I have an LLP group client. Many of the partners in this LLP have their own C-Corp. One partner is interested in implementing a medical reimbursement for himself.

Question 1: Can this partner implement his own reimbursement plan (under his c-corp arrangement) or does he have to include the other partners under the LLP/S-Corp arrangement?

Question 2: If he is able to set up a plan under his c-corp, is he required to purchase an executive reimbursment plan such as ExecuCare to be eligible?

Question 3: Does "Attribution" come in to play here? If so, please explain.

If someone could also please explain the differences between an S-Corp and C-Corp in this situation and how each is treated that would really be helpful.

Thanks!!!

A proper answer would probably need more info.

Q1 and Q3: Check the "Who's the Employer" Q&A section of BenefitsLink. Attribution, controlled group, common control or other aspects of "attribution" could be applicable.

Q2:Do a search of the Forums for "Execucare". There have been a number of discussions on the issue.

IMHO, if regardless of attribution or even if a partner could get such a benefit (in a favorable manner), it would make no sense to use something like a fully insured MERP whether ExecuCare or any other.

The difference between the treatment of an S-Corp shareholder and a C-Corp shareholder first depends on the S-Corp shareholder having more than 2% of the shares, assuming that in both cases there is a valid employee status. In this case the LLP presents a different set of additional circumstances mainly because of there being other Partners (Members).

G Burns is correct. Some of the additional information needed includes ownership percentage in the LLC, whether the LLC or the individual corps employ employees. And I would have referred you to the discussion on Execucare in which G Burns and I both expressed concerns about the legal viability of ExecuCare.

When a "C" corp provides a medical benefit or a medical reimbursement benefit, it is fully tax deductible to the corporation. If the benefit is provided through a self-insured health plan, including a MERP, benefits provided to HCIs are taxable to the HCIs to the extent that the plan is discriminatory.

If an "S" corp provides medical benefits to a 2% owner, the amount spent on behalf of the 2% owner is passed through to the owner's tax return. There it is deductible only to the extent that the owner itemizes tax deductions and the expenses exceed 7.5% of FAGI.

Hope this helps. I will not be replying off board since you asked the same questions.