A municipality reimburses its retirees for the cost of Medicare B premiums. Is this a taxable fringe benefit?
Section 106 of the Code excludes from gross income employer-provided insurance coverage under an accident or health plan. Retirees are treated like employees for this purpose. Reimbursement for the cost of Medicare B premiums can be excluded from a retiree’s income. The reimbursements have to be handled so as to ensure that they are for actual premiums paid. The employer can reimburse the employee after receiving proof of prior payment of the premiums by the employee. It can also issue the employee a check payable to Medicare. The Medicare B premium reimbursements in this case would not be a taxable fringe benefit.
