employees

RECURRING EMPLOYER QUESTION: WHEN ARE THE COSTS OF GROUP TERM LIFE INSURANCE TAXABLE?

Maybe it’s because we’re approaching the end of the year and many are prepping for reporting season.  Whatever the reason, this question about the taxability of Group Term Life Premiums has been asked a few times lately.

So we thought it might be worth posting some info for you.

Here’s the short answer:  Amounts up to $50,000 in coverage are not taxable.  Incremental amounts of coverage above $50,000 in group term life products are taxable based on something called an IRS Premium Table (for more info click on the links below).

In other words, employers can make group-term life insurance coverage available to employees that is in excess of $50,000, but the excess cost of coverage above $50k is taxable to the employee even if employees are paying for the insurance premiums associated with the coverage.

For more detailed information, here’s a link to the IRS page that  discusses Group Life Insurance.

The attached Compliance Overview may also be helpful.   

2016 Medical Loss Ratio Rebates: Get a Check From Your Carrier?

Notifications from insurance carriers about this year’s rebates have recently started going out to employers. Under the ACA, carriers have until September 30 to notify employers if they are to receive a rebate.  Any impacted employees will also be notified by the carriers that a rebate is being issued to their employer and that the employee can check with their employer to find out if they qualify for a portion of it.

This is the fourth year of the medical loss ratio rebate checks. While the total number and the aggregate dollar amounts of rebates are about half of what they were in the MLR provision’s first year (2013), more are being issued this year than last year.  From what we hear, a relatively small percentage of employers are receiving rebates and for those that do the amounts are modest.

As a refresher….

The Minimum Medical Loss Ratio (MLR) requirement is part of the Affordable Care Act (ACA). The MLR requirements set minimum percentages of premium dollars that health plans must spend on health care (medical costs and activities that improve health care quality).  If a health plan spends less in medical costs than the minimum percentage it has to pay rebates to employers.  The employer then has to follow government guidelines on how to use the rebates. The employer must use the amount of an MLR rebate that is proportionate to the premiums paid by subscribers (enrolled employees) to benefit its subscribers. There are several ways employers can choose to do this.

For more information you can read our earlier article, refer to 68557 How Employers Should Handle MLR Rebates 8-30-16, or go to

https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/technical-releases/11-04

https://www.irs.gov/uac/medical-loss-ratio-mlr-faqs

Example Rebate Check

ARE YOU WONDERING ABOUT THE “CONTROLLED GROUP” QUESTION? HERE’S WHAT YOU NEED TO KNOW

The “Controlled Group” question is popping up for many employers with much greater frequency as part of various and sundry regulatory applications, audits, surveys, reporting requirements and underwriting questionnaires.

Netting it out in layman’s terms — at least as it relates to health insurance and ACA compliance — a controlled group may exist when multiple companies fall under common ownership.

The ACA includes a provision under which companies that have a common owner (or are otherwise generally related) are combined and treated as a single employer for purposes of determining if the companies collectively employ at least 50 FTEs (the combo of full-time EEs and full-time equivalent EEs).

THE LAW OF DISPROPORTIONATE COSTS: SMALL NUMBER OF EMPLOYEES ACCOUNT FOR LION’S SHARE OF GROUP HEALTH PLAN MEDICAL COSTS

There’s plenty of cost related analytics available to support the disproportionate cost premise that medical expenses are highly concentrated among a very small proportion of enrolled employees.  These highlights, for example, from a Agency for Healthcare Research and Policy (AHRQ) are pretty telling:

  • 1 % of the population accounts for 21.4 % of total health care expenditures nationally
  • 5 % of the population account for 49.9 % of total expenditures
  • 10 % of accounts for 65.6 % of all medical costs
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