Free gourmet food and snacks that never-end, complimentary on-site gym memberships, and free on-site daycares are just a few perks that employees at Google get to enjoy. Now not all of us have these types of perks offered to us, but many employers do offer other benefits packages to attract and retain top talent. The problem is that many employees don’t take full advantage or understand their options. This makes understanding your benefits and their effect on your personal finances especially important.
The benefits listed above are all considered fringe benefits under IRS regulation and may be considered taxable to you. On the other side of the coin there are particular benefits that are tax qualified or tax exempt. The following list covers a few important benefits that your employer may offer and provides some info on how each perk can affect you:
Group Medical Insurance
This includes hospitalization coverage, major medical, indemnity coverage, health maintenance organization (HMO), preferred provider organizations (PPO), point of service plans (POS), and dental and vision plans. Premiums paid by the employer for health insurance are tax qualified and not generally included in your gross income.
Group Term Life Insurance
This provides a death benefit to a designated beneficiary in the event of your untimely passing. A company can provide up to $50,000 to an employee tax free. If you receive coverage in excess of $50,000 and the employer pays the premium, the excess must be included in your gross income. If you are considered a key-employee the cost of insurance is generally included in your gross income, but this is not always the case.
Group Disability Insurance
This provides income replacement in the event you are disabled and unable to return to work. (Note: short term and long term disability coverages vary greatly by the benefits they provide). If your employer pays the premiums, the amount is excluded from your gross income, but the benefit will be taxable to you if received. If the premiums are paid with after-tax dollars the benefit will not be taxable if needed.
Group Long Term Care
This provides coverage that pays for nursing home care and assisted living facilities. Premiums paid for such insurance are not taxable, but may be partially taxable if they exceed limits set by the IRS.
In addition to the aforementioned, employers may offer education assistance, dependent care assistance, transportation benefits, reimbursements, and other working condition fringe benefits, each with their own tax treatments. Navigating these benefits can be time consuming and tedious because of their complexity, which is why we suggest discussing them with a qualified professional.