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Compliance Issue - Help!


Guest Kristine

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Guest Kristine

We are coming up on the January renewal time... The brokers/producers within our office feel that it is okay for plans to start late, mid to late January due to decisions about medical benefits not being made until late December. How can we convince them that this would make the FSA Plans non-compliant?

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Do you have an *insurance* broker? You say the brokers within your company need the convincing, and if they're not hearing it from you, maybe they will listen to your insurance broker? Also, why don't you get on them now to make a decision? Why is it already a forgone conclusion that nothing will be decided until mid-December?

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Guest Kristine

Sorry - Yes we have insurance brokers in the office and many of our Section 125 clients are the brokers clients ( that is how we got their business) The brokers are saying that the insurance companies may not have decisions for insurace until December 1st. We are wanting ot schedule enrollment meetings for the 125 plans now and have all election forms back no later than the 15th of December. The brokers are balking at this and saying that we cannont have enrollment meetings until after insurance benefits have been decided upon. They are saying that they think it is okay to have enrollment meetings up until a week before the start of the January 1 plans and it will be okay if we don't get enrollment forms until maybe January 15th or later. They think it is okay to miss a payroll for a client, and just double up on the second payroll or reduce the payrolls by one. They also think it will be okay to hold claims until we have all of the enrollments. I am at my whits end trying to communicate that this plan is governed by the IRS rules and regulations. The brokers brush that off as no big deal. I am frustrated!

:blink::blink::( :angry:

We are coming up on the January renewal time... The brokers/producers within our office feel that it is okay for plans to start late, mid to late January due to decisions about medical benefits not being made until late December. How can we convince them that this would make the FSA Plans non-compliant?
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Guest Pensions in Paradise

I am not a 125 specialist, but I do know this. You must operate the plan in accordance with the law. Not in accordance with how the broker thinks the plan should be run.

In my experience most brokers are very ignorant of the laws. But once you explain to them why things must be done a certain way, they cooperate. You need to discuss your concerns with the powers-that-be and have them talk to the brokers.

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Guest Kristine

Oh believe me, we have talked until we are blue in the face about the regualtions. They laugh it off. They even laught it off the fact that the IRS regulates this plan. I have told them that if we get audited that we will be in big trouble!!! They laugh that off as well. AAAHH!! :angry:

I am not a 125 specialist, but I do know this. You must operate the plan in accordance with the law. Not in accordance with how the broker thinks the plan should be run.

In my experience most brokers are very ignorant of the laws. But once you explain to them why things must be done a certain way, they cooperate. You need to discuss your concerns with the powers-that-be and have them talk to the brokers.

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Guest Pensions in Paradise

All I can say then is put everything in writing. Because sooner or later they will get caught. And THEN they won't be laughing!!!!

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Guest Kristine

We will document everything. I just wish it was that easy now a days to find a new job.

Yes, document everything you did to warn them of this and then look for your next job, ASAP.
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Guest Pensions in Paradise

You may want to consider blowing the whistle on this company. If they are violating the law and endangering their clients' plans then they should be stopped. Maybe calling the state insurance commissioner or even the IRS. Of course this means you'll be looking for a new job shortly thereafter. You're in a tough spot no matter what you do. Good luck.

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Kristine,

I am not clear as to what and why this is all happening. What is your company providing? Why do you have insurance brokers in your office? What sort of office is this?

I could not determine if you were an insurance agency, a cafeteria plan TPA or someother sort of service provider.

In any case why not ask the insurance companies what they they need and by when? It is the insurnace company that sets the coverage requirements etc not the broker. It is the employer who determines what will be purchased and when they want it to be effective, not the Broker.

There are not only the limits on what you can do with a salary reduction agreement that are set by the IRS, but there are limits set by the payroll system felixibility and the employee tolerance. You cannot just abritrarily miss deductions then take them when you feel like.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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Guest Heather Sachs
We are coming up on the January renewal time... The brokers/producers within our office feel that it is okay for plans to start late, mid to late January due to decisions about medical benefits not being made until late December. How can we convince them that this would make the FSA Plans non-compliant?

Get copies of the IRS regulations that state "Retro-active enrollment" is strictly prohibitted.

Usually they are Ok with enrolling after the first of the year so long as the elections are made prior to the first payroll deductions.

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Correct me if I am wrong, but I think the real issue here is the FSA elections. Your problem is not unique, the problem is giving employees enough time to evaluate any changes and then to turn in paperwork in a timely manner. Before employees can evaluate what is available, the employer has to evaluate cost, coverage, contributions, risk, etc. Perhaps employees should be advised to start doing their homework prior to the plans being introduced, so that only minor tweaks to an FSA election are necessary when the final plan designs and costs are announced. The broker or employer should focus on what has changed and how it impacts employees financially, so that an FSA election is made prior to the first of January. Since most insurance reductions roll, whatever plan an employee elects is immaterial, the deduction will be tax-free regardless. There may be adjustments in the first few payrolls due to the timing of an election (change) or payroll call-in, but again your problem is not unique and changing your brokers attitudes is also not an unusual challenge. If you are being laughed at or blatantly disregarded, then there are problems at the top, middle and bottom.

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