Question

When employees are required to make mandatory contributions from their base salaries to the city's post retirement health benefit plan, are the employees allow to exclude the payments from gross income?

Answer 1

From a legal standpoint, the employer has wide discretion in giving all fringe benefits, including post retirement health benefit plan. Under federal law it is permissible, for example, to provide insurance benefits on a discriminatory basis. Therefore, post-retirement health benefit plan could be offered to few employees and not others. Moreover, there are no legal requirements that states the benefit be to be paid by the employer. The plan can provide that the employee is responsible for it's cost. Finally, the law is clear that post-retirement benefits can be terminated or modified by an employer so long as the employer reserves the right to do so. The employees are allowed to exclude the payments from gross income if it is a qualified retirement health benefit plan