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Old 10-18-2013, 11:15 AM
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Question Meidcal Reimburshment Account

We are a C-corp and we no longer have health insurance. Instead we have a cafeteria plan which fully covers 100% of employee medical expenses.

We would like to create an account which we contribute into each month to form a medical reimbursement fund. All medical reimbursements would then come from this account.

Fundamentally, instead of wasting money every month on Health insurance, which is fully deductible to the corp, we want to deposit what would have been spent on health insurance into this medical reimbursement account.

How can we structure this account so that all deposits into this account are fully tax deductible to the corp?



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Old 10-18-2013, 11:44 AM
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Originally Posted by klatu View Post
We are a C-corp and we no longer have health insurance. Instead we have a cafeteria plan which fully covers 100% of employee medical expenses.

We would like to create an account which we contribute into each month to form a medical reimbursement fund. All medical reimbursements would then come from this account.

Fundamentally, instead of wasting money every month on Health insurance, which is fully deductible to the corp, we want to deposit what would have been spent on health insurance into this medical reimbursement account.

How can we structure this account so that all deposits into this account are fully tax deductible to the corp?
As long as it doesn't result in excessive compensation issues, or in the unlikely event a salary needs to be capitalized, a corporation can deduct as medical expense the reimbursement of employees individual medical insurance premiums. A C-corp enjoys a full deduction for the cost of employees’ including owner employees’ health insurance, group term life insurance of up to $50K per employee, and even long-term care premiums without regard to age-based limitations; the C-corp can also deduct the costs of a medical reimbursement plan. If you have a lot of medical expenses that aren’t covered by insurance, the C corp can establish a plan that results in all of those expenses being tax deductible, and deduct it as a employee benefit expenses. It matters not if there is only a Single Shareholder for a C corp.This is in fact rare advantage of a C corp over a an S corp.



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Old 10-18-2013, 12:24 PM
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Question

I think you missed the thrust of my question.

We already have a reimbursement plan. All reimbursements are fully deducted.

However, now that we have stopped our insurance, we would like to divert the insurance payments into the reimbursement account, such that the account will contain more than is necessary to cover our anticipated medicate reimbursements.
For example, we will dump $10K into the account each month, but we may only disperse $2K/mo. So the account will grow and grow, with the intent being that should some catastrophic medical event occur, we have the extra funds to handle it. At the end of the year, the account will have 8K*12=$96K of unused reimbursement funds

Can we set up an account such that all contributions into the account are deductible, even if those funds are not used in the year the contribution is made.



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Old 10-18-2013, 01:05 PM
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In the case of health savings acct plan, it offers your employees a taxadvantaged
way to save and pay for qualified out-of-pocket healthcare expenses. The employee must be covered by a high-deductible health plan to be able to take advantage of a HSA. Employers may make pre-tax contributions to their employee’s HSAs if they have a cafeteria plan in place that provides for HSA contributions. These contributions are not subject to witholding from wages for income tax or subject to FICA, FUTA . The tax treatment of employer HSA contributions for larger corporations, employer contributions are treated as employer-provided coverage for medical expenses under an accident or health plan. the contributions are deductible by the corp. and not income to the EE.An employer may fully fund the employee’s HAS at the beginning of the year, however HSAs belong to the individual and not the employer and the employer has no further control over the accounts after they have been funded. In general, employer matching contributions wouldlikely violate comparability testing (i.e., they must make comparable contributions for all eligible individuals with comparable coverage during the same period). However, matching contributions through a section 125 cafeteria plan are not subject to comparability testing (but section 125 nondiscrimination rules would apply). HSA eligible expenses are set by the IRS and cannot be controlled by the employer.I guess you can contact a health care plan expert for more info in detail.



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Old 10-18-2013, 01:14 PM
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Originally Posted by Wnhough View Post
.I guess you can contact a health care plan expert for more info in detail.
" Health Care Plan expert" What is that? There are only people trying to sell you what ever it is they are trying to sell you.



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Old 10-18-2013, 01:43 PM
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really?? too bad then



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