C Corp.-Employee Benefits

[Bird Legs]

100% Owner, Stockholder, of C Corp. Not active in business, which is a restaurant.
His son manages the restaurant, is an officer of the corp. and receives a salary.
There are other employees.
Question: Can the C Corp. pay the medical ins. premiums for the son, manager, but not
other full time employees, and deduct the premium as a business expense, and the son
not pay tax on the premiums? Or do the premiums need to be included as wages on
the sons W-2?

[Bees Knees]

A C corporation that pays the medical insurance premiums for employees (including employees who are officers and shareholders) can deduct the expense and exclude the benefit from employee wages under Section 106. It is interesting that Section 106 does not have any nondiscrimination rules. Section 105(h) provides nondiscrimination rules for employer medical reimbursement plans, but no similar rule applies to Section 106 plans.

However, I have heard that there could be some sort of ERISA laws that require things similar to the nondiscrimination rules. I’m not sure what they are though. Usually employers get around that by having the other employees sign off on not wanting coverage because they are covered by a spouse’s employer plan.