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Informal Medical Plan


Guest Jim Yoxtheimer
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Guest Jim Yoxtheimer

I have recently been asked by a very small employer (6 fulltime employees) what are the implications of starting a program to reimburse employees for medical expenses not paid for under their existing health plan up to a dollar limit of $700 - $1,000 per year. I'm aware of many of the administrative challenges, but not the regulatory issues (e.g., does the program needed to be approved by DOL, IRS or others in order to qualify the reimbursement as a benefit and not taxable compensation). Any and all insight would be greatly appreciated. Thanks

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Sounds like a great idea especially when you combine these funds with a high-deductible policy and create incentives for the employees to spend the funds wisely. Essentially, you build a non-qualified MSA program. Non-qualified MSA's continue to thrive in the under 50 market. You will need plan documents and SPD's to have the plan comply.

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Guest BobParks

Hello Jim,

It sounds to me like you have an uninsured Medical Expense Reimbursement plan.

The employer is reimbursing employees for Section 214(?) medical expenses, (things they could deduct on their 1040 if they exceed the 7.5% of AGI), is this correct?

If so, as I remember it the plan must not discriminate, in actual operation, in favor of the HCE group. Again as I remember it you wouldn't even need a DOL filing but you would need a SPD and records to demonstrate the plan was non-discriminatory.

Someone might a speciment resolution for the board and SPD.

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