A self-insured medical reimbursement plan that favors highly compensated
employees is subject to income tax, but is exempt from social security and
Medicare taxes. For this purpose, a highly compensated employee is:
One of the five highest paid
officers,
An employee who directly or
indirectly owns more than 10% of the employer’s stock, or
An employee who is among the
25% highest paid of all employees.
Archer MSA Contributions
Contributions your employer makes to your Archer MSA (Medical Savings
Account) are not included in your taxable income. They are reported in box
12, code R on your W-2, and you should report them on Form 8853,
Archer MSAs and Long-Term Care Insurance Contracts.
Health Flexible Spending Arrangements (Health FSA’s)
If your employer’s plan qualifies as an accident and health plan, the
amounts deducted from your salary or wages and the benefits paid for you and
your dependents are generally not taxable. This same exclusion applies for
Health Reimbursement Arrangements (HRAs).
Achievement Awards
Tangible personal property received as an award for length of service or
other type of achievement is not subject to tax. This exclusion does not apply
to cash, stocks, bonds, securities, gift certificates, or intangible awards
such as vacations, meals, lodging, or tickets to sporting or other events.
Adoption Assistance
The amounts your employer pays or the expenses it incurs in connection with
the adoption of your child are exempt from federal income tax, but are subject
to social security and Medicare taxes. These amounts are reported on your W-2,
in box 12, code T. You will need tocomplete Form 8839, Qualified
Adoption Expenses, to see if you can exclude all or part of these benefits from
your taxable income.