Group Benefits Flashcards
Under what two (2) circumstances is the cost of group term insurance above 50k tax-exempt?
1) individuals who are disabled or retired, under certain circumstances.
2) if the insured has designated the employer or a charitable organization as beneficiary.
What is considered a highly compensated employee (HCE) with regard to group benefits?
- top 25% in pay
- officers of the employer
- > 5% owner
What are COBRA qualifying events and how long must coverage be granted?
- termination (18m)
- FT to PT (18m)
- Disability (29m) - Social security definition
- death (36m)
- Divorce (36m)
- EE qualifies for MediCare (36m)
- loss of depend an status (36m)
- plan termination (36 m)
What are the non-cash fringe benefits that are taxed as income to the employee.
- personal use of company vehicles ( auto, plane, etc.) or lodging
- season tickets provided by employer
- country club dues
- any discounts that are available only to HCEs and not “rank and file” employees
If taxable to the employee, what is the withholding on fringe benefits?
Flat 25%
What are the 5 basics of workers comp laws (which are statutory)?
1) negligence it a factor in liability
2) indemnity is partial but final
3) periodic payments
4) cost is treated as a cost of doing business
5) insurance is required
What requirements must be met to qualify as group life insurance (IRC Section 79)?
- 70% of employees must benefit
- 85% of participants are not KEY employees
- cover a nondiscriminatory class of employees
- comply with IRC Section 125 if part of a cafeteria plan
Who can be excluded from group benefits under IRC Section 79 (group life)?
- employees < 3 years
- part time or seasonal employees
- those covered under a collective bargaining agreement
- certain nonresident aliens
Who must comply with the Family & Medical Leave Act (FMLA)?
Employers with 50 or more employees in the previous year with-in a 75 mile radius of the workspace.
What are the de minimis fringe benefits?
- limited use of the copy machine
- occasional tickets for business purposes
- public transportation up to $125/month
- parking up to $240/month
What types of benefits does worker’s compensation provide?
- medical expenses
- disability expenses
- survivor death benefits
- rehab benefits
SARs
Stock appreciation rights
SARs benefit taxation
Considered wages so OI and payroll taxes
Difference between SAR and phantom stock plans
SARs can choose the exercise date
Section 83(b)
“Legally mandated gamble”
Can pay taxes on current invested shares to get additional gains treated as capital gains
Excess benefit plan
Supplemental deferred comp plan that provides benefit beyond Section 415 limits
For example, 10% of comp up to 250k into profit sharing..10% of salary in EXCESS of 250k goes to deferred comp plan
SERP
Supplemental executive retirement plan
DBO plan
Death benefit only plan
Taxed as OI to beneficiary
Secular trust
Protected from creditors so is taxed to EE and deducted by ER
Rabbi trust
Informally funded deferred comp
Trust setup with 2 beneficiaries…EE and creditors
Cannot be offshore
Cannot have any financial triggers
Top hat plan
Unfunded SERP
Who gets SS benefits of living worker
50% reduced…spouse 62-NRA
50%…spouse NRA+
50%…spouse any age caring for child under 17
50%…unmarried child under 18
50%…unmarried child any age if disabled
Who gets SS benefits of dead worker?
100% reduced…spouse 62-NRA
100%…spouse NRA+
75%…spouse any age caring for child under 17
75%…unmarried child under 18
75%…unmarried child any age if disabled
Compensation NOT included as taxable wages
1) sick days beyond 6 months
2) medical or hospital expenses paid by ER
3) ER payments to retirement plans
4) deferred comp as long as subject to risk of forfeiture
