Basics

This summary is provided to the employer along with the three-ring administrative binder.

In an effort to assure compliance with accepted Employee Benefit practices, as they relate to the implementation or your S.E.E.D. Medical Reimbursement Plan, please review the following suggestions.

• The concept of family employment requires a legitimate employer/employee relationship. This means the "employed" spouse must provide meaningful services to increase the success of your company. In addition, there must be a formalized hiring process. This should include an outline of duties and responsibilities, completing forms (i.e. W-4, 1-9), as well as an agreement of a total compensation package.
• An important issue in developing a bona fide Medical Reimbursement Plan is reasonable compensation. What is considered "reasonable" differs depending upon the individual circumstances. However, some factors could include the following:
  • W-2 wages paid for similar services
  • Experience
  • Present Qualifications
  • Available Workforce
  • Importance/Complexity of duties
  • Responsibilities
  • Business Economics
• The employer should require a time card (for hourly pay) and/or have a written agreement as to salary. We would recommend that payroll be on a systematic basis, i.e. weekly, semi-monthly or monthly. The paycheck and any medical reimbursement should be in the employee's name and deposited in an individual/joint account. Do not deposit into the business bank account.
• The accident and health policy should be purchased in the name of the "employee-spouse" with the "employer-spouse" added as a dependent.
• The REIMBURSEMENT section of the employer's administrative guide has forms and instruction for requesting reimbursements through the Employee Benefit Plan. Also, review Publication 502 (see TAX FORM section) for guidance.
• As an employer you are to meet certain tax form filing guidelines required by various governmental agencies. An outline of the requirements, as well as sample documents, is included in the TAX FORM section of the guide.
• Compensation paid to a spouse will be subject to Social Security and Medicare taxes (see SPOUSAL EMPLOYMENT example in MISC section). However, spousal wages are exempt from Federal unemployment and most state unemployment taxes. Please review these requirements with you tax professional.

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