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Retroactive effective date for a welfare plan amendment?


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Can a welfare plan amendment have an retroactive effective date? For example, can we sign an amendment today and state that the effective date of the amendment is 1/1/06? I know we can for retirement plans but wasn't sure about welfare plans. Thanks in advance!

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I was not aware that it was legal to do so with any plan or anything legal for that matter. Are you sure?

There is IRS and case law that shows that you cannot retroactively adopt a health plan or a cafeteria plan or a salary reduction agreement or an elective deferral agreement s it seems unlikley that you could make an amendment retroactive to a retirement plan or otherwise. This would seem to leave a door open for all sorts of abuse and "buyers remorse" type things.

I can just imagine an employer saying "Oh no, I did not mean to say that I was going to contribute to your promised pension plan, so forget that document that I gave you in January, here is the 1 that I should have given you that I signed yesterday, but see, it is dated 1/01/06 which is before the 1 that I gave you on the first working day 1/05/06."

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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You can sign the amendment with an earlier effective date. However, you need to give participants 60 days prior notice of the change. If the amendment is more beneficial, I don't see a problem except maybe with your stop-loss carrier but if you try to cut or terminate a benefit retroactively and someone had relied on it, you're asking for trouble. I'd also be careful that your retroactive amendment was not directed at any specific enrollee's medical condition.

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I would say that there is no explicit rules that allow any retroactive welfare plan amendments. There is no 401(b) or remedial amendment period concept.

I think is is just a contract and it is difficult to make any contract binding that is retroactive.

Practically, however, the answer has to depend on what you are trying to do. If you are trying to enforce a change, I would say it is difficult to do. But, for example, if you haven't documented a required amendment, though, you really have to make it retroactive as long as it is consistent with the administration of the plan. Otherwise, there is no way to fix the problem. For example, there are thousands of welfare / FSA plans out there that do not have updated claims procedures for the DOL regs that came out years ago. Is there any way to fix that that other than a retroactive effective date on the amendment? It is really your only choice. I would say that you shouldn't adopt a self-insured healt plan retroactively, though.

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The OP was on 8/16. The change is effective 1/01/06. 60 days from date of change occured back in March. However, you stated "prior to the change" which would be about November 1, 2005, last year.

How do you still give timely notice of change?

I know that many things are signed after the effective date as a result of admin or processing delays etc, but this seems more than a stretch. It is not a few days or even weeks, this involves many months.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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I'm not recommending it, I'm just saying that it's possible. Namealreadyinuse gave a perfect example of when a retro amendment would be useful. You would also have to go back and and correct your claims processing system, especially if an enrollee could have benefitted from it. I don't know what the poster had in mind so we're missing a critical item from the discussion. If they intend to cut a benefit retroactively, my opinion is don't even consider it. Make the change effective at least 60 days from now and give notice before you enforce.

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name, Neither a plan document or plan amendment is a contract. Contracts may be referenced in plan documents and plan amendments, but the contract is a separate legal agreement outside of the plan document. An example is a medical insurance policy (it's a contract) and may be referenced if the medical plan document or plan amendment.

Gburns, retroactive amendments are commaon place in plans and in all legal agreements.

The IRS allows plans to self-correct plan errors by retroactive amendments.

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If a plan document is not a contract, How do you reconcile that belief with the many courts that have adjudicated cases based on breach of contract and other contract issues regarding plan documents?

Here is a recent example. See pages 10 onwards for the references to the contract namely the plan document:

http://caselaw.lp.findlaw.com/data2/circs/11th/0510235p.pdf

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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What is the definition of "contract"?

I thought that 1 definition was "an agreement between 2 or more parties". A PD is what the employer (1 party) agrees to give/make available to another party (2nd party).

From what I recall, many plan disputes revolve around or include breach of contract issues. How could you have breach of contract if the PD is not regarded as a contract? I will follow what I see in case law, where many courts have referred to the PD as a contract.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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Gburns, in the case you cite. the plan entered into "a contract" ("a reimbursement agreement" ) with an employee participant. That reimbursement agreement is a contract. The plan document is not the contract. The 11th Circuit's references to "breach of contract" is in reference to the breach of the reimbursement agreement (not plan document).

Plans can enter into agreements (contracts). A plan document describes the employees' benefits that may or may not be the subject matter of a separate document (a contract).

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The "reimbursement agreement" is a separate issue and item from the "plan" and or "plan document" in the cited case.

The cited case had 2 issues which is why I even referenced some of the relevant pages.

In Section 1 A. Popowski v Parrott the "reimbursement arrangement" was referrred to on page 5 as a "reinforcing reimbursement agreement". But this is irrelevant to this thread anyhow.

Section 1 B. BCBS v Carillo which starts on page 6 is the section which deals with the plan document and is the section in which the court refers to "breach of contract" etc in the context of and referring to "plan documents".

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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GBurns, Section 1B (Blue Cross case) does not contain the word "contract" nor the phrase "breach of contract".

You said that courts constantly refer to a plan document as a contract, but in the case you cite ....the court does not refer to a PD as a contract.

Pleaae tell me on which page, of the Blue Cross case, the court refers to a PD as a contract.

thanks

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