IRS RULES THAT NUMEROUS SCREENING TEST QUALIFY AS A MEDICAL EXPENSE. HOWEVER...

In a private letter ruling the IRS considered whether various screening tests constituted "medical care" under Code Section 213. A unreimbursed medical participant had elected to contribute a sufficient amount to reimburse her for the cost of every screening test (for her self and spouse) offered by an undisclosed entity, and the test were performed during the applicable plan year. These tests, which were the subject of the Ruling, were procedures to evaluate risk factors for the aid in detection of heart attack, stroke, diabetes, osteoporosis, thyroid conditions and cancer, among others.

The code defines medical care as amounts paid "for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body." The IRS concluded that the tests under consideration were diagnostic, using the common meaning of the word diagnosis. "any procedure to determine the presence of a disease or dysfunction of the body." The IRS also noted that an expense deductible as a medical expense must bear a direct (or proximate) relationship to a diagnosis, and it concluded that this requirement was met because each procedure was closely followed by a report that furthered diagnosis of the participant's medical condition.

Although, the IRS found that more than 40 procedures qualified as medical care, they declined to comment on whether her unreimbursed medical plan could reimburse the expenses on a pre-tax basis.

Although the IRS did not advise whether the expenses for the screening test were reimbursable under her unreimbursed medical account, the ruling is helpful. We now know how the IRS is viewing the expenses and should get some further guidance soon. Court cases have ruled in the past that expenses are not eligible unless there is an existing disease or an imminent probability of developing a disease. Therefore, until we receive further guidance we cannot reimburse these expenses unless there is existing or imminent probability of disease. We will keep you updated once we receive approval or further quideance.

SOCIAL SECURITY WORKSHEET

Often we are asked about the effect that participating in the Cafeteria Plan has on social security. In the past, we have directed individuals to contact their Social Security office. This has been of little help. The Office of Personnel Management now has a work sheet and instructions for trying to figure out the impact. Their web site address is:

www.opm.gov/asd/pdf/2000/00-215_attach2.pdf

Please be aware that you will need a lot of information and some extra time to figure all this out. Good luck!

REQUEST FOR REIMBURSEMENTS

Please remember to make copies of all receipts and claim forms that are submitted to us. Every once in while a claim gets lost in the mail and it can be a real hassle to get duplicate receipts.

THANKSGIVING HOLIDAY

We will be closed November 22 and 23 in observance of Thanksgiving. We wish you and your family a Happy Thanksgiving.