The New York and Presbyterian Hospital Medical Resident FICA Refund Investigation

Frank llp Announces Investigation of The New York and Presbyterian Hospital.

Frank llp is investigating potential claims of breach of fiduciary duty and negligence against The New York and Presbyterian Hospital (“NYP”) on behalf of individuals who were medical residents, including fellows in training, participating in medical residency programs at NYP (“Residents”) for all or part of the time period from January 1, 2003 through December 31, 2004 (“Class Period”).

The investigation concerns NYP’s failure to properly file protective refund claims with the Internal Revenue Service (“IRS”) for FICA taxes withheld from the Residents’ wages for the years 2003-2004.  IRS regulations during the Class Period required NYP and other hospitals, and their medical residents, to pay FICA taxes.  However, in the mid-1990s, in light of evolving law as to whether residents were exempt from FICA tax under a “Student Exemption”, many hospitals began to file protective refund claims with the IRS, on behalf of themselves and their medical residents, in order to protect their and their residents’ rights to receive FICA refunds if and when the IRS’s position did change. In 2010, following a series of court decisions calling into question the validity of the IRS’s historical position, the IRS agreed that medical residents and fellows should not have been subjected to FICA taxation during tax periods prior to April 1, 2005.

Proper filing by NYP of protective refund claims for the years 2003-2004 would have preserved the Residents’ rights to future refunds, plus interest, when the IRS changed its position and extended the Student Exemption to them.  However, following the IRS’s 2010 announcement of its changed position on FICA tax withholding for residents, it emerged that NYP had properly filed protective refund claims for 1995-2002, and for 2005, but not for 2003 and 2004.  NYP tried to persuade the IRS to agree to grant it FICA refunds for 2003 and 2004, but the IRS concluded that NYP had failed to timely file protective claims as to those years.  As a result, the Residents were deprived of the right to secure the FICA refunds to which they were entitled.

If you were a Medical Resident or Fellow in Training at NYP for any period of time between January 1, 2003 and December 31, 2004, and wish to discuss this investigation, or have any questions concerning this Notice or your rights or interests with respect to these matters, please contact us.

Frank llp
Marvin L. Frank
Asher Hawkins
(800) 497-8076
(212) 682-1853