Sunday, July 14, 2013

Former KU Medical Center residents close to getting FICA refunds

By SCOTT ROTHSCHILD, The Lawrence Journal-World

KANSAS CITY, KAN. --- Checks are almost ready to be put in the mail as the struggle continues over FICA refunds to the state and former Kansas University medical students.

FICA stands for the Federal Insurance Contributions Act, under which employees and their employers pay into Social Security and Medicare.

For most of the 1990s and early 2000s, medical residents at the KU Medical Center, and several other medical schools across the country, were counted as employees and FICA was deducted from their pay.

The IRS says residents are indeed employees but that its rules at that time weren't clear so those residents and the state are due a refund.

The state's refund is $25 million, and Gov. Sam Brownback had proposed using $10 million of the refund to help build a new medical education building at the Kansas University Medical Center. The $75 million to $80 million project is a top priority of KU officials, who say it is needed because the current building is outmoded.

Legislative leaders had other plans.

In the budget approved by only Republicans in the recently concluded legislative session, they took the $25 million and put it in the state's all-purpose general fund.

Brownback applied a line-item veto to that provision, saying, "The timing of the refunds has been much slower than ever anticipated and the state has not yet received its full share of the refunds from the Internal Revenue Service (IRS). We are going to pay the medical residents their share received to date, but I veto this sweep of the state’s share so it does not occur prior to full settlement with the IRS."

While the estimated total refund to the state of Kansas is $25 million, the estimated total refund to medical residents who consented to have the state file for a refund on their behalf is $17.75 million, according Brownback's office.

Approximately 1,142 medical residents will start receiving refunds in August, Brownback's office said.

The amount of the refund is largely a factor of the time frame due to compound interest.

But those checks have not been sent yet to the former residents.

Theresa Gordzica, the chief business and financial planning officer for KU, said they had been advised to hold off on sending the checks until the entire claim had been handed over from the IRS. There is still a dispute over one fiscal quarter's worth of claims, she said.

"We did not expect this final delay," Gordzica said.

Andrew Harmon, who completed his radiology residency at KU in 2005, said the school has done a poor job of letting former students know about the status of the refunds due the former residents.

Harmon said friends of his who went to medical schools in other states that experienced the same FICA issue have received refunds, but no word has come from KU.

He said the lack of responsiveness from KU wasn't helpful to KU's efforts to solicit donations for the new medical education building.

"If you're trying to raise funds, alienating a bunch of your former residents seems like a strange way to go about it," Harmon said.

Gordzica said the residents will start getting checks in August even though some of the refund is still being calculated. "It's just not fair to just keep holding the money," she said, adding, "It has been a frustrating process for all of us involved."