Business Services Industry
IRS clarifies auto enrollment tax issues.(Internal Revenue Service)(Brief Article)
Business Insurance, May, 2002 by Geisel, Jerry
WASHINGTON-The Internal Revenue Service has clarified the tax status of two health care plan designs-both involving employee salary reductions used to pay health care premiums. The first design, addressed by the IRS in Revenue Ruling 2002-27, involves a health plan that features an automatic enrollment process.
Under that plan design, unless an employee objects, he or she is automatically enrolled in the employer's health plan, with the employee's salary reduced on a pretax basis to pay a portion of the premium. An employee who affirmatively rejects coverage does not have his or her salary reduced. The question before the IRS was whether an automatic-enrollment plan effectively offers employees a choice between cash and a tax-free benefit. Such a choice must...
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