The Delicate Subject of Cash in Lieu of Coverage - CoreMark Insurance (2024)

FAQs

What is cash in lieu of insurance? ›

A common practice for many public entities is to offer employees an opt-out payment for declining an offer of health insurance coverage. These payments are commonly referred to as a “Cash In Lieu” option. Cash In Lieu (CIL) programs are a complex subject and could use further examination.

It is legal to offer employees cash in lieu of health plan benefits, but it has to be done appropriately through a cafeteria plan that includes a “cash-in-lieu” agreement. If they opt out for cash in the agreement, they will be taxed on those funds as if they were wages.

Since cash-in-lieu-of-benefits payments are taxable, they must be included in the recipient's W-2 taxable wages.

A health insurance opt-out arrangement is a financial incentive some employers offer employees to decline group health coverage. Such arrangements are used by employers to reduce benefit costs by paying less for the incentive than they would for their share of the benefit premium.

Definition of 'cash-in-lieu'

Cash-in-lieu is payment of cash instead of stock when a stock splits or changes and the shareholder only owns a partial share.

An example: The premium for the lowest-cost minimum value plan is $400/month. The employer contribution is 50%, so the employee pays $200/month. The employer also offers all eligible employees $100/month as a “cash in lieu of benefits” amount if they decline coverage.

Technically, you'll have cost basis in whatever fractional shares produced the cash in lieu, and so you won't owe taxes on the full amount of the cash you received. You'll report both the cash and the basis on Schedule D, noting the sale of whatever fractional share resulted from the transaction.

Example of Cash in lieu

Making payment for a service: Cash in lieu can be used to pay for services rendered, such as consulting work or labor. This is often used when a company does not have the goods or services to offer in return for the service.

When an employee doesn't want health insurance from their employer, they waive coverage. Or, employees can waive coverage on behalf of a family member who was previously under their plan. A waiver of coverage is a form employees sign to opt-out of insurance.

Opt-in consent demands users actively and explicitly agree to data collection, processing, or sharing, requiring clear information and affirmative action. This approach, stricter and user-centric, grants more control over data. Conversely, opt-out consent assumes user consent unless they act to withdraw it.

Can you ask for more money if you don't need insurance? ›

You can and should ask for it. I think the best way to go about it is to be direct. There's no reason why you cannot just point out that you've saved the company thousands of dollars and would like to have a raise.

Cash in lieu in the vehicle insurance industry parlance refers to where a company exercises the option of giving one cash for repairs instead of repairing it for the client. There are a number of ways an insurance company can settle a motor insurance claim.

Sell back your policy: You may be able to fully cash in your life insurance while you're still alive by selling back your policy to the insurer in exchange for its cash surrender value, some of which may be taxable.