Life and Disability Premiums

[KBTS]

A client contacted me with a payroll question and I cannot find a definite answer anywhere. They used to offer an employer sponsored life and disability plan which employees could purchase the insurance with pre-tax dollars. As of June, they will no longer have the plan but have offered to reimburse employees the cost of the coverage (providing the employee provides proof they have the coverage). My first thought is that these payments would be considered compensation and employer should withhold payroll taxes on the amounts. Can someone confirm or provide additional information for me?

[JG EA]

Try http://www.irs.gov/pub/irs-pdf/p15b.pdf and search for life insurance. Pretax seems very specialized, but pub describes plans that can be excluded from wages. (The item we see all the time as preparers on the W-2 - Group Term Life Insurance - and coverage over the limit is in W-2.)

[Burke]

Try http://www.irs.gov/pub/irs-pdf/p15b.pdf and search for life insurance. Pretax seems very specialized, but pub describes plans that can be excluded from wages. (The item we see all the time as preparers on the W-2 - Group Term Life Insurance - and coverage over the limit is in W-2.)

Yes, but these are plans that the employer provides for the employees. OP said they were discontinuing the pre-tax plan. So, IMO, the monies provided to the employees to purchase life and health ins on their own would be compensation.