Medicare Part B Reimbursement

[DonB]

As part of their pension package, retiree's over age 65 are reimbursed for the Medicare Part B amount. The retirees are not required to document the payment of the Part B payment. Prior to 2015 on form 1099-R, the plan reported the Part B reimbursement and pension amount in the gross distribution, and only the pension amount in the taxable amount. Now they are going to report them on separate 1099-Rs with the reimbursement marked as " taxable amount not determined". Retirees are advised to seek advise on the taxability of the reimbursement.

I believe it is taxable. Does anyone have a contrary opinion, or agree with me?

Don in Colorado

[New York Enrolled Agent]

As part of their pension package, retiree's over age 65 are reimbursed for the Medicare Part B amount. The retirees are not required to document the payment of the Part B payment. Prior to 2015 on form 1099-R, the plan reported the Part B reimbursement and pension amount in the gross distribution, and only the pension amount in the taxable amount. Now they are going to report them on separate 1099-Rs with the reimbursement marked as " taxable amount not determined". Retirees are advised to seek advise on the taxability of the reimbursement.

I believe it is taxable. Does anyone have a contrary opinion, or agree with me?

Don in Colorado

It should not be included in gross income.

Read paragraphs 133-135 of ILM 200206053 . It gives appropriate citations.

[taxea]

A reimbursement is a refund of a payment made by the TP therefore not taxable as income. If the TP can document that the payment was made and the reimbursement is included in gross income the gross income should be adjusted for the amount of the payment.

[TAXNJ]

Further

Agrre with reply posters.

Also you can reference IRS notice 2015-17 see page 6 - which states..... Rev. Rul. 61-146 holds that under certain conditions, if an employer reimburses an employee’s substantiated premiums for non-employer sponsored hospital and medical insurance, the payments are excluded from the employee’s gross income under Code § 106...

[DonB]

I would like you all to be right, -- but,

As I read section 106 it says under certain conditions would this be excluded from tax. those conditions are:

(1) reimburses each employee directly once or twice a year for the employer's share of the insurance
premiums upon proof of prior payment of the premiums by the employee;
(2) issues to each employee a check payable to the particular employee's insurance company, the
employee being obligated to turn over the check to the insurance company; or
(3) issues a check as in method (2) except the check is made payable jointly to the insurance
company and the employee.

As I see it, the key is the payment is first verified and then reimbursed. In my case, there is no verification.

Am I splitting hairs? or digging too deep?? or misinterpreting this?

[TAXNJ]

Split

As I read section 106 it says under certain conditions would this be excluded from tax. those conditions are:

(1) reimburses each employee directly once or twice a year for the employer's share of the insurance
premiums upon proof of prior payment of the premiums by the employee;
(2) issues to each employee a check payable to the particular employee's insurance company, the
employee being obligated to turn over the check to the insurance company; or
(3) issues a check as in method (2) except the check is made payable jointly to the insurance
company and the employee.

As I see it, the key is the payment is first verified and then reimbursed. In my case, there is no verification.

Am I splitting hairs? or digging too deep?? or misinterpreting this?

Are you saying your client gets reimbursed for Medicare part b and client has no Medicare part b or such payments for it?

Client should be able to verify. Check with client

[DonB]

Are you saying your client gets reimbursed for Medicare part b and client has no Medicare part b or such payments for it?

I'm saying client pays Part B and could prove it if asked, but does not have to document this payment to get the reimbursement.

[beck]

His documentation to the pension provider would have included a copy of his Medicare card stating his benefits or a letter from Social Security stating his benefits. If he did not provide that documentation, he would not be reimbursed.

Beck

[TAXNJ]

So

I'm saying client pays Part B and could prove it if asked, but does not have to document this payment to get the reimbursement.

So what's the problem. If can meet the requirements of the code then it meets the requirements. End of story. Right?

[FEDUKE404]

Additional benefits not income?

I'm trying to wrap my head around how a retired employee can be paying monthly Medicare B premiums (either directly or by reduction of monthly Social Security net benefits) and simultaneously the retirement program of his former employer separately pays to him the amount of the same Medicare B premiums. . . and somehow those "extra" funds from his retirement program can NOT be deemed to be taxable income.

( Or are those Medicare B premium payments from the retirement plan simply excludable from income? ? ? )

Sounds seriously like a "taxable retirement benefit" to me.

OTOH, if the retirement program is directly paying the Medicare B premiums, and then *REDUCING* the net monthly benefits paid to the retiree, that would be a different scenario entirely.

(There was an earlier TTB discussion about "medical insurance payments" directly paid from retirement funds for qualified Public Safety Officers, but that is a different situation from the one presented here.)

(Wish I could get my former employer to pay MY monthly Medicare B premiums!!!)

FE

[DonB]

His documentation to the pension provider would have included a copy of his Medicare card stating his benefits or a letter from Social Security stating his benefits. If he did not provide that documentation, he would not be reimbursed.

Beck

He does not provide that documentation (or any documentation) and is reimbursed as is everyone else in that plan. As I see it, that is a problem for it to be non-taxable. DonB

[TAXNJ]

IF DonB

I'm trying to wrap my head around how a retired employee can be paying monthly Medicare B premiums (either directly or by reduction of monthly Social Security net benefits) and simultaneously the retirement program of his former employer separately pays to him the amount of the same Medicare B premiums. . . and somehow those "extra" funds from his retirement program can NOT be deemed to be taxable income.

( Or are those Medicare B premium payments from the retirement plan simply excludable from income? ? ? )

Sounds seriously like a "taxable retirement benefit" to me.

OTOH, if the retirement program is directly paying the Medicare B premiums, and then *REDUCING* the net monthly benefits paid to the retiree, that would be a different scenario entirely.

(There was an earlier TTB discussion about "medical insurance payments" directly paid from retirement funds for qualified Public Safety Officers, but that is a different situation from the one presented here.)

(Wish I could get my former employer to pay MY monthly Medicare B premiums!!!)

FE

Agree. If DonB wants to spend more time on this issue, then ask client to get copy of company policy related to this issue and then make decision.

Sounds like a great company to work for.

[Burke]

My software will auto-populate the Sche A for medicare ins prems for B or D when input on the SS benefit worksheet. Therefore, if the TP is reimbursed, I would think that would have to be adjusted or omitted from the Sche A by the preparer.