Can premiums for individual health insurance policies be run pretax th

[Guest RAJ]

Can premiums for individual health insurance policies be run pretax through a Section 125 plan if the employer doesn't offer group health insurance? If so, what information is required in the plan documentation and SPD?

[Guest ploski]

IRS Revenue Ruling 61-146 states that individual health insurance premiums are allowed as a tax-free benefit, but not under the Health FSA portion of the Cafeteria Plan. The policies are owned by the participant and not by the spouse or any other employer plan. It is not a pre-funded account as is the Health FSA. A separete account must be used and is listed in the SPD and Plan Document as a separete Plan.

[Guest linmois]

Premium Only Plans are only available under a company sponsored benefit. Individual policies are excluded.

[GBurns]

Where does it say in the IRC or Treas. Regs. that a company sponsored benefit cannot be individually issued plans and/or must be group plans?

[Guest dsilver]

GBurns, I think S. 106 and the 1.125-2 QA7(a)(4)

[GBurns]

There is absolutely no mention of either group or individual plans in either 106 or 1.125-2 Q&A 7.

Treas Regs 1.105-1(a)(d)(1) addresses "Individual policies" and 1.105-1(a)(d)(2) addresses "Group policies".

There is nothing that I have ever seen in either the IRC or Treas Regs that say that any employer provided accident and health coverage has to be through a group policy.

[Bob R]

As PLOSKY pointed out, IRS Revenue Ruling 61-146 is the authority. That Rev. Rul. allows an employer to provide individual coverage on a tax free basis.

Issues that need to be considered is whether providing individual policies though a cafeteria plan subject the policies to ERISA or HIPAA. The problem is that once the premium is paid through the cafeteria plan, it's an employer provided benefit for purposes of the code. That doesn't necessarily mean it's an employer provided benefit for purposes of ERISA or HIPAA. But, I had heard that some Blue Cross Co.s won't issue individual policies if the premium is paid by the employer (e.g., through a cafeteria plan) because of HIPAA. If 2 employees obtain the same policy, then oher employees can't be denied coverage.

[GBurns]

Aside from the ERISA and HIPAA issues, there are some states that prohibit the List Billing of individual policies. I have never seen it applied, but it is there.

If you consider that the Cancer and A&H or STD policies sold by Unum/Colonial, AFLAC, American Heritage/Allstate, Great American etc are usually sold through Cafeteria Plans and are all individual accident & health plans under IRC 105 just like medical insurance and there have been no problems over the last 15 years that I have ever heard of.

The problem then seems to be the requirements of your health insurer. I suggest that you check with them. Please note checking with your agent is not checking with the insurer. Also check your DOI.