Medical Insurance Reimbursement

S

scavenger

Registered User
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Hi All,

I am just wondering if anyone can help me here.

The employees have their own medical insurance and they paid directly to the insurance provider. The company then reimburse the amount by paying it to the employees.

My question is how the reimbursement be accounted in the payslip. My concern is that if the company accounts the amount reimbursed as BIK for healthcare then the employees will receive double reliefs - i.e. relief from Revenue on PAYE plus relief on the TRS deducted on the insurance that they paid directly.

Any thought on this will be much appreciated.

Thanks
 
That's a rather convoluted and tax inefficient system in place! It would be simpler for the company to pay the insurance company directly and charge BIK on the employees. Additionally, this would make the insurance much cheaper for the employees- basically, they get their insurance for the cost of PAYE + PRSI + USC, say a max of 52% of the insurance premium and can reduce this by the TRS claimed from Revenue.

As the employees get a cash payment from the company it can't be treated as a BIK since it's not 'in kind'. In essence, I'd say that the best treatment is to treat it as additional salary or if preferred a 'round sum expense allowance'. Either way, they will pay PAYE, PRSI and USC on it.
 
Thanks for your reply deadlyduck. Indeed I agree with you on the first paragraph there but this is rather an isolated case we have here. Two new joiners have their own policy for another 2 to 3 months to run and unwillingly to change to the company's scheme due to the additional cost they will incur in terminating the existing contract (according to the employees although I am skeptical about it but they are so adamant). So they prefer to run it down and subscribe to the company's scheme after that. Company agrees to reimburse the amount paid by them for a couple of months before add them to the company's scheme.

Thanks
 
ps just pointing out that the relief is limited to the cost of the policy up to a maximum of €1,000 per adult and €500 per child
 
In your position I would be offering the amount their insurance will cost when they convert over as part of their gross pay. They will indeed pay tax on this. It would be more tax efficient for them to transfer in now.
 
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