Discussion:Medical Reimbursement Plan in Corporation

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Advanced Tax Questions --> Medical Reimbursement Plan in Corporation
Discussion Forum Index --> Tax Questions --> Medical Reimbursement Plan in Corporation

Harvey (talk|edits) said:

25 January 2008

Just a little confused re: discrimination rules re: medical reimbursment plan.

Facts: C Corporation, one 100% stockholder, the 100% stockholder is the only employee. Can the Corporation set up a medical reimbursement plan for the 100% employee/stockholder and not be in violation of the discrimination rules? All the benefits would be going to a "highly compensated employee" - would this then mean that the plan is in fact discriminatory? Somewhere along the line I thought there was a rule that if a certain % of the benefits paid are for the benefit of highly compensated employees, then this makes the plan discriminatory and the benefits need to be added to wages.

Follow-up question - what if the C Corporation actually pays no salary to the 100% employee/stockholder? (Thus the C Corporation would have a deductible fringe benefit (medical reimbursment plan) but no wagers paid.) Does this pass the smell test?

Thanks for your feedback!

Marty760 (talk\|edits) said:	25 January 2008
Yes, to having a medical reimbursement plan in a one employee corp. even if 100% stockholder. No porblem with that. Not sure that no wages paid and a medical reimbursement plan would pass the smell test. MIght have some sort of agreement that the salary was deferred for some reason, but that is the only way I think it might work. The second part of this answer is an opinion.

Death&Taxes (talk\|edits) said:	25 January 2008
A medical reimbursement plan is not paid to a shareholder, but to an employee, but with no wages, there is no employment, is there?

Smokeytax (talk|edits) said:

26 January 2008

I agree that your client can take the position that the 100% shareholder is an employee, even if no wages are paid.

I've been content to sign returns in the past that include this type of arrangement, and I'm a little on the conservative side.

If the corporation can't afford to pay both wages and fringe benefits, I think paying just the fringe benefits would pass the smell test.

An employment agreement probably be helpful.

DouglasHolbrook (talk\|edits) said:	26 January 2008
Go read the Spelz or Speltz case. It's right on point.

Kendrick (talk\|edits) said:	26 January 2008
Medical reimbursement plans. I can't seem to find any information anywhere on what one looks like, what one must say. You would think there would be plenty of examples SOMEPLACE of what medical reimbursement plans look like, but I guess I am a dummy - I just can't find anything. Can anyone help out here? I sure don't want to pay Section105Concepts.com, or whatever there name is, $500 to join up.

Death&Taxes (talk\|edits) said:	26 January 2008
Find yourself a corporate kit....you know those black binders that incorporators used to give with the shares of stock and minute book. Almost all held a boiler plate 105 plan inside. My first corporation's book did, and so does my second, formed in 1997.

Kendrick (talk\|edits) said:	26 January 2008
Thanks Death. I will look for one.

Lardog (talk\|edits) said:	29 October 2009
Hey Kendrick, You will find a draft of a Medical reimbusement plan at: http://www.elliscpafirm.com/PDF's/SelfInsured_Medical_Reimbursement_Plan.pdf

Blrgcpa (talk\|edits) said:	29 October 2009
How can you pay employee benefits if there are no employees on the books? You can't have 1 employee and no wages. Slavery was outlawed by Abe Lincoln.

Trillium (talk\|edits) said:	29 October 2009
I believe Barb's question is well-addressed in the posts toward the top of this discussion. But my real reason for posting (reworded): Anybody else think the combination of no profile/first post/offsite link/two-year-old question looks a little suspicious?