Benefit deductable

lrobb · June 2008

employer wants to reimburse any employee the cost of their deductable during the coming plan year. only those employees who meet the $750.00 deductable would be reimbursed.

questions are is this ok and what are the tax implications for the $750.00 payment

FunHRBanker · June 2008

Why would they not want to reimburse everyone who had to pay deductible expenses? So if someone paid $700 for medical expenses throughout the year, they would not be reimbursed. I think this would cause major morale problems.

If this is done, I'd think it was taxable income to be included with their payroll or listed on their W-2 or 1099 at the very least.

joannie · June 2008

I'm with you Fun. I definitely think it would be taxable and can't imagine why you would reimburse some and not others.

Peyton Irby MS · June 2008

Any reimbursement would be taxable income to the employee. As noted, the issue of some being reimbursed and others not or not as much can be a morale issue.

Peyton Irby
Editor, Mississippi Employment Law Letter
Watkins Ludlam Winter & Stennis, P.A.
(601) 949-4810
[email]pirby@watkinsludlam.com[/email]

lrobb · June 2008

Thanks, for the information. We thought it would be easier to pay when deductable was reached instead of a little at a time.

lnelson · June 2008

If the employer has an FSA Medical Out Of Pocket it can basically do the same thing but have it be pre-tax dollars. The employee would take the deduction out of their check then they would submit receipts for the reimbursements. The company can set the maximum amount maybe start at $500 then raise as you see fit or based on its usage. It would be a voluntary program.

FunHRBanker · June 2008

I may have misunderstood the question based on your response of reimbursing all at once rather than a little at a time. You plan to reimburse everyone, but as a one time, end of year payment, correct?

You may also want to look into a Health Reimbursement Account if this is the route you want to go. The FSA is an employer sponsored benefit, but is funded by employee dollars.

Texas · June 2008

We established an HRA designed to pay the back half of our $1,000 health insurance deductible. The employee makes no contribution to the plan, but submits an EOB for reimbursement once they reach $500 out of pocket. The benefit is not taxable to the employee, nor is the employer paid portion of the health insurance premium.

FunHRBanker · June 2008

HRA is probably the way to go if you want to reimburse employees for their deductible. There are a number of vendors out there that could administer the program. With all the HIPAA regs out there, we don't want to deal with ee claims!

Benefit deductable

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