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Double Dipping Illegal

Ruling 2002-3 Says Plans Not Supported

Mike Haberman

"The Internal Revenue Service (IRS) hopes to trigger the meltdown of a widely marketed health plan design that gives sponsors and employees a tax break by reclassifying premium payments as reimbursements. Promoted by independent consultants and insurance brokers, the design restructures health plans so employees pay premiums through pretax contributions deducted from their wages. The employer then reimburses the employees for some or all of the premiums on a pretax basis, thus reducing employee and employer contributions for FICA and FUTA taxes and lowering the employees' reported gross income.

Revenue Ruling 2002-3, released in January, states that such plan designs are not supported by the tax code."

To read more of this article "IRS regulators put heat on double-dipping health plans" written by Craig Gunsauley click on the title to find the link to BenefitNews