IRS drafts health insurer exec comp regs

Officials and commenters have been debating whether and how to make a distinction between “natural persons” and services provided through arrangements with corporations or partnerships, including “personal services corporations.”

“Commenters were concerned that remuneration paid to doctors working for practice groups that provide services to a covered health insurance provider would be subject to the deduction limitation under Section 162(m)(6),” officials said. “In general, a corporation or a partnership (for federal tax purposes) would not be treated as an applicable individual.”

But the IRS and its parent, the U.S. Treasury Department, worry about the possibility that health insurers could try to avoid having to comply with the deduction limit by “encouraging employees and independent contractors who are natural persons to form small or single-member personal service corporations or other similar entities to provide services that are historically provided by natural persons,” officials said.

The IRS is asking for comments about how it can keep health insurers’ highly paid executives from all becoming parts of small or single-member personal services corporations or similar entities and selling executive services back to the health insurers through those entities.

Comments on the proposed regulations are due July 1.

See also:

• PPACA: IRS Interprets “Excess Comp” Rules
• GAO: Qualified SERPs a Mystery
• Federal Agencies Post Comp Rule Draft