Sarah Stephens
Elmore Autauga News
We recently received a Letter to the Editor from Prattville resident Dr. Gerald Cimis concerning healthcare insurance for the City of Prattville. Dr. Cimis’ original letter is posted below, as well as a response from the City of Prattville following his letter that was received today, July 21, 2025.
Letter to the Editor/Opinion: ‘History is repeating itself in Prattville’
From Dr. Gerald Cimis
Prattville resident
Dear Editor,
I, Dr. Gerald Cimis, as well as other Prattville citizens, are troubled by the fact that history is repeating itself in Prattville…and it’s NOT a good history. I am a retired healthcare insurance consultant/investigator. I discovered a scheme dating back 21 years, where the Prattville City Council approved, and the Mayor allowed by signing their Resolutions, intentionally treating some part-time City Attorneys under contract, as employees. This was done to provide these full-time private practice attorneys and their families with both basic health and third-party City Municipal Group health benefits. Since Prattville is self-insured for basic health, it is estimated that this has cost the City’s taxpayers in excess of $700,000 in health/premiums/claims/employee benefits! While providing self-insured basic health is permitted, the attached AL CODE does not permit, nor do the ATCH insurance policies allow, third-party insurance for contractors. The City also offered Flexible Spending Accounts (FSA) to three attorneys, which the IRS prohibits.
To create the appearance of being employees, the City issued Form W-2s to three attorneys, rather than the mandatory contractor Form 1099s. This was despite my advance written warnings (attached) to the Finance and H.R. Directors, not to do so. This was likely done to fly under the radar of any inspection. However, it created a tax evasion issue because certain contractor’s fringe benefits (such as health/life, etc.), unlike employees, are reportable as taxable income on Form 1088.
Despite my repeated written and verbal warnings to the City leaders, this scheme continues. The AL Examiners of Public Accounts discovered a similar scheme by Chilton County in 2013. The Examiners issued the attached letter to Mayor Gillespie on 2/13/24 regarding this practice being impermissible. The letter offered several options: change the Benefits Policy Manual or pay the contractors a lump sum compensation in their contract to obtain their own insurance. The City opted to change the Benefits Policy Manual; however, this only permits offering self-insured health coverage and does not all third-party insurance and FSA offerings for the reasons stated earlier. The City Attorneys do not desire the lump sum compensation option, because it would be taxable.
I have also written to Mr. Will Parker, Chief Counsel for Gov. Ivey on July 3 (see attached), seeking his assistance to get the pertinent State Agencies to act upon these clear-cut violations.
I have recently filed a second complaint with the AL Examiners, who have referred this case to the AL Attorney General’s Office and the AL Dept. of Revenue for further investigation. AL healthcare ins. Fraud over $1,000 is a Class B Felony offense and State/Federal Tax evasion is a serious violation, particularly if a City is intentionally facilitating the contractor’s offenses.
I am available to meet, provide ample evidence, that my allegations of healthcare insurance fraud and both State and Federal tax fraud, are valid. I can be reached at 334-328-5081 or by email at [email protected]
Respectfully, Gerald M. Cimis, D.M.D., M.B.A.
Editor’s Note: Mr. Cimis includes multiple other documents including a word document below.
Cimis’ document for verification:
IRS Position on Fringe Benefits to Independent Contractors
• The IRS defines fringe benefits as a form of compensation for services.
• If an independent contractor receives non-cash compensation (like health insurance), the fair market value of those benefits must be included as income.
• These benefits are not excludable from income the way they might be for employees under certain IRC sections (like §106 for employer-provided health insurance).
• The value of the fringe benefits must be included in box 1 of Form 1099-NEC (Nonemployee Compensation).
Key IRS References
1. IRS Publication 15-B (Employer’s Tax Guide to Fringe Benefits):
“You must include fringe benefits in an independent contractor’s income on Form 1099-NEC if you paid the contractor $600 or more during the year.”
2. IRS Instructions for Form 1099-NEC:
“Enter nonemployee compensation of $600 or more for services performed for your trade or business by an individual who is not your employee. Include fees, commissions, prizes, awards, and other forms of compensation for services…”
3. Treasury Regulation §1.61-21(a)(4):
“Unless excluded by law, the value of fringe benefits is includible in gross income and is subject to income tax withholding and employment taxes.”
• Health, dental, life, or other insurance benefits provided to independent contractors (like outside attorneys) are taxable.
• Their fair market value must be included on Form 1099-NEC, along with any direct payments.
• Failing to report such compensation could constitute noncompliance with IRS reporting requirements — and possibly tax evasion if done knowingly.
In fairness to the City of Prattville, we asked for a response to the allegations. That response came today and can be read below.
Below is the response from the City Attorney from Prattville
City Attorney Benefits Statement
City of Prattville
It has come to my attention, that, yet again, the benefits we offer to our city attorney, city prosecutor and city Judge are being questioned on social media. This issue has been addressed numerous times, and the City has gone above and beyond in conducting its due diligence by coordinating with our Group Health Insurance Provider, as well as the Alabama Examiners of Public Accounts.
The City additionally retained the services of an outside attorney with decades of experience representing municipalities to provide guidance on this matter, and the result is that the City is authorized to provide certain limited benefits to our city attorneys. This ability is very important for the City to be able to attract and retain quality individuals for these critical positions, which are very involved in the day-to-day operations of our City, which involve legal work with most, if not all of the City’s numerous departments.
If this practice was not above-board, it would have ceased long ago. The City has discussed this matter with our Group Health Insurance Provider, and the Alabama Examiners of Public Accounts, and this process has not come under any further question in light of our current Human Resources Policies and Procedures Manual.
It is important to note that city attorneys, including the city prosecutor and the city judge are not merely contracted-they are appointed positions, which are filled through mayoral recommendation and city council approval and include a hiring process. For example, our most recent city attorney went through an application and a full interview process. Municipal law is a very specialized area in the legal field, so there is a need to attract and retain those who have acquired experience in this area of law. Additionally, our city attorneys are local citizens, as these positions require frequent interaction with city officials and attendance at most all public meetings according to city ordinance.
I would encourage any individual with questions to review the City’s Human Resources Policies and Procedures Manual, which is available on the Human Resources Department page on our website. Said manual specifically provides that appointed city attorneys, along with appointed municipal judges, are eligible for some city benefits, but not retirement and leave accrual. (Section 5.2.2 of the HR Manual).
Furthermore, our HR Manual specifically provides that Group Health Insurance is provided for part-time Elected Officials (including Council Members), City Attorneys, City Prosecutors and the City Judge. (Section 9.2 of the HR Manual).
The matter was again extensively researched and discussed in 2023, and it was determined that the City has the right to negotiate and offer these limited benefits to the city attorney, city Judge and city prosecutor. There are no statutes or provisions which prevent a municipality from offering limited benefits, such as health insurance, as part of the benefits package, if the Council so approves—which it did for our present city attorney on April 4, 2023.
I hope this will provide clarity for anyone with questions about these positions who may come across these social media posts.
