Self-Insured Medical Plans: Tax Trap For The Unwary

Law360, New York (May 8, 2009, 12:00 AM EDT) -- The continued escalation of medical costs has made self-insurance an increasingly attractive alternative for employers who want to better control their medical costs.

Changing from a fully insured plan to a self-insured arrangement, however, carries with it a potential tax trap that can inadvertently create significant tax liabilities for an employer’s most valuable employees.

Moreover, the employer may also incur economic loss if the affected employees look to it to be made whole for their unexpected liability.

The issue arises because most welfare benefits, including medical...
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