IRC 125 - Med. Saving accounts

Max B. Sawicky sawicky at
Wed Mar 29 05:20:37 PST 2000

Most deductions of this sort are stacked towards upper income persons, say from the 70th to the 95th percentile. They don't mean much to the very rich.

Aside from the distribution, the 'cost-shifting' may be mostly illusory because workers could be bearing the entire cost in the first place. Money the employer spends on worker health insurance might otherwise be paid as wages. It wouldn't make any difference to the employer -- both sorts of payments are deductible to his/her taxes.

The real problem with MSA's is that they are not a suitable replacement for health insurance, since MSA's don't do anything for you if you have high medical expenses, where "high" is defined relative to your income, since what you can put into an MSA depends on your income.


-----Original Message----- From: owner-lbo-talk at [mailto:owner-lbo-talk at]On Behalf Of Steve Grube Sent: Wednesday, March 29, 2000 1:09 AM To: LeftBusObsrvr Subject: IRC 125 - Med. Saving accounts

My employer has just started to offer this benefit, and it is "sold" as a win-win for everyone----right! My impression so far is that it is a greater tax break for the employer than the employee. One website I looked at even said it paves the way for greater cost shifting to employees! I'm reminded of Prop 13 in California in the late seventies. I had just become a homeowner and had a vested interest in seeing California real estate tax come down, so I voted yes. But in fact 2/3 of the tax break ended up in corporations hands so what's the point if the end result after 20+ years is a steady reduction in the proportion of tax corporations pay?

Does anyone know the real story of IRC 125 (&127?) and exactly who wins and how?

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