All employees of United Company are covered by a group hospitalization insurance plan, but the employees must pay the premiums ($8,000 for each employee). None of the employees has sufficient medical expenses to deduct the premiums. Instead of giving raises next year, United is considering paying the employee's hospitalization insurance premiums. If the change is made, the employee's after-tax and insurance pay will:

Question

Quizplus · Accepted Answer

Highly paid employees in the 35% tax bracket will benefit more because the premiums paid by the employer are not taxable income, effectively giving them a larger after-tax benefit compared to lower-income employees.

All Employees of United Company Are Covered by a Group