Unit 22 Taxation

Health Savings Accounts (HSA)

- distributions are tax free if used to pay for qualified medical expenses - individuals are eligible for it if hey cannot be claimed as a dependent - inside the HSA earrings are tax-differed

Benefits of qualified long term care policies

-benefits are received income tax free up to a specific amount -premiums are tax deductible for self employed ppl -employer paid premiums not taxable to employees

individuals are eligible for an HSA if they

-have no other comprehensive medical expense coverage -cannot be claimed as a dependent -are enrolled in a High Deductible Health Plan

If Wanda paid her entire premium for her group disability coverage, how much of her benefits from this coverage would be subject to tax?

0%

3 types of business disability insurance plans

1. buy-sell 2. key person 3. business overhead expense (BOE)

tax treatment of an individual depends on what 2 things?

1. who is paying the premiums 2. the type of plan

self employed ppl are allowed to deduct _ % of what the pay for health insurance from their gross income

100

wandas employer pays the entire premium for her group disability coverage. If wanda became disabled, how much of her benefit from this coverage would be subject to tax?

100%

Nonqualified withdrawals from a health savings account are subject to income taxes and a penalty of:

20%

Health Reimbursement Account (HRA)

Employer-funded plan that reimburses employees only for eligible and substantiated health-care expenses.

spend it or lose it

FSA

flexible spending arrangement

a cafeteria plan benefit that is funded w employee money by means of a salary reduction

High Deductible Health Plan

a health plan that offers lower premiums and requires the insured to pay a high deductible when the plan is used

The eligibility requirements to establish a health savings account (HSA) state that you must be enrolled in

a high-deductible health plan

health savings account

a tax-advantaged medical savings account available to taxpayers who are enrolled in a high-deductible health plan

What plan requires the insured to have a high-deducible health plan?

an HSA

Which of the following characterizes a health reimbursement account?

an employer-funded account that pays employees for qualified medical expenses they incur

the premiums are deductible and the benefits are taxable for which of the following business disability plans?

business overhead expense

which type of business disability plan has a deductible and its benefits are taxable?

business overhead expense

The XYZ Coffee Company may deduct its premiums from taxes but the benefits are taxable. The type of business disability plan that the company must have is a

business overhead expense plan

Employees can use the funds in an HRAs to pay for what?

coinsurance, copays, deductibles

The premiums and benefits in a business overhead expense plan are

deducible and taxable

qualified group long term care coverage premiums that are paid for by the employer are

deducible by the company but not the employee

disability benefits provided by a group insurance plan are what

fully taxable to the extent that they are paid for by the employer

was created to help employees and self employed individuals pay for their medical care expenses on a tax advantage basis

health savings account

distributions in an HSA used for things other than qualified medical expenses are subject to what kind of tax?

income tax, 20% penalty tax

A flexible spending account (FSA)

is a qualified employee benefit plan and approved withdrawals are not taxed

Can you establish an HSA if you have another comprehensive medical expense plan such as Medicare?

no

do individuals need IRA authorization to set up an HSA?

no

personally owned disability income insurance premiums are

not deducible to the insured, but the benefits are received tax free

With employer paid group health insurance, premiums are

not taxable for employees

Which of the following statements regarding the tax treatment of disability income insurance premiums is CORRECT?

premiums paid by the employer for a group disability plan are deductible by the employer

HSA distributions are tax-free when used to pay for what?

qualified medical expenses

benefits paid by personally owned accident, health, disability, or long-term care policies generally are

received income tax free

unlike a Flexible Spending Account, funds in an HSA do what?

rollover into the next year if not spent

The purpose of a health savings account is to

serve as a tax-favored way to accumulate funds to cover medical expenses

Self-employed ppl can take an income tax deduction for all amounts paid for medical care (including premiums ) as long as they

show a net profit for the year and are not covered or eligible to be covered under a group plan

the premiums paid by a company for group medical for its employees are

tax deductible by the company endnote considered taxable income to the employees

contributions to an HSA are

tax deductuble

earnings in the HSA grow

tax deferred

benefits are considered a reimbursement of expenses and are not ___

taxable

When a group disability insurance plan is paid entirely by the employer, benefits paid to disabled employees are

taxable income to the employee

When the premiums for qualified long term care insurance are payday an employer,

the benefits are tax free up to a specified inflation-indexed limit for the employee

If a business entity purchases disability insurance on the lives of the business owners to fund a disability buyout

the business cannot take a deduction for the premiums paid

If a company pays the premiums on a disability income policy covering a key employee,

the company received benefits from the policy income tax fee

When a group disability insurance plan is paid entirely by the employer, benefits paid to disabled employees are taxable income to who?

the employees

Who establishes the HRA?

the employer

employer paid group medical and dental health insurance benefits are tax free and the premiums are deductible to who?

the employer

Sajil had an accidental death and dismemberment policy through her company. What is the tax treatment on the expenses if her employer pays 100% of the premiums?

the premiums are deductible for her employer and her benefits are tax free

If a company buys disability buy-sell insurance,

the premiums are not deductible by the business