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Section 125


Donna
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We offer AFLAC as part of our benefit plan. The reps insist that all eligible employees must be seen and see all the products offered, sign an acknowledgement form or a waiver even if they do not want to make any changes or cancel coverage during open enrollment. True or False

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Take a look at your enrollment/election forms.  Are AFLAC premium payments made through pre-tax contributions through an IRC 125 cafeteria plan?  If so, what does that plan document provide?  Is AFLAC treated as a health care plan under IRC 105 (such as if there was an employer contribution)?  If so, what does the SPD/Plan Document provide in terms of elections?  Or, is AFLAC a voluntary benefit where premiums are paid by employees with after-tax dollars, outside of the cafeteria plan.      

That is, with respect to those who enrolled in prior years, did they enroll for a single year or was their enrollment/election indefinite until they make a change?  If it is the former, they need to consider whether or not they want to enroll for the next year.  If it is the latter, best practices would suggest that you should be sure to offer them the option to make a change and keep a record that they were solicited at annual enrollment. 

Either enrollment method, enrolling for a single plan year, or an indefinite election is permissible.  What did you choose and do you now want to make a change?   However, regardless of the method you choose, you should certainly approach every employee no less frequently than once a year to reconfirm access, and the ability to make a change.  

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Employees do not need to be seen by the rep, this is a tactic to increase their sales. The employers’ responsibility is to provide a yearly opportunity for eligible employees to make decisions about their coverages.  This could be done with face-to-face meetings, group meetings, or by providing each eligible employee with the information.  Whichever the employer chooses, I would suggest they have a method of documenting that the employee has received the information and has made a decision as to coverage.

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12 hours ago, BenefitJack said:

Take a look at your enrollment/election forms.  Are AFLAC premium payments made through pre-tax contributions through an IRC 125 cafeteria plan?  If so, what does that plan document provide?  Is AFLAC treated as a health care plan under IRC 105 (such as if there was an employer contribution)?  If so, what does the SPD/Plan Document provide in terms of elections?  Or, is AFLAC a voluntary benefit where premiums are paid by employees with after-tax dollars, outside of the cafeteria plan.      

That is, with respect to those who enrolled in prior years, did they enroll for a single year or was their enrollment/election indefinite until they make a change?  If it is the former, they need to consider whether or not they want to enroll for the next year.  If it is the latter, best practices would suggest that you should be sure to offer them the option to make a change and keep a record that they were solicited at annual enrollment. 

Either enrollment method, enrolling for a single plan year, or an indefinite election is permissible.  What did you choose and do you now want to make a change?   However, regardless of the method you choose, you should certainly approach every employee no less frequently than once a year to reconfirm access, and the ability to make a change.  

Your reply is interesting.  Can you help me understand how this issue relates to IRC 105?  Thanks

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  • 3 weeks later...

The definition and the eligibility of any employee health benefit whether insured, or self-funded is determined under IRC 105.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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3 hours ago, GBurns said:

The definition and the eligibility of any employee health benefit whether insured, or self-funded is determined under IRC 105.

I have never heard this before, and have my doubts about it too.  Could you please explain in more detail?

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In order to be deductible or to be excluded from being treated as taxable income an item must be either be a health insurance plan or a medical expense. This is determined under section 105 which defines and explains each item. I suggest that you first read the 1.105 Treasury Regs. rather than go by anyone's explanation.  

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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My bad.  When you wrote “ the definition and eligibility of any employee health whether insured, or self-Funded is determined under IRC 105” I took it to mean something entirely different.  It sounded as if you said Section 105 discussed what these plans did and how employees would be eligible for such plans, when in fact you were discussing the deductibility of each.  Thanks.

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