• IRS Addresses Insurance Characterization
  • July 26, 2017 | Authors: M. Kristan Rizzolo; P. Bruce Wright; Saren Goldner; Graham R. Green
  • Law Firms: Eversheds Sutherland (US) LLP - Washington Office; Eversheds Sutherland (US) LLP - New York Office
  • Captive Insurance Company Reports

    A recent Chief Counsel Advice (CCA) released by the IRS employee benefits division of the Office of Chief Counsel is the latest statement by the IRS on the issue of “what is insurance.” In CCA 201719025, released May 12, 2017, the IRS determined that an arrangement involving a self-funded accident or health plan did not quality as insurance for participating in a health-related activity generally exceeds the after-tax contributions by the employee.

    As a result, benefits received under the plan did not quality for an exclusion for accident or health insurance benefits under section 104(a)(3) and were included in the employee’s income. In their article for Captive Insurance Company Reports, Eversheds Sutherland (US) attorneys P. Bruce Wright, Saren Goldner, M. Kristan Rizzolo and Graham Green provide background on section 104(a)(3) and discuss the IRS analysis in CCA 201719025.