“Because human beings suffer so much more than ducks…You might not think so if you were a duck.”
– Michael Faber
The IRS’ Chief Counsel office clarified fixed-indemnity health benefits, which are coverages that pay insured individuals a specified amount of cash for health-related events. Aflac, with its spokesperson duck, is not only a big player in the fixed-indemnity product marketplace, but their products can also be found in many of the clients BenefitCorp consults for. If your company offers employees fixed-indemnity health benefits, like Aflac, here are some things you should know.
First, the payments made to an individual that exceed the cost of the medical care are taxable if the premiums are paid on a pre-tax basis. The onus is on the employer to make sure that income and employment taxes are properly withheld.
Second, the payments made to an individual are not taxable if the employees pay the premiums with after-tax dollars. After-tax premiums are much cleaner in terms of IRS reporting, but some of the benefits to group insurance are the tax savings to the company and individual, but now that comes at an administrative cost.
If you would like to understand better how to manage the new regulations around fixed-indemnity benefits, contact BenefitCorp here, and we will recommend the best CPAs and advisors to help navigate these waters.