Discussion:Health ins - reimb. & separate plan
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Discussion Forum Index --> Basic Tax Questions --> Health ins - reimb. & separate plan
Discussion Forum Index --> Tax Questions --> Health ins - reimb. & separate plan
| May 2, 2008 | |
| There are already several looooonng discussions about this topic, but I don't recall seeing this question:
Can an S-corp reimburse health insurance premiums for three owner-employees (all under one outside plan) and have another plan in the name of the corp. for another owner-employee? Assume the three owner-employees are > 2% S-corp owners (also happen to be husband/wife/son) and are currently covered by an outside plan that husband/wife pay for 100%. They are considering having the corp reimburse them for the premiums, as per notice 2008-1. Other owner-employee (daughter) is currently covered by another employer, but if business takes off, she may quit that job. Can do? | |
| 2 May 2008 | |
| You can have an HRA plan for premiums for SH that have a plan not in the company name, so I don't see why you couldn't have it be for multiple plans instead. I thought the idea was to be able to have the S Corp pay HI premiums, even if the plan wasn't in the company name. | |
| 6 May 2008 | |
| The corp can reimburse, but it goes on W-2 not subject to FICA or MCare. Box 14[I think] shows the amount of premiums to 2% SH, and the premiums are then deductible on page 1 of Form 1040. This works for both company plans and reimbursed health insurance. | |
| May 6, 2008 | |
| So the corp can have one plan that reimburses three owner-employees and one plan that it pays directly? | |
| 6 May 2008 | |
| I didn't read that into your original post. There was only one plan and the potential to need another one, should the daughter need it. First off, if the daughter will also need coverage, I would bet they could get better coverage/rates through a company plan, issued in the company name, and premiums can be paid directly by the company (then go on W2, etc). S Corps can often get good plans if there are at least 2 plan participants. I have clients where the husband and wife are both separate plan participants for this reason. Other than that, the HRA is supposed to allow the >2% SH to get reimbursed for premiums for HI premiums for plans that are not in the company name. I don't know whether or not it matters if the premiums are paid directly by the company, but I would think that what really matters is that it be posted appropriately, and that the final result would be the same. Or if it does matter, why not just have them all pay them personally and get reimbursed? | |
| May 6, 2008 | |
| Corp has already checked out other plans, and the cost/benefits are better under the current plan that the three shareholders have. Should business take off and require daughter to work full-time, I'm sure they would get a regular HI plan, not an HRA. My understanding of Notice 2008-1 is that the premiums must be paid by the corp in order for them to be deductible above the line. | |
| 6 May 2008 | |
| From Notice 2008-1:
A plan providing medical care coverage for the 2-percent shareholder-employee in an S corporation is established by the S corporation if: (1) the S corporation makes the premium payments for the accident and health insurance policy covering the 2-percent shareholderemployee (and his or her spouse or dependents, if applicable) in the current taxable year; or (2) the 2-percent shareholder makes the premium payments and furnishes proof of premium payment to the S corporation and then the S corporation reimburses the 2-percent shareholder-employee for the premium payments in the current taxable year. If the accident and health insurance premiums are not paid or reimbursed by the S corporation and included in the 2-percent shareholder-employee’s gross income, a plan providing medical care coverage for the 2-percent shareholder-employee is not established by the S corporation and the 2-percent shareholder-employee in an S corporation is not allowed the deduction under § 162(l). | |
| 6 May 2008 | |
| I guess what we've never established is whether the children are shareholders. I've been assuming they are. | |
| May 6, 2008 | |
| There are four shareholder-employees, and they are all related. The policy they want to keep is the one that is currently being paid for by them personally -- it covers the mom, dad and adult son. The daughter is currently covered by her current full-time employer. | |
