Health Reimbursement Accounts

[caryn22359]

1.Can I have HRA for shareholders in an S corp. that own greater thatn 2 percent of the stock?

2. Can I Have an HRA for employees that are enrolled in medicare?

[Guest John14]

1) Owners of S corps "may" not participate in an HRA. The issue, depending on who you talk to, is how you taxes are treated. Owners may be able to participate in the reimbursement process, but absolutely cannot receive an HRA benefit tax-free.

2) Answer is maybe yes. There are other requirements/restrictions depending on various factors like the size of the benefit, how many EEs you have. Look up MMSEA.

[caryn22359]

Thank you John.

Are HRA 's treated in the same manner for tax purposes as accident and health benefits, Ex. If the s corp s/h were to participate in a HRA the money put aside would be taxable as salary and then they can deduct it on their personal income tax return as an AGI adjustment??

[Guest morris]

Caryn: Informal guidance suggests that HRAs may not provide coverage for self-employed individuals, even on a taxable basis, because the 2002 guidance specifically provides that the term "employee" does not include a self-employed individual.

In regards to HRAs for Medicare enrollees: Careful if you are considering reimbursing Medicare premiums. If your Medicare enrollees are also employees, be careful that you don't provide an incentive to them to drop your group health insurance coverage. There are stiff penalties for trying to make Medicare primary when the group coverage should be primary. (If less than 20 employees--disregard). Otherwise, OK to provide HRA benefits for former employees and retired employees.