Discussion:Employer reimbursesment of Health Insurance premiums

ER reimburses John 800/mo. as payment of his health ins. prem. Same ER reimbusrses Sue and Mary 50/mo. as part payment of their health insurance premiums. Some other EE's recieve no reimbursement.

There is no mention of discriminatory vs non-discriminatory in Code Sec 106. Code Sec 105 has this discussion.

IRC Sec 105(h) states that if an employer provides an uninsured or self-insured reimbursement plan then it must be non-discriminatory, i.e. an employer cannot reimburse an employee for their out-of-pocket medical EXPENSES (Co-pays, Deductibles, Uncovered benefits, ...) unless the employer does this through a non-discriminatory plan.

Reimbursing an employee for their PREMIUMS paid to a medical insurance provider (Blue Cross, Aetna, Health Net, Kaiser, ...) is NOT a self-insured plan by definition. Therefore, this can be discriminatory.

I know of no requirement to have a written plan to reimburse for health insurance premiums under Sec 106.

https://www.105concepts.com/

I also believe that since this is a Section 105 plan, then this must be a non-discriminatory plan. Is that correct?

Do I have to have a plan such as 105 to reimburse my employees for the health insurance premium (not other medical expenses)? Can I just write them those checks directly?

Thanks again.

What I am DESPERATELY seeking clarification on is, can a 105 plan be discriminatory. I always get clashing answers when I try to find out if my corporate client can have the corporation pay for his health insurance only, legally deduct it, and not be required to pay for the health insurance of his employees.

And if so, can he get a group plan (in case, wink wink, he ever decides to include another employee) that only has himself on it?

I will get to the bottom of all of this soon. I feel I am making some progress - I just can't believe it is not more simple. Thus the nature of this tax world . . .

"105(h) Amount Paid To Highly Compensated Individuals Under A Discriminatory SELF-INSURED Medical Expense Reimbursement Plan-- (1) In General -- In the case of amounts paid to a highly compensated individual under a SELF-INSURED medical reimbursement plan which does not satisfy the requirements of paragraph (2) for a plan year, subsection (b) shall not apply to such amounts to the extent they constitute an excess reimbursement of such highly compensated individual.

(6) Self-insured Medical Reimbursement Plan

The term "self-insured medical reimbursement plan" means a plan of an employer to reimburse employees for expenses referred to in subsection (b) for which reimbursement is not provided under a policy of accident and health insurance."

See also 1.105-11.

1.105-11(2) states: "The rules of this section apply to a self-insured portion of an employer's medical plan or arrangement even if the plan is in part underwritten by insurance. For example, if an employer's medical plan reimburses employees for benefits not covered under the insured portion of an overall plan, or for deductible amounts under the insured portions, such reimbursement is subject to the rules of this section. However, a plan which reimburses employees for premiums paid under an insured plan is not subject to this section. In addition, medical expense reimbursements not described in the plan are not paid pursuant to a plan for the benefit of employees, and therefore are not excludable from gross income under section 105(b). Such reimbursements will not affect the determination of whether or not a plan is discriminatory."

My reading is that a SELF-INSURED plan (i.e., one that shifts less than 100% of the risk to a third party) is subject to the nondiscrimation rules. A fully insured plan is not subject to these rules. Hope that helps.

The next question is whether the reimbursement has to go through a plan such 105 Plan. The answer to this makes a critical difference: If the health insurance premium reimbursement has to go through a 105 plan, then you do have to worry about the non-discrimination issue because 105 plan can not be discriminatory.

Could someone clarify and summarize on this? Thank you.

Not sure if you would need that in the corporate minutes either. Do the corporate minutes have to address expense reimbursements to officers? I don't think so.