Taxpayers are not taxed on contributions or insurance premiums their employer makes to a health, hospitalization, or accident plan to cover them, their spouse, their dependents, and their children under age 27 whether or not they can be claimed as a dependent. The tax-free treatment applies to same-sex spouses as well.
If you obtain health and accident coverage by making pre-tax salary-reduction contributions under your employer’s cafeteria plan then your contributions are considered employer contributions and are tax-free. Employer contributions during a period where you are temporarily laid off from work are also tax-free. Insurance paid for by an old employer for retirees is not taxed. Medical coverage provided to a family of a deceased employee is tax-free since it is treated as a continuation of the employee’s fringe benefits. Medicare premiums paid by your employer if you are age 65 or older are not taxed.
Employer contributions to health reimbursement arrangements (HRAs) are tax-free to their employees. The contributions must be paid by the employer and not by salary reduction. HRA contributions can be used to reimburse medical costs for employees, their spouses, and their dependents.
Taxpayers are not taxed on contributions their employer makes for long-term care coverage that would pay them benefits in event they became chronically ill. Long-term care coverage cannot by offered through a cafeteria plan and reimbursements of long-term care expenses cannot by made through a flexible spending arrangement.