Medical Reimbursement Plan

[equinecpa]

I have a client setting up a medical reimbursement plan -one spouse will employ the other.

My question: The spouse employing the other also has a regular W-2 job and has insurance coverage through that employment. The co-pays and premiums related to this insurance wouldn't be deductible in the medical reimbursement plan would they?

[JG EA]

I have a client setting up a medical reimbursement plan -one spouse will employ the other.

My question: The spouse employing the other also has a regular W-2 job and has insurance coverage through that employment. The co-pays and premiums related to this insurance wouldn't be deductible in the medical reimbursement plan would they?

Here are some quotes from pub 969

A health reimbursement arrangement (HRA) must be funded solely by an employer. The contribution cannot be paid through a voluntary salary reduction agreement on the part of an employee. Employees are reimbursed tax free for qualified medical expenses up to a maximum dollar amount for a coverage period. An HRA may be offered with other health plans, including FSAs.

You do not have to be covered under any other health care plan to participate.

Self-employed persons are not eligible for an HRA.

For an HRA to maintain tax-qualified status, employers must comply with certain requirements that apply to other accident and health plans. Chapters 1 and 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits, explain these requirements.

I'm sure you know all these and if it is being set up by an agency - they will know.

Qualified medical expenses. Qualified medical expenses are those specified in the plan that would generally qualify for the medical and dental expenses deduction. These are explained in Publication 502, Medical and Dental Expenses. However, even though non-prescription medicines (other than insulin) do not qualify for the medical and dental expenses deduction, they do qualify as expenses for HRA purposes.

Qualified medical expenses from your HRA include the following.
Amounts paid for health insurance premiums.

Amounts paid for long-term care coverage.

Amounts that are not covered under another health plan.

Your question isn't really answered here but since premiums are allowed I would think co-pays would be.

Now my question to you is are you in a community property state? Then the two could be considered one entity therefore not allowing this type of deduction. That would depend on state law I would think.

[JG EA]

Another consideration:

Does the cost to set up such a plan plus the cost of payroll (especially if someone else does) out weigh the tax savings of such a plan.

[Kram BergGold]

My take

A is the employer and has health insurance. B is the spouse who works for A. If A sets up a medical reimbursement plan for B and B's family then any expneses B incurs for B or other family members could be paid for by the medical reimbursement plan. Remember, B has to pay the bill an dsubmit it to A for reimbursement. If a pays the bill then this can't be reimbursed.

[dsi]

Is A self employed?

[Gretel]

I have a client setting up a medical reimbursement plan -one spouse will employ the other.

My question: The spouse employing the other also has a regular W-2 job and has insurance coverage through that employment. The co-pays and premiums related to this insurance wouldn't be deductible in the medical reimbursement plan would they?

I agree with your conclusion. Only expenses incurred by the working spouse are reimbursable, just as it would be for any other employee. This at least is the only thing that makes sense to me.

[equinecpa]

I know the wording used to be that the premium had to be in the EMPLOYEES name and then could cover the spouse (self-employed employer). If in this case the spouse(employer) has coverage through another business (w-2), then the plan won't be in her spouses name and thus the premiums for neither of them would be deductible. I was really wondering about the co-pays..since the spouse employee could pay those out of pocket.

As for cost to set up these plans -they are very negligible and IMO if you can get $10,000 of medical expenses moved from Schedule A to Schedule C -very worthwhile.

[Gretel]

I know the wording used to be that the premium had to be in the EMPLOYEES name and then could cover the spouse (self-employed employer). If in this case the spouse(employer) has coverage through another business (w-2), then the plan won't be in her spouses name and thus the premiums for neither of them would be deductible. I was really wondering about the co-pays..since the spouse employee could pay those out of pocket.

As for cost to set up these plans -they are very negligible and IMO if you can get $10,000 of medical expenses moved from Schedule A to Schedule C -very worthwhile.

I thought you were asking about co-pays for owner. I think anything paid by employee-spouse can be reimbursed if it is not for the benefit of owner.