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Terms in this set (13)

The premiums paid by a company for group accident, health, and dental coverage for its employees are generally deductible by the company as a business expense. The premiums are not taxed to the employees. The benefits are received by the employees income-tax free to the extent the benefits do not exceed actual expenses. The premiums paid by a company for group disability insurance for its employees are generally deductible by the company as a business expense. The premiums are not taxed to the employees, but the benefits are taxable. However, if an employee pays all or part of the premiums for group disability coverage, he may not deduct these premiums, but the benefits will be received income-tax free to the extent that the employee paid the premiums. disability benefits are subject to Social Security tax (FICA) and federal unemployment tax (FUTA) for the first six calendar months following the last month the employee was on the job. Group accidental death and dismemberment coverage premiums may be deducted as a business expense by companies. The premiums are not taxable to the employees, and the benefits are received income-tax free. Qualified group long-term care insurance, like individually owned longterm care, is treated the same as other group health policies. Companies offering this coverage may deduct any premiums paid as a business expense. The employee is not taxed on these premiums, and the benefits are tax exempt. Companies offering group long-term care coverage can deduct any premiums paid as a business expense. The employee is not taxed on these premiums, and the benefits are tax exempt. However, these tax advantages do not apply to group long-term care coverage provided through a Section 125 cafeteria plan, and expenses for long-term care services cannot be reimbursed under flexible spending arrangements.
Individual Medicare supplement insurance premiums are considered deductible medical expenses to the extent that the combination of premiums paid plus other unreimbursed medical expenses exceeds 10% of adjusted gross income. Benefits are considered reimbursements for medical expenses already incurred and are therefore received tax free. Premiums paid by an employer for group Medicare supplement insurance are tax deductible to the employer, and benefits are received tax free. The Health Insurance Portability and Accountability Act of 1996 provided that premiums paid for individually owned long-term care insurance are tax deductible to the extent that combined premiums and unreimbursed medical expenses exceed 10% of adjusted gross income. Premiums for group LTC insurance paid by employers are deductible as a business expense, but the coverage cannot be part of a cafeteria plan or flexible spending account. Benefits are received tax free up to specified limits, which are indexed annually for inflation. LTC policies issued on or after January 1, 1997, must meet federal standards for tax-qualified status. LTC policies issued before that date are grandfathered and are automatically tax qualified. The federal standards establish new eligibility requirements. The individual must be certified by a licensed health care professional to be chronically ill with a condition that is expected to last at least 90 days and must have a plan of care. The individual must be recertified as chronically ill on an annual basis. The new federal standards also establish consumer protection standards such as guaranteed renewability and the option to add inflation protection and nonforfeiture benefits (but not in the form of cash surrender values) and impose new disclosure requirements.