Employee pretax health premium
contributions must be allowed

(Sept. 26, 2007) Beginning Oct. 1, companies that provide health insurance benefits to their employees and deduct a portion of the premiums from employees’ pay must allow the employees to make premium contributions with pretax dollars. These pretax employee contributions are governed and limited by Section 125 of the U.S. Internal Revenue Code.

It’s not clear whether this requirement means that all existing plans, or just new or renewed plans, will have to comply as of Oct. 1.

The law does not require employers to provide health benefits to their employees if they are not doing so already. What the new law does says is that if a company chooses to provide benefits and has their employees pay part of the premium, then that company must afford their employees the opportunity to pay their portion on a pre-tax basis.

This new requirement is a part of various health care reforms that were enacted into law under Public Act 07-185, as amended by Public Act 07-02 of the June Special Session.

Employers should contact their tax advisors to discuss their options about how best to comply with this new law.

Please contact Eric George at 860-244-1921 or georgee@cbia.com for more information.