| What is the implication of retirees who get cash in lieu of medical coverage?
There is some bad news for retirees who receive a cash payment instead of medical coverage. The IRS says these payments would be subject to the FICA tax.
The IRS feels the payment is extremely closely related to salary, because it related to a benefit from an employment relationship and is enough to subject the cash settlement to payroll tax withholding. Hence, in these situations, the IRS wishes to impose the FICA tax.
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