Cash in lieu of health insurance-opt out provisions
Posted 06 January 2000 - 07:59 PM
Posted 06 January 2000 - 09:42 PM
Posted 07 January 2000 - 02:48 AM
Posted 07 January 2000 - 12:08 PM
Re: "the cash payout was always less than the employer's share of the premium": Here's where many self-funding entities really miss the boat, by equating an underwriter's 'premium equivalent' for what they really would be spending for "opt-outers".
Where the plan's insured, the employer saves a "hard" premium cost. Where self-funded, the employer's only going to save whatever 'real' expenses the opt-outer might generate--and that's normally a LOT less than the 'premium equivalent'. It's sort of like the COBRA situation in reverse. I've seen several self-funded plans pay a over $1,000 to employees opting out, when had they examined their claims data more carefully, they would have found their actual spending on the 'opt out class' was under $300/yr. Net result: plan spends MORE, not less money, gaining nothing from the opt out. Only winners: those reaping the 'opt out' cash windfall.
In my experience, self-funded plans are much better off putting together targeted communications on the subject of dual coverage -- many two-earner families still assume, often mistakenly, that their 'overlapping' coverage is beneficial to them. A good communications campaign may result in the behavior 'opt out strategists' are hoping for, for much less cash outlay.
Posted 07 January 2000 - 06:16 PM
If the cashout amount is fairly small (example $50/month) wouldn't that be de minimus as far as FSLA is concerned?
Also, is everyone requiring proof of other coverage when they allow someone to opt-out of medical coverage?
Posted 25 April 2003 - 06:13 PM
Posted 25 April 2003 - 08:20 PM
But, the IRS held that the arrangement was not covered by IRC 125. Thus, you don't need a cafeteria plan in order for the employees who don't get cash to have an exclusion from income. However, because many people think that is a cafeteria plan, the IRS allows you to treat the amounts paid for insurance as "deemed 125 compensation" for qualified plan purposes. Clearly those who elect cash pay taxes and those who don't have the other coverage (and can't get cash) don't have an inclusion in income for federal tax purposes.
Posted 27 November 2006 - 04:54 PM
Posted 28 November 2006 - 10:41 AM
Thanks for providing this Rev. Rul.
It seems that according to the RR, those who elect cash pay taxes, because the employers did not verify the employees actually had their own policies.
If the employers did do this, then Section 125 would not apply, but the employee would not report the premiums paid by the employer as income, right?
Also, do you think the employer could selectively choose to reimburse those employees who certify other coverage, or. would they have to reimburse all who certify other coverage?