Treatment Under Employment Taxes

Type of Fringe Benefit

Income Tax Withholding

Social Security and Medicare (including Additional Medicare Tax when wages are paid in excess of $200,000)

Federal Unemployment (FUTA)

Accident and health benefits

Exempt1,2, except for long-term care benefits provided through a flexible spending or similar arrangement.

Exempt, except for certain payments to S corporation employees who are 2% shareholders.

Exempt

Accident and HealthBenefits

This exclusion applies tocontributions you make to an accident or health plan for an employee, includingthe following.

· Contributions to the cost of accident or health insuranceincluding qualified long-term care insurance.

· Contributions to a separate trust or fund that directlyor through insurance provides accident or health benefits.

· Contributions to Archer MSAs or health savings accounts(discussed in Publication 969, Health Savings Accounts and Other Tax-FavoredHealth Plans).

This exclusion also applies to payments youdirectly or indirectly make to an employee under an accident or health plan foremployees that are either of the following.

· Payments or reimbursements of medical expenses.

· Payments for specific injuries or illnesses (such as theloss of the use of an arm or leg). The payments must be figured without regardto any period of absence from work.