Page 7 - Employers Tax Guide to Fringe Benefits

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3. Are covered under a collective bargaining agreement • No-additional-cost services.
if there is evidence that the benefits covered under • Retirement planning services.
the cafeteria plan were the subject of good-faith bar-
gaining, or • Transportation (commuting) benefits.
4. Are nonresident aliens working outside the United • Tuition reduction.
States whose income didn't come from a U.S. source. • Working condition benefits.
Contribution requirements. You must make a contri- See Table 2-1 for an overview of the employment tax
bution to provide qualified benefits on behalf of each treatment of these benefits.
qualified employee in an amount equal to: Accident and Health Benefits
1. A uniform percentage (not less than 2%) of the em-
ployee’s compensation for the plan year; or This exclusion applies to contributions you make to an ac-
2. An amount that is at least 6% of the employee’s com- cident or health plan for an employee, including the follow-
pensation for the plan year or twice the amount of the ing.
salary reduction contributions of each qualified em- • Contributions to the cost of accident or health insur-
ployee, whichever is less. ance including qualified long-term care insurance.
If the contribution requirements are met using option (2), • Contributions to a separate trust or fund that directly
the rate of contribution to any salary reduction contribution or through insurance provides accident or health ben-
of a highly compensated or key employee can't be greater efits.
than the rate of contribution to any other employee.
• Contributions to Archer MSAs or health savings ac-
More information. For more information about cafeteria counts (discussed in Pub. 969).
plans, see section 125 of the Internal Revenue Code and This exclusion also applies to payments you directly or
its regulations. indirectly make to an employee under an accident or
health plan for employees that are either of the following.
2. Fringe Benefit Exclusion • Payments or reimbursements of medical expenses.

Rules • Payments for specific permanent injuries (such as the
loss of the use of an arm or leg). The payments must
be figured without regard to the period the employee
This section discusses the exclusion rules that apply to is absent from work.
fringe benefits. These rules exclude all or part of the value
of certain benefits from the recipient's pay. Accident or health plan. This is an arrangement that
provides benefits for your employees, their spouses, their
In most cases, the excluded benefits aren't subject to dependents, and their children (under age 27 at the end of
federal income tax withholding, social security, Medicare, the tax year) in the event of personal injury or sickness.
federal unemployment (FUTA) tax, or Railroad Retirement The plan may be insured or noninsured and doesn't need
Tax Act (RRTA) taxes and aren't reported on Form W-2. to be in writing.
This section discusses the exclusion rules for the fol- Employee. For this exclusion, treat the following individ-
lowing fringe benefits. uals as employees.
• Accident and health benefits. • A current common-law employee.
• Achievement awards. • A full-time life insurance agent who is a current statu-
• Adoption assistance. tory employee.
• Athletic facilities. • A retired employee.
• De minimis (minimal) benefits. • A former employee you maintain coverage for based
• Dependent care assistance. on the employment relationship.
• Educational assistance. • A widow or widower of an individual who died while an
employee.
• Employee discounts. • A widow or widower of a retired employee.
• Employee stock options. • For the exclusion of contributions to an accident or

• Employer-provided cell phones. health plan, a leased employee who has provided
• Group-term life insurance coverage. services to you on a substantially full-time basis for at
least a year if the services are performed under your
• Health savings accounts (HSAs). primary direction or control.
• Lodging on your business premises. Special rule for certain government plans. For
• Meals. certain government accident and health plans, payments

Publication 15-B (2020) Page 5