I recieved a question regarding taxabilityand reporting for Cobra payments and funeral expenses paid for an employee who died suddenly. According to Pub. 15B, It appears the Cobra payments could be excluded from income and everything I have researched indicates this also is ok under ACA rules and would not trigger an excise tax. So this payment would not be reported on any tax form sent to the surviving spouse? I am wondering about ACA reporting for this. Also, I am thinking the funeral expenses and any other payments to the familyshould be a taxable fringe benefit. However my colleague feels that funeral expenses could also could be excluded according to this provision of the code:
§ 31.3121(a)(2)-1 Payments on account of sickness or accident disability, medical or hospitalization expenses, or death.
(a) The term “wages” does not include the amount of any payment (including any amount paid by an employer for insurance or annuities, or into a fund, to provide for any such payment) made to, or on behalf of, an employee or any of his dependents under a plan or system established by an employer which makes provision for his employees generally (or for his employees generally and their dependents) or for a class or classes of his employees (or for a class or classes of his employees and their dependents), on account of -
(1) Sickness or accident disability of an employee or any of his dependents, only if payment is received under a workers' compensation law;
(2) Medical or hospitalization expenses in connection with sickness or accident disability of an employee or any of his dependents, or
(3) Death of an employee or any of his dependents.
I did not find any more specifics on a fund set up and designated for this purpose- would this code section apply?
