Fixed indemnity health plans are plans that pay to covered individuals fixed amounts for certain medical services regardless of the amount of medical expenses incurred. Examples might include accident insurance, hospital insurance, cancer insurance and critical disease insurance. The IRS recently released a memorandum concluding that proceeds paid under fixed indemnity plans regardless of the amount of medical expense incurred are taxable unless the premiums for the coverage are paid on an after-tax basis. Consequently, proceeds paid under a fixed indemnity health plan that is either employer-paid or purchased with pre-tax dollars through a cafeteria plan may be taxable and reportable as gross W-2 wages. Find the memorandum here.