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Old 12-23-2008, 07:15 PM   #1
DisneyBeagle
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Health insurance premiums (pre-tax or post-tax)?

I work for a rather small company and one of our employees wants to know if she can pay her portion of her health insurance premiums with pre-tax rather than post-tax money. I have never had to deal with this question before, so who would I ask to find out the answer the health insurance provider, the payroll company or our accountant?

We don't have an HR department....technically, I am the HR department, but we are so small that we don't deal with many questions like this.

Thanks
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Old 12-23-2008, 07:19 PM   #2
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I have always paid mine pre tax... I work for a large company, NOT in the HR department. I don't even think they give us an option to pay it post tax. Again, I am not a tax guru or know any of the legalities, but in 23 years of working at this company, mine has always been pre tax. Hope this helps.
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Old 12-23-2008, 07:33 PM   #3
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Ours is pre-tax. My dad is a broker for group benefits plans and part of his pitch is the benefit to the employees of lowering their taxable income by having their premiums (health and dental) deducted.
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Old 12-23-2008, 07:45 PM   #4
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Ours also was always pre tax.
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Old 12-23-2008, 08:15 PM   #5
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Hi, these boards are my wife's deal, but I just happened to see this. I work in the payroll industry and in order for insurance to be pretax it has to be set up through your insurance provider for your company. The employer has to pay more for the employee to be pre tax versus post tax. Not that the company is cheap, they also have to pay more because of the cost of administering pre tax insurance and keeping it in compliance with federal guidlines. I would start with the insurance provider and see what they can do, if your contract or renewal is up soon, you could find an insurance broker help you find cheaper rates with another provider. There is a lot out there, it just depends on how much time you can/want to put into it if you are not the full time HR person. If you can find an affordable plan that works, this is a good tool to help recruit good employees too with the cost of insurance these days.

Hope this helps.
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Old 12-23-2008, 08:17 PM   #6
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Hi, your employee can pay for premiums pre-tax, it will save both her and the company money as it cuts down on the employers matching tax contributions, however; in order to do this you must set up a pre-tax savings plan called a Section 125/cafeteria plan and it must be offered to all of your employees. The plan can also be opened up to all of the other benefits that you offer for which the employee pays a contribution such as dental, life, STD, LTD, etc. You have to create a "plan year" with an election period and open enrollment and draft documents to file with the IRS so your employee may have to wait for a few week/months for you to set this up. There are usually fees associated with the creation of the plan and may be ongoing administration costs. Since you pay commission to have them help you with your group insurance plans contact your insurance agent or the financial specialist who helped you set up your companies 401(k) or Keogh plan; most can help you set this up. I'm an underwriter for an insurance agency and my company helps with this all the time. If you don't have an insurance agent or financial specialist or your agent is not qualified to help you, your accountant can probably help you set this up as well or your company lawyer. There are a few "online" options for setting up one of these plans but I don't necessarily consider them the best option as they don't take into account all of the nuances of your individual company. You could also try contacting the insurance provider or your payroll company but unless they administer these plans they will probably refer you somewhere else.
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Old 12-23-2008, 08:23 PM   #7
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kinda a hijack here but on the same subject of health insurance...if your premiums are taken out pre tax are they still an allowable heathcare deduction on income tax (I am guessing that it is only deductable if it is post tax) . Ours is pre tax so I am wondering we usually just take the standadrd deduction but we have never included our health premuims in the figure maybe becuase it is pre tax for us...
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Old 12-23-2008, 09:52 PM   #8
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Quote:
Originally Posted by DisneyBeagle View Post
I work for a rather small company and one of our employees wants to know if she can pay her portion of her health insurance premiums with pre-tax rather than post-tax money. I have never had to deal with this question before, so who would I ask to find out the answer the health insurance provider, the payroll company or our accountant?

We don't have an HR department....technically, I am the HR department, but we are so small that we don't deal with many questions like this.

Thanks
I would suggest talking to the Payroll company first. For tax purposes it is treated similar to a retirement deduction; it is included in gross pay for FICA/Medicare but not for taxable wages or withholding.

I cannot see where the insurance company has to be invlved at all; it is not an HSA.


Quote:
Originally Posted by eeyorethegreat View Post
kinda a hijack here but on the same subject of health insurance...if your premiums are taken out pre tax are they still an allowable heathcare deduction on income tax (I am guessing that it is only deductible if it is post tax) . Ours is pre tax so I am wondering we usually just take the standard deduction but we have never included our health premiums in the figure maybe because it is pre tax for us...
Since the premium is paid from money you are not taxed on, you cannot deduct the premiums on Schedule A of the tax return. If that were allowed, you would effectively be getting a double deduction for the same thing.

The big thing is most people do not, even with their share of health insurance premiums, hit the 7.5% of AGI floor for deductability of medical expenses.

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Old 12-23-2008, 10:28 PM   #9
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Thank you so much for your replies. You have been very helpful. I am going to review your suggestions and go from there.
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