Thanks to the internet, news and useful information can be sent from point to point in a matter of seconds. Outstanding, up to a point…

But the internet also makes it possible for holy-cow, gut-wrenching rumors that can fry your brain even as they jump start your digestive system. And sometimes there is a grain of truth buried in the item. Case in point:

We’ve heard from a couple of dozen active and retired feds who have been advised that under the new health care reform law, premiums paid by workers and retirees/premiums paid by the government or both, will be considered part of income (yours) and subject to federal taxes next year. So, the reports say, would be other tax-breaks you now enjoy, like FSAs (flexible spending accounts) and HSAs (health savings accounts).

A reader from South Dakota says:

• “I figured if anyone would know if this is true, you would. If so, does that mean the 60% government portion of my health insurance premium will be added to my gross disability retirement income? And I will have to pay additional taxes on it? Thanks for your help! Stephanie DePasqua.

Or this version from Don at the IRS:

• “Is it true that the intent of the new law is to discourage or eliminate what you have previously referred to as ‘cadillac health plans’ by taxing them out of existence?”

So we went to two of the top sources of information on the federal health plan, the new health care reform law and its impact on you.

Walton Francis wrote the book – literally – on federal health plans. Each year, for more than 30 years, he’s published Checkbook’s Guide to Health Plans for Federal Employees. It breaks down plans by benefits and cost to you as an employee, retiree or survivor.

So we asked him about Stephanie’s question. Here’s his response.

• “Yeah. It is false, however. What the law did was require that W-2s show the amount the employer pays for health insurance, for the information of the enrollee. It does NOT go into the total taxable income box, and is not taxable income. There is also a tax on ‘Cadillac’ plans that starts 4 years down the road. But that tax will not be paid by the individual or by including any insurance premium as taxable income.” Walton Francis

And then there’s this refutation from Snopes.com titled “2011 W-2 Tax Forms and HR3590”, click here.

How About Excise Tax On Health Plans?

In the May issue of its members-only Retirement Life magazine the National Active and Retired Federal Employees said that: “effective in 2018, an excise tax will be imposed on insurers of employer-sponsored health plans with total premiums that exceed $10,200 for individual coverage and $27,500 for family coverage. Amounts that count against the threshold include total FEHBP premiums (both government/employer and enrollee shares), FSA’s (flexible spending account) amounts and employer contributions to HSA’s (health savings accounts.)” (Corrected figures. sk)

So while the excise tax is some time off, it is coming, unless Congress revisits health care reform. NARFE and other groups representing feds opposed it because, given the the fast pace of medical inflation, health premiums are going up each year, despite deflation in the general economy. NARFE says that it opposed the tax “because FEHBP plans could eventually be caught by the tax, if premiums and other health care spending outpace general inflation.”

To reach me: mcausey@federalnewsradio.com

Nearly Useless Factoid
by Suzanne Kubota

This NUF is buried at the bottom of an AOL.com news item about the world’s most expensive hot dog: “Cher is a (Serendipity 3 restaurant) regular who always gets the regular foot-long”.

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