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Abstract: 

An employer provided various insurance plans for its employees, but provided only administrative services for a dependent group life program. The employer paid no portion of the premiums associated with that program, and the program was not subsidized by premiums charged for any other the other programs the employer provided. Rather, the uniform charge to the employees meant that some employees, younger employees with fewer children, were subsidizing the benefits of other employees, older employees with more children. Relying on two private rulings from the 1990s, the employer did not treat any of the employees as receiving wages under the plan, and did not withhold for any benefits. Now, in TAM 200502040,1 the Service says that some of the employees were indeed receiving wages from the benefit, and withholding will be necessary.2

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