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The Payroll Source T-4 SECTION 4: HEALTH, ACCIDENT, AND RETIREMENT BENEFITS 4.1 Health Insurance. ................................................................................................................................. 4-3 4.1-1 Affordable Care Act Health Insurance Requirements.......................................................... 4-4 4.1-2 Tax Treatment of Contributions and Benefits.................................................................... 4-19 4.1-3 Medical Savings Accounts.................................................................................................. 4-37 4.1-4 Long-Term Care Insurance. ............................................................................................... 4-39 4.1-5 COBRA Health Insurance Continuation. ......................................................................... 4-39 4.1-6 Health Reimbursement Arrangements............................................................................... 4-44 4.1-7 Health Savings Accounts.................................................................................................... 4-51 4.2 Family and Medical Leave Act........................................................................................................... 4-62 4.3 Sick Pay. ............................................................................................................................................. 4-72 4.3-1 Sick Leave Pay.................................................................................................................... 4-73 4.3-2 Sick Pay Under a Separate Plan. ........................................................................................ 4-73 4.3-3 Permanent Disability Benefits............................................................................................ 4-78 4.4 Workers’ Compensation Insurance. .................................................................................................... 4-79 4.4-1 Benefit Payments................................................................................................................ 4-79 4.4-2 Premium Payments............................................................................................................. 4-79 4.5 Cafeteria Plans. .................................................................................................................................. 4-81 4.5-1 What Benefits Can Be Offered.......................................................................................... 4-82 4.5-2 How Cafeteria Plans Are Funded. ..................................................................................... 4-84 4.5-3 What the Cafeteria Plan Document Must Contain........................................................... 4-85 4.5-4 Benefit Elections. ............................................................................................................... 4-86 4.5-5 Who Can Participate in the Plan. ...................................................................................... 4-91 4.5-6 Nondiscrimination Testing................................................................................................. 4-92 4.5-7 Flexible Spending Arrangements. ...................................................................................... 4-94 4.5-8 Tax Treatment of Cafeteria Plans..................................................................................... 4-108 4.5-9 Reporting Requirements. ................................................................................................. 4-109 4.6 Retirement and Deferred Compensation Plans................................................................................ 4-111 4.6-1 Qualified Pension and Profit-Sharing Plans (IRC §401(a)). ........................................... 4-111 4.6-2 Cash or Deferred Arrangements (IRC §401(k)). ............................................................. 4-118 4.6-3 Tax-Sheltered Annuities (IRC §403(b)). ......................................................................... 4-131 4.6-4 Deferred Compensation Plans for the Public Sector and Tax-Exempt Groups (IRC §457(b)). .................................................................................................... 4-135 4.6-5 Employee-Funded Plans (IRC §501(c)(18)(D)).............................................................. 4-139 4.6-6 Individual Retirement Accounts....................................................................................... 4-140 4.6-7 Simplified Employee Pensions (IRC §408(k))................................................................. 4-143 4.6-8 Savings Incentive Match Plans for Employees of Small Employers (SIMPLE Plans). ... 4-144 4.6-9 Employee Stock Ownership Plans. .................................................................................. 4-147 4.6-10 Nonqualified Deferred Compensation Plans.................................................................... 4-148 4.7 State Taxability of Cafeteria Plan and §401(k) Salary Reductions. .................................................. 4-168 4.8 Review Questions and Exercises. ..................................................................................................... 4-171 The Payroll Source®