Contributions made by the taxpayer to the retiree HRA on behalf of eligible retirees, spouses, and eligible dependents that were used exclusively to pay for eligible medical expenses were excludable from the retirees’ gross income under Code Sec. 106. Further, contributions made to the retiree HRA on behalf of eligible retirees, spouse and eligible dependents were not wages subject to FICA taxes (social security and Medicare taxes) imposed under Code Sec. 3121, FUTA taxes imposed under Code Sec. 3306(b) or income tax withholding under Code Sec. 3401(a). However, contributions made to the retiree HRA that were used to provide medical coverage for registered domestic partners of eligible retirees were included in the gross income of eligible retirees under Code Sec. 61. The taxpayer represented that amounts in the retiree HRA would only be used to reimburse health insurance premiums and medical expenses and under no circumstance would the eligible retiree or any beneficiary receive cash or other nonqualified benefits. (IRS Letter Ruling 201528004, LTR Report Number 1987, July 23, 2015.)
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