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Guest sfjfl

501(c)(5) Plan Sponsor/501(c)

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Guest sfjfl

A 501©(5) corporation is designated as the Plan Sponsor of an Insured Group Medicare Supplement Plan & a Group Medicare Part D Plan.

A 501©(9) Veba Trust is established as the Employer and Policy Holder ( Application of Coverage Terms)

Prior Employer contributes a portion of the Group Medicare Supplement Plan & Medicare Part D Prescription Plan cost.

Plans are not considered an ERISA Plan.

I understand that the employer usually sets up the Veba Trust which is not the case in this example.

1. Why wouldn't the 501©(5) Corporation apply for the insurance coverage and also be the plan sponsor/applicant for insurance coverage and (2) why is the VEBA even necessary if the 501©(5) Corporation also contracts with a Third Party Administrator to coordinate the billing & collection of premiums from the prior employer and the retiree's and pays each insurance plan the premiums due?

All comments are appreciated. This just looks out of the norm and maybe non-compliant.

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I am not very familiar with 501©(5) organizations, but, according to the IRS manual, accident and health benefits can be provided as a way to better the members' lives.

However, these benefits are not to be the primary function of a 501©(5).

I am wondering if the benefits can even be legally provided through a 501©(5) directly, particularly if any self-funding is involved?

Don Levit

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Just to toss out a few random thoughts:

I.R.C. Sec. 501©(5) covers both labor and horticultural organizations. Because I've never encountered a Sec. 501©(5) horticultural organization -- I probably wouldn't recognize one if I tripped on it -- I'm guessing that your client is a labor organization.

Are you certain that your client is a corporation? Very few Sec. 501©(5) labor organizations are incorporated; most are unincorporated associations. (Not that this makes any difference with respect to plan sponsorship, but it's something you might want to clarify.)

Does this plan benefit the organization's own employees, or does the plan cover union members -- rather than just the labor organization's own staff -- and are contributions made pursuant to collective bargaining agreements? If no, yes, and yes, the plan is a multiemployer plan. The Sec. 501©(5) organization isn't the sponsor of a multiemployer plan; the plan is sponsored by a joint labor/industry Board of Trustees.

Most welfare benefit plans don't use trusts or other separate funding vehicles. While it's true that single-employer plans can exist in connection with VEBA's, they usually don't. A multiemployer welfare benefit plan, however, must hold its assets in trust. You mention an I.R.C. Sec. 501©(9) organization, which suggests that you could be working with a multiemployer plan.

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Guest sfjfl

Don,

The 501©(5) Corp was not established just for the plan benefits. It's primary function is that of a Labor Organization/Union. The members of the 501©(5) all had a common employer. The retiree's former employer did not establish the Veba. Although the prior employer is contributing to the retiree medical plan, the majority of the premium's are retiree paid. The VEBA was established to apply for medical coverage and to accept the premiums from the prior employer and the retiree's. the Veba pays the premiums collected to the insurance company's. The benefits are fully insured.

The 501©(5) organization could have applied for the medical coverage and the national Third Party Administrator was contracted to do the premium billing and collections. The TPA also is contracted by the retiree group medical plan(Insurance Company) to adjudicate their claims. My thoughts are, why was there a need to estblish the Veba at all? The premiumc contribution from the prior employer is paid to the TPA & not directly to the retiree. I do not believe this would create a taxable event for the retiree's.

It just looks like the Veba was an additional expense & layer in the process/

sfjfl

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Guest sfjfl

Don,

My mistake on the term Corporation. Please omit its use. Only members of this Labor Organization participate in the benefit plan.

There is an agreement on the employer contributions and how long they are required. The benefit plan union members are all retired from the same prior employer.

Some retirees of the union from the prior employer did have a collective bargining agreement and the balance did not. Most of the retiree's are under an agreement with the exception of those that retired after a common established date.

All of the 501©(5) organizations member's have equal staus and standing.

I hope this helps.

sfjfl

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Premiums are collected by the VEBA and paid to the insurance company plus you also stated that this medical plan is fully insured, So what claims does the TPA adjudicate ?

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Guest sfjfl

GBurns,

There are several National Insurance Company's that insure Group Retiree Medical Plans. Some of these insured plans out source all plan administrative services to TPA's, claims adjudication, permium billing & collections, eligibility, etc. Employer groups, etc., usually have one or more insured products being offered to plan members. Thus, for the retiree group markets, TPA's have been developed just to facilitate a source of premium billing & collections for multipal retiree plan insured products. EMployer's want on list bill for the retiree plan benefits. Most of the time it is for Group Medicare Supplement pPans & Medicare Part D Plans or EGWP's. These are group insured products that are usually offered on a stand alone basis but coupled together to compete with MA's or MA/PDP's. A Humana, United, CIGNA, Aetna, etc. bill & collect just their own plan products.

Getting back to your question, Yes, in this case the Insured Group Medicare Supplement Plan has contracted the same TPA to pay it Medicare Supplement Claims and the plan has conmtracted them to do the plan premium billing & premium collections. They also are an approved TPA to bill & collect for the Stand alone Medicare Prescription Drug Plan or EGWP. This offer's one source for the billing of each seperat insured product.

SFJFL

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