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From Gerald M. Cimis, D.M.D., M.B.A., F.A.G.D.
Healthcare Insurance Consultant
Letter to the Editor
I wanted to respond to the Mayor’s Office response released on July 21, 2025, entitled “City Attorney Benefits Statement”. This was written apparently in an effort to justify that the issue of providing healthcare benefits has been addressed with due diligence and is allowable. This is only partially correct. The Mayor received a warning letter from the Examiners of Public Accounts (hereafter referred to as the Examiners) on Feb. 13, 2024 recommending a revision of the H.R. Policies & Procedures Manual. Revising the current H.R. Manual to allow insurance coverage, ONLY applies to the City’s self-insured coverage, not third-party ins. coverage. The H.R. Manual cannot circumvent AL law, nor compel third-party ins. companies to cover contractors in their Group Municipal policies. The current Code of Alabama, 1975 (§ 11-91-1, 11-92-2, 11-92-3) excludes contractors from third-party municipal policies. Each of these policies (MetLife Life and Dental, VSP Vision, Granular Catastrophic) Eligibility Sections also specifically limits eligibility to employees and their dependents.
The City also offers Flexible Spending Arrangements (FSAs) to these attorneys. IRS Regulations, Pub. 969, and Flores Assoc. Administrators specifically prohibit FSAs for contractors.
Per Treasury Reg.1.61-21 (a)(4), fringe health benefits to contractors, both self-insured and third-party, are to be reported as taxable income on IRS Form 1099-NEC. Yet the City issues W-2s, exclusively reserved for employees, to three contract attorneys. This is despite my written advance warnings, ostensibly to preclude detection, and avoid these contract attorneys having to pay State and Federal income taxes on these fringe benefits.
The Mayor’s Office response states they discussed this with their Group Health Insurance Provider. They may have discussed this with Blue Cross/Blue Shield (their self-insured administrator), but I have provided the City with my written confirmations from Met Life Life/Dental, VSP Vision, Granular Catastrophic Ins. and Flores Assoc. FSAs, that they do not cover contractors in these municipal policies. Their response further states that this process has not come under further question by the Examiners. This is incorrect. As a result of the evidence I provided, the Examiners, after review, forwarded this evidence for investigation on June 11 and June 12, 2025, to the AL Attorney General’s Office and the AL Dept. of Revenue, for alleged healthcare ins. fraud and alleged tax evasion investigations. I have also filed a Complaint with the IRS.
Their response states that if this practice was not above-board, it would have ceased long ago. This is not necessarily always true. Some schemes (e.g. Ponzi) can last for many years before being discovered.
An interesting fact is that our City Prosecutor receiving benefits, is also Millbrook’s contract Judge and their former Prosecutor. Millbrook’s Mayor’s Office does not pay their contract attorneys ANY benefits because they are contractors, not employees. ALL nine cities in Alabama I conducted in a sample survey with part-time contract attorneys provided them with no fringe benefits.
A major risk is that these contractors are not covered for a catastrophic event in excess of $115,000 (limit on Prattville’s self-insurance coverage). This was explained to the Mayor and City Council at their January 16, 2024, Meeting. Should there be a severe illness or a catastrophic event, guess who would carry the burden for their years of long-term medical care? You, the taxpayer!
Copies of documentation regarding this matter is available upon request via email [email protected].
Related article can be found on our website at Prattville Resident Questions Healthcare Coverage For City Of Prattville, City Attorney Responds – Elmore-Autauga News
