Hannah is an employee of Bolero Corporation. Bolero pays the medical insurance premiums of all of its employees. Because of large deductible levels and limitations on the payment of certain medical expenses, the basic health insurance policy does not cover all medical costs. During the current year, Bolero adopted a Flexible Benefits Plan that employees can contribute into to pay for any medical expenses not covered by insurance. Hannah pays $2,650 into the plan during the current year. Premiums paid by Bolero for Hannah's medical insurance were $5,000.
I.Hannah's gross income from her Bolero salary is reduced by the $2,650 payment into the Flexible Benefits Plan.
II.Amounts paid for medical costs by the medical insurance policy are excluded from Hannah's gross income.

Question

Hannah is an employee of Bolero Corporation. Bolero pays the medical insurance premiums of all of its employees. Because of large deductible levels and limitations on the payment of certain medical expenses, the basic health insurance policy does not cover all medical costs. During the current year, Bolero adopted a Flexible Benefits Plan that employees can contribute into to pay for any medical expenses not covered by insurance. Hannah pays $2,650 into the plan during the current year. Premiums paid by Bolero for Hannah's medical insurance were $5,000.
I.Hannah's gross income from her Bolero salary is reduced by the $2,650 payment into the Flexible Benefits Plan.
II.Amounts paid for medical costs by the medical insurance policy are excluded from Hannah's gross income.
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Quizplus · Accepted Answer

Statement I is correct because the amount paid by an employee into a Flexible Benefits Plan is excluded from the employee's gross income. Statement II is also true because amounts paid for medical expenses under an employer-provided health insurance policy are excluded from an employee's gross income.

Hannah Is an Employee of Bolero Corporation