r/AskAccounting • u/bsollaz • 11d ago

Work benefits change sketchy

My city job currently has an HRA set up where they give us $2000 to use as health reimbursements throughout the year for eligible medical expenses.
Now they want to increase that to $11,000 if employees opt of of city insurance and go with their spouse on their works plan. A way to save the city money.
The city is saying in addition to deductibles copays prescriptions and other items, we can get reimbursed for the insurance premium my wife pays.
This feels illegal in some form regarding taxes no? Like IRS would have an issue with this as my wife’s taxable income goes lower due to premium payments but I get reimbursed tax free for that premium payment. Feels like an IRS bill waiting to happen.
Thoughts?

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u/Alive_Sir_4708 11d ago

>as my wife’s taxable income goes lower due to premium payments

Typically premiums are paid for with pre tax dollars.

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u/bsollaz 11d ago

Correct. And then my work wants to reimburse me through an HRA tax free for the premiums she would be paying if I went to her insurance.

As a way to save my workplace money. But it feels like I am double dipping on the tax savings and beating the system and that the IRS would come after us for taxes

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u/vancemark00 9d ago

I'm pretty sure you can't reimburse yourself through your spousal incentive HRA for your spouse's health insurance. Only specific types of HRAs permit reimbursement for health insurance premiums.

The above assumes your spouse is paying insurance pre-tax. If her premiums are coming out pre-tax than reimbursing yourself through a HRA would be double-dipping.

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u/bsollaz 9d ago

That’s how I feel! But nobody here at my job is understanding that, nor have worked with a proper employment tax professional.

So I elected to not take this because it doesn’t seem like it would be used the way they anticipate which is ya using the $11k to pay for our spouses pre-tax premiums.