Final answer:
Non-taxable fringe benefits include health insurance, retirement plans, Social Security payments, and other insurances such as unemployment and worker's compensation, which all contribute to employee's overall compensation package while being exempt from income tax.
Step-by-step explanation:
Non-taxable fringe benefits are forms of compensation provided to employees that are not subject to income tax withholding. These benefits can significantly enhance an employee's total compensation per hour and include various forms of insurance and retirement plans that have implications beyond immediate financial reward. Here are some examples:
- Employee insurance, mainly health insurance, which includes premiums paid by the employer that are not taxed as income to the employee.
- Contributions to retirement plans, which can be in the form of Defined Benefit or Defined Contribution plans, such as 401(k)s.
- Employer payments to Social Security, which are mandatory contributions not reflected as taxable income for the employee.
- Unemployment and worker's compensation insurance, which provide protection against loss of income due to unemployment or workplace injury.
- Other benefits, such as contributions to Medicare which provide health benefits to qualifying individuals who are typically retired or have specific disabilities.
- Pension insurance, where employers contribute to the Pension Benefit Guarantee Corporation, offering a safety net for pension benefits in case the company cannot fulfill its pension obligations.
- Protections that allow employees to take up to 12 weeks of unpaid leave per year for personal or family illness, or the birth of a child, without the loss of job security.
These benefits are often long-lasting, exceeding two years, and contribute to the security and well-being of employees.