When the employer pays the premium, covered individuals normally receive tax-free benefits under all of the following group health plans EXCEPT:

When an employer pays the premiums for a group disability income plan, those premiums are generally not included in the employee's taxable income. Consequently, any disability benefits received by the employee are considered a replacement for lost wages and are fully taxable as income. In contrast, benefits from medical expense plans—such as major medical, dental, or HMOs—are typically received tax-free. These benefits are considered reimbursements for medical expenses incurred, not a form of income, regardless of whether the employer or employee paid the premium.

B. Major medical: Benefits are reimbursements for medical expenses and are received tax-free, not as taxable income.

C. Dental: Benefits are reimbursements for dental expenses and are received tax-free, not as taxable income.

D. Health maintenance organization: Benefits are provided as medical services, not cash, and the value of these services is not considered taxable income.

1. Internal Revenue Service (IRS) Publication 525, Taxable and Nontaxable Income (For use in preparing 2023 Returns). Under the section "Sickness and Injury Benefits," sub-section "Disability Pensions," it states: "If your employer pays the entire cost of your disability pension and your employer's contributions aren't included in your income, you must report all of your pension as income." (Page 17).

2. Internal Revenue Service (IRS) Publication 15-B, Employer's Tax Guide to Fringe Benefits (For use in 2024). In Chapter 2, under "Accident and Health Benefits," it clarifies that employer contributions to an accident or health plan are not wages. However, it distinguishes the taxability of benefits. For medical care reimbursements, they are not taxed. For disability, it directs to Publication 525, confirming the benefits are taxable if the employer paid the premiums. (Page 10).

3. Cornell Law School, Legal Information Institute (LII). 26 U.S. Code § 105 - Amounts received under accident and health plans. Section 105(a) establishes the general rule that benefits attributable to employer contributions are included in the employee's gross income. Section 105(b) provides the key exception for amounts that "constitute payment for the medical care... of the taxpayer, his spouse, and his dependents." This statutory language directly separates taxable disability income from non-taxable medical expense reimbursements.