W-2. But the item is not included as taxable income unless the amount totals “excess benefits.”

So, the answer continues, well possibly…. As is often the case with the laws in our nation, the real answer is, in fact, there is a possibility that employer contributions to healthcare benefits could be taxed. As stated in TITLE IX REVENUE PROVISIONS- SUBTITLE A, an excise tax will be assessed on “excess benefits” – with “excess benefits” being “applicable benefits” / employer contributions of over $8300 for a single employee and over $23000 for an employee and family in fiscal year 2013.

So the final answer is that it is unlikely that one will be taxed for employer contributions to healthcare costs unless they are being given ‘excess benefits.’ At least, according to my brief and cursory research.

Does this begin to explain the matter? Of course, what the future may hold in this regard is anyone’s guess at this point in time.

Adam V. Trotter / AVT

Fyi: Most employers, such as the Federal government, pay 60% of healthcare insurance costs with the employee paying 40% of the cost - which is taken from the employees’ paycheck.

After thought:  June, 2016.
I might have to revisit this blog entry and make some changes or a rare blog-entry deletion, methinks.