Virginia State Life, Health, and Annuities Practice Exam 2026 – Your All-in-One Guide to Exam Success!

The correct choice is that health maintenance organizations (HMOs) typically provide tax-free benefits under employer-paid plans. This is due to the fact that the premiums paid by employers for health insurance coverage, including those offered by HMOs, are often deductible as a business expense and can be provided to employees without being subject to income or payroll taxes. When an employer pays for health insurance and offers it as part of an employee benefits package, employees generally do not have to report the value of the coverage as taxable income.

Vision plans, disability benefits, and life insurance may have different tax implications. For instance, employer-paid disability benefits can be taxable depending on how the premiums are paid and whether the employee has any percentage of those premiums deducted from their paycheck. Likewise, life insurance premiums paid by employers may not be taxed to employees up to specific coverage limits but could be taxable over a certain threshold. Thus, while HMOs usually offer tax-free benefits under employer-paid plans, the other options have various tax considerations that can impact their tax-free status.