Taxing that amount is both violating income principle, reimbursement is not income, and discriminating against disabled, who receive insurance benefits from disability plan. It is, also, discrimination against disabled to tax employee benefits payable because of forced retirement, due to disability, when retirement benefits are not taxed in Illinois. It is contrary to principle of not taxing retirement benefits in Illinois. Need to change tax instruction which have existed for many years. IDOR report on Retirement Match Project which states confusion of many taxpayers on this matter.
Federal code allows for health insurance covered cost to be reduced from taxable income.
Therefore, like all other insurance payments, it was not taxed. Payments in excess of covered cost become taxable income and is a retirement benefit due to disability. State does not tax retirement benefit income, IRS does. A reimbursement of covered cost is not income due to Income principle, Rule, or Statute. A Statute is an established rule.