Newsweek Article - How Should Social Security Be Reformed ?

@gail1, the ACA does require employers to report the value of Healthcare coverage. Generally, the amount reported includes both portions paid by employers and employees, if any. Some Unions negotiate that employers pay 100% of the cost. Anyway, the reporting is for informational purposes only. The concept is that such information will provide employees with useful and comparable information on the cost of their Healthcare coverage. Because it would be a cumbersome task to report each employees' specific cost for Healthcare coverage in an employee benefit plan, the IRS suggests 3 methods: the applicable COBRA premium method; a modified COBRA premium method; or the premiums charged for fully insured Healthcare coverage. In a self funded Plan, there are no premiums that are paid to an insurance company. So, for most employees in the USA (approximately 80% or more), their Healthcare coverage is provided by an employer via an employee benefit plan rather than an insurance company. Many employers use an insurance company or a Third Party Administrator to pay benefits (claims) via an Administrative Service Agreement with such organizations. So, a self insured employer does not pay the reported value that appears on a W2 to an insurance company unless that Plan is fully insured. Generally, most employers with over 100 employees find self funding is more cost efficient. However, smaller employers with as few as 50 employees may self fund and buy reinsurance to reimburse the employer for benefit payments (claims) over a certain dollar amount whether individually or in aggregate. Essentially, an employee benefit plan reimburses an employee for covered Healthcare expenses they incur while eligible for such coverage. The amounts of reimbursements can vary from employee to employee and from year to year ($0.00 to $millions). The questions that needs to be answered are do you tax an employee based on an informational value even though such employee received $0.00 or less than the informational value? Or, do you tax the employee on the actual amount of benefits paid or reimbursed to such employee for the Healthcare expenses they incurred during the calendar year? The current Regs.,as I understand them, will tax the employee for the actual amount of benefits paid if an employee benefit plan is non-qualified. This is why compliance with ERISA in maintaining a qualified plan is important. 

To compare a parallel benefit (short term disability) that is available in some employee benefit plans, employees who receive STD pay taxes based on the amounts they receive. They are not issued an average amount based on the average cost per employee. I realize the Government can change the rules from time to time, and they have. 

In summary, employee benefits are not considered as part of an employee's base pay. They are considered part of a total compensation concept, but many benefits are not monetary unless they are needed and used. How do you tax benefits not used? 

  Gail - I totally agree.

With both political parties being more concerned with tearing each other down rather than reaching across the Maginot Line and creating a solution together, I cannot foresee a comprehensive solution anytime soon.

   Yup - gloomy….