Discussion:C-Corporation Health Insurance

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Discussion Forum Index --> Advanced Tax Questions --> C-Corporation Health Insurance
Discussion Forum Index --> Tax Questions --> C-Corporation Health Insurance

WIBadgerCPA (talk\|edits) said:	3 July 2008
Have a C-Corporation that wants to start to provide health insurance for their employees ( 6 of them not including the owner). Can the C corp pay 100% of the owners premium if it only covers 50% of the other employees? I thought health insurance was one of the areas you can discriminate in, but wanted to make sure.

PHIL MOODY (talk\|edits) said:	3 July 2008
YES.

RJM (talk\|edits) said:	3 July 2008
Fellow Badger- I agree. OK to discriminate. You may want to set up a self-administered S125 premium-only plan for the 50% premiums to be paid by employees. The savings on 941 and 940 taxes should more than cover the costs. May also want to add a medical flex benefit to the S125, for even more tax savings.

Riley2 (talk\|edits) said:	6 July 2008
Discrimination must be employment based and not ownership based. For example, it would be ok to pay 100% of health insurance costs of management personnel. However, a plan that covers 100% of the premium for shareholders only would result in taxable income to the shareholder.

Smokeytax (talk\|edits) said:	6 July 2008
Riley2 - do you think discrimination in favor of shareholder/employees might be justified as part of a reasonable compensation package?

Riley2 (talk\|edits) said:	8 July 2008
Yes. Sec. 106 applies to employees. This suggests that any health insurance coverage that qualifies as reasonable compensation for services rendered could qualify under Sec. 106.