Retired Employees Health Ins?

[dan doshan]

Don't understand this situation. Retired employees on medicare that used to pay X amount, generally around 220 dollars a month each for employee and spouse to or thru their former company for Insurance coverage, sort of like a Medicare Supplement policy .......

A couple of years ago the company wanted to get out of this health insurance arrangement covering their retired employees that had reached the age for medicare. So they negotiated with the union that the company would reimburse these retired employees up to say around 160 dollars a month each for husband and wife for any medicare supplement or advantage plans the former employees got. These clients insist that none of this reimbursement of their premiums is taxable. That they were told it would not be taxable. They do not get any sort of document from the company showing it is. The amounts reimbursed are not added to their normal 1099R retirement pay.

Basically the retired employees send proof each month of the amounts they paid for their extra Medicare policy and the company reimburses them up to a certain amount.

I guess I don't understand why this would not be a taxable event to the retired employee. Anyone have any idea why it would not. Have a few clients like this and to a person they are absolutely adamant that this is not taxable period.

[DonPriebe]

... They do not get any sort of document from the company showing it is. The amounts reimbursed are not added to their normal 1099R retirement pay. ... I guess I don't understand why this would not be a taxable event to the retired employee. ...

We have retirees in this area that get a benefit that exactly pays their Medicare premium. They receive a separate 1099-R showing -zero- in the taxable box.

I receive a monthly payment from my ex-employer for NOT enrolling in the available retiree medical insurance. The documentation says it is non-taxable, and I receive no 1099-R, W2, etc.

Both instances involve Fortune 500 companies.

[BP.]

I have seen retirees get a tax free benefit towards their premiums. These people sometimes receive a letter reminding them that if deducting medical expenses, they must reduce their paid premiums by the tax free premium assistance they received.

[FEDUKE404]

Inquiry

We have retirees in this area that get a benefit that exactly pays their Medicare premium. They receive a separate 1099-R showing -zero- in the taxable box.

I receive a monthly payment from my ex-employer for NOT enrolling in the available retiree medical insurance. The documentation says it is non-taxable, and I receive no 1099-R, W2, etc.

Both instances involve Fortune 500 companies.

Out of curiosity, what distribution code(s) appear on the Form 1099-R for those who do receive such ?? (I get a lot of Forms 1099-R with no entry in the "taxable" box....but there is in fact taxable income present.)

Playing devil's (IRS ) advocate, why issue that Form 1099-R in the first place??

FE

[dan doshan]

I receive a monthly payment from my ex-employer for NOT enrolling in the available retiree medical insurance. The documentation says it is non-taxable, and I receive no 1099-R, W2, etc.

That's basically what I am wondering about. My clients worked for a company that just wanted to quit providing insurance for retired employees once they became eligible for Medicare. Originally these retired employees would pay around 200 to 220 dollars a month out of their own funds for the coverage. Normally the insurance amount would be deducted from their pension payment if their pension had enough to cover the costs.

I just can't quite understand as to why now that the company instead reimburses the retired employee up to a certain amount for insurance they now get on their own, why this amount would not be taxable. Would love to know the logic or reason. If it was taxable previously when the employee paid out of his own funds or retirement money, why not now.