My thoughts in the big scheme of things is that healthcare pre-tax just means more income tax due later. I remember when I worked that the pre-tax premium while it put more $ in my pocket initially, just meant I had to pay out more $ at tax time.I'm slow this AM. Can you explain a little further?
My former employer had a target of 20% for employee contributions, though they never achieved it during the 16 years I was with them. They probably averaged about 15-18%. Very few employees knew how much HC costs really were even though we shared them several times/year ('oh, they're lying') and a significant minority thought they were paying way too much, 'shouldn't have to pay anything.' The few who had to consider COBRA on leaving were shocked, 'you're kidding, I can't afford that!' Ah, I miss the good old days...At least at our company - the total health care costs were available - if you went looking. It was the COBRA tables, and were posted on the internal HR website.
I always looked at these during open enrollment. I was always curious about how much the megacorp was paying, and how much the employee was paying. A few years ago the ratio started shifting towards a bigger burden on the employee for family coverage. (single remained the same ratio). That shift of burden, combined with increased premiums, made for a big impact on the payroll deductions. Lots of folks didn't do the math till I pointed it out. (I'm a trouble maker.) Many switched to spouse's work coverage after doing the math.
Well it doesn't work out that way for health care insurance which is an expense, not a tax-deferred savings with some future tax ramifications. It's simply a major tax break for those with employer-provided health insurance.My thoughts in the big scheme of things is that healthcare pre-tax just means more income tax due later. I remember when I worked that the pre-tax premium while it put more $ in my pocket initially, just meant I had to pay out more $ at tax time.
But then, I was earning enough so not paying taxes up front was necessary to cover basic expenses.
Rita
Well it doesn't work out that way for health care insurance which is an expense, not a tax-deferred savings with some future tax ramifications. It's simply a major tax break for those with employer-provided health insurance.
Especially when you work at a crummy job for someone else with no health insurance. The self-employed can generally deduct the premiums they pay, but those who are employed but buy their own health insurance (or those who are retired) can not.Thanks. This is the way I understand it, too. Add in that someone paying their own health care insurance is more likely to be a low paid worker than someone getting employer supplied health care, and it does seem regressive.
So, would I be correct in saying that if your employer provides you with health care, it is tax free to you, but if you have to purchase your own health care, you pay for it with after tax money?
If true, that would seem kind of regressive.
Sounds like a potential build-up for when and if they decide to start taxing it...
Or included as "imputed income" for potential future means testing for various entitlements? All conjecture, but it feels like we may be headed down that road, especially if you are under about 50-55 years old. There is plenty they *could* do with it, but right now it's only going to be used starting in 2018 to determine what is a "Cadillac" health plan.+1.
Just like muni bond interest reporting has lead to more & more of that being functionally taxed (e.g. non-AMT bonds, MAGI for ACA subsidies, etc.).
That has been discussed frequently enough by the politicians and likely will happen in the near enough future. Why else would they put that on the W-2 form?Sounds like a potential build-up for when and if they decide to start taxing it...
Here is another twist. I am retired military and DW is a teacher. DW has no health insurance coverage at her work because we instead use Tricare Prime. My retirement income is reported on a 1099R I got a couple days ago which has no entry for health insurance cost. On DW's W2 her block 12 DD value is reported as $4587. If reporting this number is so important to somebody in the governement why is it not reported on retired military 1099s? Also the value reported on DW's W2 is wrong. Will there be any repercussions for employers who report an incorrect number?
It only applies to current employees with employer health insurance who are normally issued a W-2. It doesn't apply to the self-employed or to retirees:Here is another twist. I am retired military and DW is a teacher. DW has no health insurance coverage at her work because we instead use Tricare Prime. My retirement income is reported on a 1099R I got a couple days ago which has no entry for health insurance cost. On DW's W2 her block 12 DD value is reported as $4587. If reporting this number is so important to somebody in the governement why is it not reported on retired military 1099s? Also the value reported on DW's W2 is wrong. Will there be any repercussions for employers who report an incorrect number?
Q10. Will employers now be required to issue a Form W-2 to retirees or other former employees to whom the employer would not otherwise issue a Form W-2?
A. No.
Just looked at my W2 and it says $12,683.47 in that box. But what do I do with this info? Is it useful?
So, would I be correct in saying that if your employer provides you with health care, it is tax free to you, but if you have to purchase your own health care, you pay for it with after tax money?
If true, that would seem kind of regressive.
Midpack said:We just got DW's W-2 yesterday and I noticed same, didn't know what it was at first. I knew exactly what HC cost/employee at my former employer was (with and without empl contributions), but she'd never heard estimates at her .org employer. Her DD was $16,641! She also contributed $4160 medical & $153 dental, though NOT over and above DD I assume? Plus out-of-pocket!!!
I also got an online estimate (using a link an ER member provided yesterday) of what we'll spend for HC once ACA is fully enacted, and the estimate was $18,864/yr. We only spend about $41K/yr on all other expenses, there is something wrong when two healthy adults have to cough up $19K for health care - 32% of expenses. I was hopefully estimating $12K/yr even though I knew I was kidding myself.
"We" can't get to addressing the cost, and rate of increase, of HC in this country (relative to the rest of the world) too soon for my tastes...[/rant]
I think many corporations may have made the same arguments about PPACA and competitiveness issues in the distant past.Union leaders say many of the law's requirements will drive up the costs for their health-care plans and make unionized workers less competitive. Among other things, the law eliminates the caps on medical benefits and prescription drugs used as cost-containment measures in many health-care plans. It also allows children to stay on their parents' plans until they turn 26.
To offset that, the nation's largest labor groups want their lower-paid members to be able to get federal insurance subsidies while remaining on their plans. In the law, these subsidies were designed only for low-income workers without employer coverage as a way to help them buy private insurance.
But, the silver lining . . .Federal tax subsidies under the 2010 health law designed to help lower-income Americans afford insurance won't extend to dependents who can be covered through a family member's employer.
The decision, announced by the Obama administration on Wednesday, means some low-income Americans whose employer-plan premiums are beyond their means won't be eligible for the main perk of the law. Several provisions are behind the wrinkle.
Under the law, large employers have to provide coverage for their workers and subsidize it so that premiums don't come to more than 9.5% of an employee's wages. Otherwise, they face a fine. The administration determined last year that employers had to offer coverage to a worker's dependent children but wouldn't have to subsidize their inclusion in a plan. Employers aren't required to cover a worker's spouse.
Many lower-income Americans who don't have access to affordable insurance will be eligible for federal tax subsidies toward the cost of premiums beginning next year. But the rules released Wednesday confirm that that benefit won't extend to dependents who can be covered through a family member's employer, even if the cost of that plan puts it beyond the family's means.
So, dependents of covered workers have to be covered, but they can be made to pay "full freight" (no subsidy from the employer). And no subsidy from the taxpayer, either. But, zero penalty for waiting until a major health crisis develops to buy insurance.The administration said in a separate rule Wednesday that people in such situations would be among several groups who don't have to pay penalties for not carrying insurance coverage.
Some of these estimated quotes just seem outrageous. I checked in my area and I can't believe it would be that high, compared to what I am currently paying on my own individual plan. Maybe they are overestimating the eventual cost. Hopefully, my grandfathered plan will hold for a while. I will be honest. If I get thrown on the exchange somehow, and had to pay what you are reading, I will seriously consider paying the fine and getting it when the occasion arises. I have been healthy my whole life and will assume that to be the case going forward. I will continue to check BP, cholesterol , and such and pay for physicals with cash. If a problem occurs, I'll buy later. I am not going to simply give $10,000 a way every year. I could probably pay cash for a heart attack treatment every 5 years and still come out a head. End of my rant