Your long-term care insurance deduction fits nicely in the Section medical reimbursement plan. Avoid Payroll Taxes If you are married and operate a Schedule C, Schedule E rental properties , or Schedule F business, you can use the Section plan as the sole source of remuneration to your spouse.
Result: Neither you nor your spouse pays federal payroll taxes. Thus, with the plan as compensation, you save money and have your spouse as a bona fide employee. Putting the Plan in Place Your first step: Create a Section plan document, sign it, and keep it in your tax files. A sample document in Microsoft Word for my clients only is available, simply contact me.
If you operate as a C corporation, make the Section plan cover you with single or family coverage. Then either submit your medical bills to the corporation for reimbursement or have the corporation pay the medical bills directly. If married and operating as other than a corporation, say a proprietorship, you need to hire your spouse to have the plan cover both you and your spouse.
Make sure that you have proof that the spouse is doing the work. The simple and easy way to prove that work is to require that your employee-spouse give you a time sheet with hours worked and descriptions of the tasks performed.
Further, the employment contract does not prove that any work was done, whereas a good time sheet does. Reasonable Compensation Make sure that the reimbursements to the employee-spouse represent reasonable compensation.
Is that reasonable for the work performed? Do you have proof? When establishing dollar amounts, look for salary and wage guides online, articles, interviews with others, signed affidavits, newspaper clippings — you get the idea…whatever it takes to get decent proof.
Allowed Reimbursements The Section medical plan can reimburse all health and long-term care insurance costs for the family, including health plans purchased separately by the spouses. One caution : The IRS medical and dental expense publication applies to individual tax payers. The plan may reimburse all of those expenses. But in the plan, you get two bonus deductions:. The prescription rule for the plan allows for reimbursement of a medicine or drug if the medicine or drug:.
Besides the usual medical insurance, drugs, and co-pays, keep the following medical expenses in mind for reimbursement. In Conclusion If you fit the profile for the plan, you can sit back, relax, and smile, knowing that you are creating deductions where none existed before.
There are a few different ways in which the employers can assist their employees with their medical expenses. The contributions made to this account can be from the employee or from the employer. An HRA or Health Reimbursement Account is an arrangement between the employer and employee, where the former reimburses the latter for specific medical expenses, on completion of a filing process. A well-planned Health Reimbursement Arrangement HRA facilitated by your employer can definitely help reduce the cost of overall healthcare spending.
However, a shift to a high-deductible health plan or a HDHP increases the cost of healthcare as it imposes additional out-of-pocket expenditure on the individual deductibles, coinsurance, and copays. While the HRA does play a big role in helping Americans manage their healthcare expenditure, employers and employees alike have found more benefits with the MERP plan instead.
There are several benefits associated with the highly-flexible MERP. They are as follows:. This funding is used to offset high deductible programs by saving the difference betweenLow Deductible Higher premium vs. High Deductible Lower premium. The most important aspects that the employee needs to understand are as follows:. As the MERP exists in conjunction with the group health insurance and individual health plans purchased by the employees , it is crucial that the employer takes the responsibility of educating the employees on how the MERP works.
While the MERP is discussed at length after onboarding the employee and through periodic group meetings after that, the third-party provider who takes care of administering the MERP will also act as a one-point contact to answer all and any questions that the employee may have at any point in time.
Contact us at or send us an email at [email protected]. It only covers the cost of deductibles and coinsurance. An MERP, on the other hand, is more flexible. While the benefits for the employees are diverse, the employer also benefits from a lower cost of group health insurance. Employers can also buy one single MERP plan and create multiple funding arrangements and benefits designs.
They can also assign different levels of contribution for each employee. Employees can also contribute to the MERP to gain even more flexibility. Premium equivalent rates are usually considered to decide on the minimum and maximum limits of the employee contributions. A Section plan is an IRS-regulated health benefit.
It allows for the tax-free reimbursement of medical and insurance expenses, as described under Section of the Internal Revenue Code IRC. These plans can be designed to benefit the employees and employers in multiple ways.
It can be used to pay for qualified health expenses, cover the cost of insurance premiums up to a qualified amount , and it can be offered alongside a group health plan to reduce the cost on the employer.
It also offers tax-free benefits to the employer. Employers can also opt for different types of plans based on a consultation with the employee and the benefits that the plan gives.
Call us for further information. Two of the most valuable reports that we provide are:. In an era of consumer directed health plans, experience and flexibility distinguish us from the crowd. We can easily help you in determining what is going to produce the best results, based upon your long term goals. Our experienced staff works with employers to design solutions which fit the needs of the organization, no matter the size.
With our experience, we have grown very flexible in our ability to administer some of the most complicated plan designs very easily.
Our ability to create any plan design imaginable, gives you the freedom to not only control cost, but employee behavior. MERP Plans were solely designed to get employees involved in the cost of healthcare and push the consumer driven health plan ideology, they were meant to get away from the health plans in the past, where employees had no involvement. The idea of having an HRA where an employee is not involved in the process and the carrier handles everything, is not helping employers control costs because employee behavior still has not changed.
Carriers process numerous claims that are submitted from doctors and hospitals in error, thus resulting in direct file feeds paying out these error claims automatically as the most inefficient means of monitoring employer claim costs.
BDS offers a range of services and products dedicated to a two-fold goal; delivering quality, cost-effective employee benefit plans coupled with hassle-free benefits management for our clients HR departments.
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