Medical Expense Reimbursement plans (MERP’s) – Section §105
are also known as Health Reimbursement Accounts (HRA’s).
Wraps – Self Funding
MERP’s, Wraps (see Ben E Lect for further discussion and how many Insurance Companies do NOT allow wraps – Blue Cross requires a signed statement that you won’t do it) and HRA’s allow an employer to pay Self Fund (Ben E Lect) and possibly save thousands of $$$, for his and the employees uninsured medical care for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. and deduct them. (§IRC §213 (d), IRS Publication 502 Allowable Medical Expenses Internal Revenue Code (IRC) §105 Publication 969)
The employee does not have to report income as long as the plan complies with §106 and §105 (b) and Rev Ruling 2-41 The funding for medical expenses can be pay as you go.
Aetna, Kaiser UHC and Health Net offer HRA’s & HSA’s (Health Savings Accounts).
Please email [email protected] or call us 310.519.1335 to discuss further.
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ust click on HRA or HSA when you get to this screen for employers, after entering your census. Individuals and families click here
Consumer Links
Technical Links Top
Section §105 Discrimination Testing, Rules & Definitions
IRS publication on Fringe Benefits 15 b
Tax Almanac
Treasury Regulations, Subchapter A, Sec. 1.105-11 Self-insured medical reimbursement plan
Tax Facts on Life Insurance Subscription required or email us your questions Top
MERP’s Wikipedia
Explanation of above and below the line deductions Motley Fool.com
Tax Form HSA 8889 Instructions which is an Attachment to Form 1040 Instructions
us tax court.gov Opinions Search
Purchase Plan Documents It is not necessary for tax purposes that the plan be in writing or that the employee’s rights to benefits under the plan be enforceable. For example, an employer’s custom or policy of continuing wages during disability, known to the employees generally, has been held to constitute a plan. Niekamp v. U.S. , 240 F. Supp. 195 (E.D. Mo. 1965); Pickle, TC Memo 1971-304
Sample Resolution
Qualified Filing Statuses Top While the above rulings specifically address family employment in a sole proprietorship, corporations and partnerships may also take advantage of Section §105 plan. Additionally, employers seeking to offer non-related employees a medical benefits package may also implement such a plan. Here is how a Section 105 plan would work within the various filing statuses S-Corporations S-Corporations can qualify for a Section §105 plan,
Two percent or greater shareholder must pay attention to these special rules
- Revenue Ruling 91-26 and
- Announcement 92-16
Employees not owning stock in the corporation may realize substantial savings by participating in a Section 105 plan. (tasc online.com/)
§3121. Definitions (a) Wages For purposes of this chapter, the term ?wages? means all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash; except that such term shall not include? (2) the amount of any payment (including any amount paid by an employer for insurance or annuities, or into a fund, to provide for any such payment) made to, or on behalf of, an employee or any of his dependents under a plan or system established by an employer which makes provision for his employees generally (or for his employees generally and their dependents) or for a class or classes of his employees (or for a class or classes of his employees and their dependents), on account of? (B) medical or hospitalization expenses in connection with sickness or accident disability, or
Administrators Top
Assoc. §105 Eflex 3rd Party Administrators
Internal Revenue Code § 105. Amounts received under accident and health plans
(a) Amounts attributable to employer contributions
(b) Amounts expended for medical care
(c) Payments unrelated to absence from work
(e) Accident and health plans
(f) Rules for application of section 213
(g) Self-employed individual not considered an employee
(h) Amount paid to highly compensated individuals under a discriminatory self-insured medical expense reimbursement plan
(1) In general
(2) Prohibition of discrimination Top
(3) Nondiscriminatory eligibility classifications
(A) In general
(B) Exclusion of certain employees
(4) Nondiscriminatory benefits
(5) Highly compensated individual defined
(6) Self-insured medical reimbursement plan
(7) Excess reimbursement of highly compensated individual
(B) in the case of benefits (other than benefits described in subparagraph (A) [1] paid to a highly compensated individual by a plan which fails to satisfy the requirements of paragraph (2), the total amount reimbursed to the highly compensated individual for the plan year multiplied by a fraction—
(ii) the denominator ofwhich is the total amount reimbursed to all employees under the plan for such plan year.
(8) Certain controlled groups, etc.
(9) Regulations
(10) Time of inclusion
(i) Sick pay under Railroad Unemployment Insurance Act
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- What Medical Expenses Are Includible?
- Abortion
- Acupuncture
- Alcoholism
- Ambulance
- Annual Physical Examination
- Artificial Limb
- Artificial Teeth
- Autoette
- Bandages
- Birth Control Pills
- Body Scan
- Braille Books and Magazines
- Breast Reconstruction Surgery
- Capital Expenses
- Car
- Chiropractor
- Christian Science Practitioner
- Contact Lenses
- Crutches
- Dental Treatment
- Diagnostic Devices
- Disabled Dependent Care Expenses
- Drug Addiction
- Drugs
- Eyeglasses
- Eye Surgery
- Fertility Enhancement
- Founder’s Fee
- Guide Dog or Other Service Animal
- Health Institute
- Health Maintenance Organization (HMO)
- Hearing Aids
- Home Care
- Home Improvements
- Hospital Services
- Insurance Premiums
- Intellectually and Developmentally Disabled, Special Home for
- Laboratory Fees
- Lead-Based Paint Removal
- Learning Disability
- Legal Fees
- Lifetime Care—Advance Payments
- Lodging
- Long-Term Care
- Meals
- Medical Conferences
- Medical Information Plan
- Medicines
- Nursing Home
- Nursing Services
- Operations
- Optometrist
- Organ Donors
- Osteopath
- Oxygen
- Physical Examination
- Pregnancy Test Kit
- Prosthesis
- Psychiatric Care
- Psychoanalysis
- Psychologist
- Special Education
- Sterilization
- Stop-Smoking Programs
- Surgery
- Telephone
- Television
- Therapy
- Transplants
- Transportation
- Trips
- Tuition
- Vasectomy
- Vision Correction Surgery
- Weight-Loss Program
- Wheelchair
- Wig
- X-ray
- What Expenses Are Not Includible?
- Baby Sitting, Childcare, and Nursing Services for a Normal, Healthy Baby
- Controlled Substances
- Cosmetic Surgery
- Dancing Lessons
- Diaper Service
- Electrolysis or Hair Removal
- Flexible Spending Account
- Funeral Expenses
- Future Medical Care
- Hair Transplant
- Health Club Dues
- Health Coverage Tax Credit
- Health Savings Accounts
- Household Help
- Illegal Operations and Treatments
- Insurance Premiums
- Maternity Clothes
- Medical Savings Account (MSA)
- Medicines and Drugs From Other Countries
- Nonprescription Drugs and Medicines
- Nutritional Supplements
- Personal Use Items
- Swimming Lessons
- Teeth Whitening
- Veterinary Fees
- Weight-Loss Program
- What Medical Expenses Are Includible?
No more MERP now HRA