SABC Newsletter

  Southern Administrators and Benefit Consultants, Inc.

March, 2002

President Bush outlined his Administration's health care agenda, which includes proposals to expand Unreimbursed Medical spending accounts. During a recent speech in Milwaukee, the President discussed proposals that would provide refundable health tax credits to low and middle income individuals and families who do not have employer provided insurance.

In his remarks, the President asserted that the role of the federal government is "not to centralize or to control the delivery" of medical services, but to "reform the system to make it more individualized."

The President's proposal would eliminate the onerous "use-it or lose-it" rule afflicting Unreimbursed Medical spending accounts.  In the proposal the Administration would allow employees to roll over up to $500 in unspent health care contributions to the following year or contribute it to their 401(k) plans. The proposal would cost $8 billion over ten years.

With the elimination of the use-it or lose-it rule imposed by the IRS, we should see greater participation from those that are grossly under estimating their expenses and those that are nervous about losing money.

President Bush also proposes to improve Medical Spending accounts by lowering the deductible requirements to levels that are comparable to private health insurance.  This proposal will help self employed and other individuals that cannot participate in a Cafeteria Plan. 

DISABILITY PREMIUMS INCLUDED IN EMPLOYER GROSS INCOME 

In a recent letter ruling the IRS responded to an employer's proposed amendment to its long-term disability (LTD) plan. The employer paid 100% of the LTD insurance premiums.  To ensure that the disability benefit payments received by participants under the plan would be nontaxable, the

employer proposed to include the amount of the premiums in   each participant's taxable wages in the year the premiums were paid (in effect, the amount would show up on each participant's Form W-2). If an individual purchases a policy out of his own funds (that is if the premiums are paid with after-tax dollars), the amounts received thereunder for personal injuries or sickness are excludable from gross income.  However, if the premiums are paid by the employer or with pre-tax dollars, then any benefit would be considered income and would be taxable as such.  Since in this case, the employer was including the cost of insurance in the participant's gross income, the employer would be "acting as a conduit for the payment of the premiums" and the participants would be paying the premiums with after-tax dollars.  Therefore, the IRS concluded, LTD benefit payments received by the participants under the amended LTD plan would be excludable from their gross income.

WHEN FAXING YOUR CLAIM . . .

Please only fax your unreimbursed medical and/or dependent care claim once.  If your claim is over (3) three pages please mail it. If you fax your claim, please do not mail it. Also, please include a phone contact number on your claim incase the fax is not clear. If you wish to pick up your check at our office, please state so on your faxed claim.

Following these procedures will expedite your claim and ensure accuracy.

If you are a participant in flexible spending and wish to stop by our office to submit your claim, please be aware that we cannot process any claims after 4pm. Please make  copies of your receipts prior to your arrival to avoid coping charges.  If you plan allows, we are more than happy to process your claim and present you with a reimbursement check while you wait.

We will be closed Friday March 29th in observance of Good Friday. The staff at SABC wishes you and your family a Happy Easter.