By SCOTT ROTHSCHILD, The Lawrence Journal-World
TOPEKA — Approximately 1,140 former Kansas University Medical Center students received $17.75 million in FICA refunds last week, state officials reported today.
"These refunds were possible due to the dedication and commitment of our state employees,” Gov. Sam Brownback said in a news release. "They are literally responsible for saving Kansas taxpayers millions of dollars," Brownback said.
The refunds represent Social Security and Medicare taxes, plus interest, withheld from the paychecks of former medical residents from January 1993 through March 2005 under the Federal Insurance Contribution Act.
The IRS agreed to issue refunds following litigation by medical schools across the country that claimed the medical residents were students and therefore exempt from FICA taxes under IRS regulations in place at that time.
To avoid further litigation, the IRS clarified the regulation, effective April 2005, to specify that medical residents were full-time employees and therefore ineligible to receive the student exemption, according to the Kansas Department of Administration. In 2011, the U.S. Supreme Court upheld that decision.
State officials said that staff at the KU Medical Center, the Department of Administration, and the Kansas Board of Regents worked more than 18 years to ensure that medical residents and the state were eligible to claim refunds for the maximum number of years available under the IRS settlement ruling.
“We’ve worked hard over many years to ensure that the money that residents and the KU Medical Center paid to the IRS is returned. This is good news for our former medical residents, and we look forward to the return of the full amount of the employer contribution,” said KU Chancellor Bernadette Gray-Little.
In addition, the state will receive $25 million, representing the employer's share of FICA withholding.
