Publication 15-B Employer'S Tax Guide To Fringe Benefits - 2003 Page 3
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24taxable benefits they could have selected. A plan favors
•
Archer medical savings accounts. (See Accident
key employees if more than 25% of the total of the nontax-
and Health Benefits.)
able benefits you provide for all employees under the plan
•
Athletic facilities.
go to key employees. However, a plan you maintain under
•
a collective bargaining agreement does not favor key em-
De minimis (minimal) benefits.
ployees.
•
Educational assistance.
A key employee during 2003 is generally an employee
•
who is either of the following:
Employee discounts.
•
1) An officer having annual pay of more than
Lodging on your business premises.
$130,000.
•
Meals.
2) An employee who for 2003 was either of the follow-
•
Moving expense reimbursements.
ing:
•
No-additional-cost services.
a) A 5% owner of your business.
•
Transportation (commuting) benefits.
b) A 1% owner of your business whose annual pay
•
Tuition reduction.
was more than $150,000.
•
Working condition benefits.
Form 5500. If you maintain a cafeteria plan, ERISA may
It also cannot include scholarships or fellowships (dis-
require you to file Form 5500, Annual Report/Report of
cussed in Publication 520, Scholarships and Fellow-
Employee Benefit Plan. See the Instructions for Form
ships).
5500.
Employee. For these plans, treat the following individuals
More information. For more information about cafeteria
as employees.
plans, see section 125 of the Internal Revenue Code and
•
A current common-law employee (see section 2 in
its regulations.
Circular E (Pub 15) for more information).
•
A full-time life insurance agent who is a current stat-
2. Fringe Benefit Exclusion
utory employee.
•
Rules
A leased employee who has provided services to
you on a substantially full-time basis for at least a
year if the services are performed under your pri-
This section discusses the exclusion rules that apply to
mary direction or control.
fringe benefits. These rules exclude all or part of the value
of certain benefits from the recipient’s pay.
Exception for S corporation shareholders. Do not
The excluded benefits are not subject to Federal income
treat a 2% shareholder of an S corporation as an employee
tax withholding. Also, in most cases, they are not subject to
of the corporation. A 2% shareholder for this purpose is
social security, Medicare, or Federal unemployment
someone who directly or indirectly owns (at any time dur-
(FUTA) tax and are not reported on Form W-2.
ing the year) more than 2% of the corporation’s stock or
This section discusses the exclusion rules for the follow-
stock with more than 2% of the voting power.
ing fringe benefits.
•
Plans that favor highly compensated employees. If
Accident and health benefits.
your plan favors highly compensated employees as to
•
Achievement awards.
eligibility to participate, contributions, or benefits, you must
•
include in their wages the value of taxable benefits they
Archer medical savings accounts. (See Accident
could have selected. A plan you maintain under a collec-
and Health Benefits in section 2.)
tive bargaining agreement does not favor highly compen-
•
Athletic facilities.
sated employees.
•
A highly compensated employee for this purpose is any
De minimis (minimal) benefits.
of the following employees.
•
Dependent care assistance.
•
1) An officer.
Educational assistance.
•
2) A shareholder who owns more than 5% of the voting
Employee discounts.
power or value of all classes of the employer’s stock.
•
Employee stock options.
3) An employee who is highly compensated based on
•
Group-term life insurance coverage.
the facts and circumstances.
•
Lodging on your business premises.
4) A spouse or dependent of a person described in (1),
•
(2), or (3).
Meals.
•
Moving expense reimbursements.
Plans that favor key employees. If your plan favors key
•
employees, you must include in their wages the value of
No-additional-cost services.
Page 3
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