Read now! The conclusion about the Insurance in Payroll (part 15)

 

 

 

 

 

 

 

Presented by Paystrubmakr.com      By John Wolf and Tom Cullen CPA

PAYS TUB MAKER Team provide the conclusions about Insurance for your payroll members

 

Disqualified Benefits

Section 4976 imposes an excise tax on the employer equal to 100% of any disqualified benefit. A disqualified benefit is narrowly defined as:
(1) Any post-retirement medical or life insurance being provided to any key employee other than from a separate account.
(2) Any medical or life insurance benefit provided post-retirement unless such benefits are nondiscriminatory; and
(3) Any part of a welfare benefit fund that reverts to the employer’s benefit.
The excise tax applies to contributions paid or accrued after December 31, 1985, in taxable years ending after that date. Section 4976 imposes an excise tax on the employer equal to 100% of any disqualified benefit. A disqualified benefit is narrowly defined as:

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Employment Insurance – Important notice about maximum insurable earnings for 2021

The maximum insurable earnings (MIE) is the income level up to which Employment Insurance (EI) premiums are paid. It determines the maximum rate of weekly benefits paid for all types of benefits under the EI program.

Effective January 1, 2021, the maximum insurable earnings will increase from $54,200 to $56,300. This means that an insured worker will pay EI premiums in 2021 on insured earnings up to $56,300.

In 2021, the employee EI premium rate will be $1.58 per $100. This premium rate and the MIE increase means that insured workers will pay a maximum annual EI premium in 2021 of $889.54 compared with $856.36 in 2020.

(1) Any post-retirement medical or life insurance being provided to any key employee other than from a separate account.

Small Business – Employers | Aetna

(2) Any medical or life insurance benefit provided post-retirement unless such benefits are nondiscriminatory; and

(3) Any part of a welfare benefit fund that reverts to the employer’s benefit.

The excise tax applies to contributions paid or accrued after December 31, 1985, in taxable years ending after that date.

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Disqualified Benefits – IRS.gov

Conclusion

Any part of the earnings of a welfare benefit fund that does not qualify under §501(c)(9) will be taxed to the employer in addition to the income tax liability of the fund itself with respect to such earnings. Finally, §505(c) requires a VEBA to apply for qualification with the IRS. All in all, the benefits of VEBA trusts, particularly to the smaller corporation have been curtailed almost to the point of extinction. Most small employers would be well advised to look elsewhere for a fringe benefit vehicle.

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IRS Audits | Internal Revenue Service – IRS.gov

Review Questions

Under NASBA-AICPA self-study standards, self-study sponsors are required to present review questions intermittently throughout each self-study course. The following questions are designed to meet those requirements and increase the benefit of the materials. However, they do not have to be completed to receive any credit you may be seeking with regard to the text. Nevertheless, they may
help you to prepare for any final exam. Short explanations for both correct and incorrect answers are given after the list of questions. We recommend that you answer each of the following questions and then compare your answers. For more detailed explanations and references, you may do an electronic search using Ctrl+F (if you are viewing this course on a computer), consult the text Index, or review the general Glossary.

64. Under a split-dollar life insurance plan, the employee and the company
each pay a portion of the premiums. At death, what does the employer receive?
a. the amount at risk.
b. the cash value.
c. the difference between the face amount and the cash value.
d. the face value.

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