South Carolina Life and Health Practice Exam

How much taxable income would a $10,000 benefit be under an employer's group major medical plan where the employer pays 75% of the premium?

1. $1,000

2. $2,500

3. $5,000

4. $0

The correct answer is: $0

In the context of an employer's group major medical plan, when an employer pays a significant portion of the premium—such as 75%—the benefits provided under this plan are typically not considered taxable income to the employee. The key aspect here is that employer contributions toward health insurance premiums are generally excluded from the employee’s taxable income under current tax regulations. Therefore, the $10,000 benefit received, which is tied to a group health insurance premium that the employer covers largely, does not generate any taxable income for the employee. Thus, the correct response to how much taxable income would arise from this benefit is zero. This highlights the favorable tax treatment of employer-sponsored health insurance plans, designed to encourage individuals to obtain necessary healthcare coverage without incurring additional tax liabilities.