Medical Expences

[arnguy]

A MERP falls under Sec.105 IRC and is similar to an HRA. Fom the facts given by SamIAm I don't see any advantage to a MERP since their corporation pays the premiums that are deductible by it. I believe MERPs are often used by employers to permit the employees to purchase their own individual health plans. I don't think a MERP is allowed to pay for the copays, etc. It appears to me that Sam's clients are looking for a 100% free ride. If they have high medical expenses they are enteitled to the deduction I mentioned in my previous post. BTW I went back on my meds so I should be able to think more clearly and not misspeak.

 

[superfly33]

I can deal with 5% commision or so because volume is going to go up and the ease of GI will speed things along. But it's the flat rate compensation that I'm really worried about.

 

[CHUMPS FROM OXFORD]

$12 per month per person wouldn't be bad.

 

[somarco]

MERP's can be used to cover premiums and any allowable out of pocket expenses under Section 105(b), including deductibles, copays, vision, dental, etc that is not reimbursed by other plans.

Here is sample wording for a MERP, and here is one used by SELA.

The beauty of the MERP is there is no requirement to pre-fund the account and it is not limited to C corps. Here is a Tax Court case addressing the use of a MERP in a self employment situation.

I also found a document used by NEF and administered by Health Plan Services that explains how MERP's can be used including how to calculate the participation requirements.

Here is an HRA worksheet outlining the services that can be included in a reimbursement plan.

Another Tax Court reference from Iowa State Center for Law & Taxation. Other searches included many references to the Speltz case. I don't know if that would be considered a "landmark" decision but it certainly is popular.

I may not have completely Shepardized this topic but unless there are some newer rulings that are contradictory, it seems the MERP/HRA is still viable. The HRA is the more common term in use now but some old timers still remember the MERP.

 

[arnguy]

Hey, Bob, not arguing with you. If it works for you, that is great. In a quick perusal of the documents you linked I noticed that NEF plan mentions coverage of coinsurance but not copays. Those two terms are not interchangeable. I will study this further and do appreciate the references. I am always open to learning more about tax topics. However, I am dismayed that the cost of a hotel room for sex therapy is specifically excluded from coverage in the NEF document.

 

[somarco]

Maybe copays are not included but that is certainly an OOP expense. Unless they are specifically excluded I would lean towards saying they are OK.

I do agree with excluding hotel rooms for sex therapy. Do you have any idea what kind of disease you can pick up in a hotel room?

 

[arnguy]

I know that there are bedbugs invading hotels, but in today's Parade Magazine it was stated that they do not carry any diseases---just uncomfortable bites. But, hey, they need blood to survive.

 

[somarco]

they need blood to survive

So does the IRS

 

[arnguy]

So does the IRS

Believe me, you are not kidding!

 

[SamIam]

The MERP is easy to set up, just one page declaration. I have used it for years and used to set these up for large companies many years ago before they came under the non-discrimination provisions. They are a great tool for mom & pop businesses.

What is a Medical Expense Reimbursement Plan (MERP)?

FWIW, arnguy is a former IRS agent. I believe he knows a thing or two about what can and cannot be done within the framework of the IRC.

Somarco, you are correct if they have a medical reimbursement account but as I stated my client didn't have Medical reimbursement account or an HSA.

I do agree with you about the medical reimbursement accounts they are beautiful I have one for my family.