Benefits that complement major medical coverage: dental, vision, group life and AD&D, disability, accident, critical illness, hospital indemnity, and Employee Assistance Programs.
In Texas, an LTC plan cannot deny a claim for a preexisting condition for losses more than 6 months after coverage starts, must give a 30-day free look with a full refund, and cannot use or raise premium rates without approval from the Texas Department of Insurance. These apply to group certificates as well as individual policies.
Yes, as part of the self-employed health insurance deduction, but only up to the age-based eligible premium limit for each person (for 2026, $500 to $6,200), and not for any month the person could join an employer-subsidized LTC plan through their own or a spouse’s employer.
No. Long-term care insurance cannot be a qualified benefit in a cafeteria plan, so employee payroll contributions for it are after-tax. Premiums the employer pays for a tax-qualified LTC policy, outside a flexible spending arrangement, are generally excluded from the employee’s wages.
An HSA can pay tax-qualified LTC premiums tax-free up to the same age-based limits as the deduction (for 2026, from $500 to $6,200 per person). A health FSA cannot pay LTC premiums or LTC services. Most HRAs can reimburse LTC premiums within the limits, but not LTC services.
Benefits from a tax-qualified policy are generally tax-free. A reimbursement policy that pays actual care costs is tax-free; a per diem policy that pays a set amount regardless of cost is tax-free up to the greater of actual care costs or $430 per day for 2026.
For 2026, premiums for a tax-qualified LTC policy count as medical expenses up to an age-based limit per person: $500 at 40 or under, $930 at 41 to 50, $1,860 at 51 to 60, $4,960 at 61 to 70, and $6,200 over 70. They are deductible only as part of itemized medical expenses above 7.5% of adjusted gross income.
If someone with an approved Partnership policy uses its benefits and later applies for Medicaid long-term care, Texas disregards assets equal to the benefits the policy paid, dollar for dollar. Those protected assets are also ignored in later estate recovery.
A traditional policy covers only long-term care, pays nothing if care is never needed, and its premiums can be raised with regulator approval. A hybrid is a life insurance or annuity contract with long-term care coverage built in, so it pays a death benefit if care is not used; the tax code treats the LTC part as a separate contract.
For a tax-qualified policy, a licensed health care practitioner must certify within the past 12 months that the person cannot perform at least 2 of 6 activities of daily living for at least 90 days, or needs substantial supervision because of severe cognitive impairment, and the care must follow a plan of care. The policy’s elimination period then has to be met.
Often yes, through the policy’s waiver of premium provision, if the employee meets the contract’s definition of total disability and files the claim on time. The tax code also keeps employer-paid coverage on a disabled former employee out of the imputed income rule.
For a terminally ill insured (a physician certifies death is expected within 24 months), the accelerated amount is treated like a death benefit and is tax-free. For a chronically ill insured it is tax-free only within long-term care limits: actual qualified care costs, or the per diem limit of $430 per day for 2026.
Texas law requires a 31-day grace period for every premium after the first. Death benefit coverage continues during the grace period unless the policyholder gives the insurer written notice of discontinuance.
In Texas, only employees insured under the policy for at least 5 years get a conversion right when the group policy itself ends, and the policy may cap the conversion at the lesser of $2,000 or the lost coverage minus any new group life they become eligible for within 31 days.
Conversion turns the group coverage into an individual permanent policy at individual rates, with no health questions, and Texas law requires every group life policy to offer it. Portability, where the contract includes it, lets the person keep term coverage at group-style rates; it is usually cheaper but has conditions set by the carrier.
Texas law gives the employee the right to an individual policy, without evidence of insurability, if they apply and pay the first premium within 31 days after employment ends. The new policy can be any non-term individual policy the insurer customarily issues, up to the amount that ended, at the insurer’s regular rates for the person’s age and risk class.
Most group life contracts reduce the benefit at stated ages, and federal age discrimination rules allow it when the reduction is no greater than the higher cost of covering that age justifies, measured in age brackets of no more than 5 years. Cutting off coverage entirely because of age is not allowed.
Usually for any amount over the guaranteed issue limit, for elections made after the first eligibility window, and for later increases. The rules are in the policy: Texas law requires a group life policy to state the conditions under which the insurer may require evidence of insurability.
No. Insurance that pays only for accidental death is not group term life for the $50,000 rule, so AD&D is not added to the life amount when figuring imputed income. Accident-only coverage, including AD&D, is also an excepted benefit outside the health plan’s HIPAA and ACA rules.
It can. If the employer arranges the payroll deductions and the voluntary rates charge at least one employee less than the IRS table cost and at least one more, the IRS treats the policy as carried by the employer, and coverage over $50,000 can produce imputed income.
Employer-paid dependent life with a face amount of $2,000 or less is a tax-free de minimis benefit. Above $2,000, the cost the employee does not pay after tax is generally taxable unless it is too small to account for. In Texas, dependent coverage cannot exceed the amount the employee is eligible for.
Yes, if it meets an IRS exception: generally, coverage offered to all full-time employees, based on a uniform percentage of pay or the insurer’s coverage brackets, with any health screening limited to a questionnaire and no physical. Texas law lets an employer group life policy cover as few as 2 employees.
No. A 2% S corporation shareholder is not treated as an employee for this exclusion, so the entire cost of the group life coverage provided to them is wages, not just the cost over $50,000.
If the plan favors key employees in eligibility or benefits, the key employees lose the $50,000 exclusion and are taxed on the full cost of their coverage, using the greater of the actual premium or the IRS table cost. Rank-and-file employees keep the normal treatment.
Yes, generally: the imputed income rule follows former employees and retirees. The employer reports it, and the former employee pays their share of Social Security and Medicare tax with their own return. Coverage on a former employee who left because of disability is an exception.
The taxable cost goes in boxes 1, 3 and 5 of the W-2 and in box 12 with code C. It is subject to Social Security and Medicare tax, but federal income tax withholding is optional and no FUTA tax is due.