Employer self-funded health plan payment not excluded

An employer could not exclude from an employee’s gross income payments under an employer-provided self-funded health plan if the average amounts received by the employees for participating in a health-related activity predictably exceed the after-tax contributions by the employees. Further, the employer could not exclude from an employee’s gross income payments under an employer-provided self-funded health plan if the employer-provided self-funded health plan was not insurance (nor did it have the effect of insurance) for federal income tax purposes. Moreover, the ratio of the average amounts received by the employees for participating in health-related activities to the after-tax contributions by the employees demonstrated that the amounts received by the employees were attributable to contributions by the employer and not employee after-tax contributions; therefore, the exclusion under Code Sec. 104(a)(3) did not apply. (Chief Counsel Advice Memorandum 201719025, April 24, 2017.)
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