IRS Likely to Allow Tax-Free Roll Over of Funds for Employees in Defined Contribution Health Plans
The Internal Revenue Service this week is "widely expected" to announce that it will allow employees participating in defined contribution health plans to roll over, tax-free, the money their employers give them to pay for out-of-pocket medical expenses, USA Today reports. While the few companies that currently offer such plans "commonly" allow employees to roll over their funds tax-free, the practice has been a "gray area" under current IRS rules. Many companies have been reluctant to offer the plans because of concerns about the permissibility of rollovers. Defined contribution plans were designed to lower companies' insurance premiums and give employees an incentive to control their health care spending. Fewer than 350,000 employees nationwide participate in defined contribution plans, although many employers are considering implementing them in the next few years (Appleby, USA Today, 6/26).
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