Employer-sponsored health insurance refers to any medical, dental or vision insurance obtained through an employer on behalf of its employees. Employer-sponsored health insurance includes plans such as group health insurance, COBRA and retirement benefit plans, and may include medical, dental or vision. Typically, the employer will make a contribution towards the cost of the coverage for employees, while the employee’s portion will be deducted from their paycheck. The employee’s portion may be deducted pre-tax or post-tax.
Participants whose spouse has an employer-sponsored premium may wish to submit this premium expense for tax-free reimbursement through their Zane Benefits plan. This will have certain tax implications if the spouse’s premium is deducted tax-free.
Plan Administrators have the option of either allowing or disallowing employer-sponsored premium reimbursement on their Zane Benefits plan. This is a simple matter of plan design; similar to allowing or disallowing various eligible medical expenses.
Allowing Employer-Sponsored Premium Reimbursement
Due to the core rule of no double dipping, payroll contributions to employer-sponsored health insurance premiums are not eligible for reimbursement unless those payroll contributions are added to the spouse’s taxable income. As a result, participant’s must understand and sign the Tax Acknowledgement Letter, and submit a signed copy with their reimbursement request. The amount that the needs to be accounted for as taxable is equal to the amount the participant is getting reimbursed tax-free.
June Cash has a Zane Benefits plan with a monthly allowance of $150. She receives her health insurance through her husband’s employer in which they have $200 deducted pre-tax from his paycheck every two weeks. This means that within a year, they are paying $5,200 for their insurance ($200 x 26 pay periods) and receiving a double tax benefit of $1,800 ($150 x 12 months). At the end of the year, they need to claim $150 for each month they were reimbursed.
June would therefore submit her claim as follows:
Note: Employer-sponsored premiums can only be submitted as recurring if the premium deductions are taken out of the paycheck on a consistent basis within the 12-month period. This means that the amount and frequency of the deductions MUST be the same each pay-period. For example, if an individual has 26 pay periods, but only has their health insurance premium deducted out of 24 paychecks, this cannot be submitted as a recurring claim.
Documentation confirming the following items must be submitted for each employer-sponsored health insurance claim (this example specifically refers to group health insurance policies):
Type of Health Insurance
Name of Primary Policyholder
Period of Coverage for the Amount Claimed
Proof of Payment for the Amount Claimed
Signed Acknowledgement Form (This can be Electronically Signed)
To receive approval, a Participant must submit one of the following forms of documentation for each requirement individual documentation requirement.
1. Insurance Provider
Sole Option: Insurance Card
2. Type of Health Insurance
Sole Option: Insurance Card
3. Name of Primary Policyholder
Sole Option: Insurance Card
4. Period of Coverage for the Amount Claimed
Option 1: Paycheck showing the date range for the pay period (e.g. If you are claiming a weekly contribution for 3/2/14 - 3/8/14, the pay period would be 3/2/14 - 3/8/14).
Option 2: If Option 1 does not show a pay period start date, two paychecks showing the end dates for each individual pay period (e.g. If you are claiming a weekly contribution for 3/2/14 - 3/8/14, the pay period end date for one paycheck would be 3/1/14 and the pay period end date for the second paycheck would be 3/8/14).
Option 3: If Option 1 and 2 are unavailable because the paychecks do not show a pay period start or end date, a payroll schedule or letter from the spouse’s HR confirming the pay periods for each check date.
5. Proof of Payment for the Amount Claimed
Sole Option: Paycheck with a pay period matching the period of coverage for amount claimed showing a payroll contribution (or “deduction”) matching the amount claimed.
6. Signed Acknowledgement Form
Sole Option: Completed and Signed Acknowledge Form (the “Acknowledgement of Tax Responsibilities for Payroll Contributions to Employer-Sponsored Premiums” Form). NOTE: you may electronically sign this form.
Frequently Asked Questions:
Q: I get my insurance through my spouse’s employer-sponsored plan. Does this policy apply to me?
Q: How do I report reimbursements on a tax return?
A: This amount is added to your spouse’s (or joint/household) tax return under “Other Income.”
Q: What amount needs to be included on the tax return?
A: Taxes need to be paid on the full amount reimbursed.
Q: What are the documentation requirements for being reimbursed for a group health plan?
A: The documentation required for group health plans includes a paycheck, insurance card, and a Tax Acknowledgement Letter. See above for details.
Q: Is a Tax Acknowledgement Letter required for COBRA and retirement benefit plans?
A: No, the Tax Acknowledgement Letter is only required for group health plans.
For Plan Administrators: Disallowing Employer Sponsored Premium Reimbursement
If the Plan Administrator chooses to disallow employer-sponsored premium reimbursement, participants cannot be reimbursed for any employer-sponsored premium (both pre-taxed or post-taxed). Participants who are impacted by this may wish to opt out of their spouse’s employer-sponsored plan and purchase their own individual policy. For more information, see: How to allow (or not allow) employer-sponsored premium reimbursement for your company's Zane Plan
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