Don Levit

Advisory Opinion 2004-08A from the DOL may be helpful. Go to http://www.dol.gov/ebsa/regs/aos/ao2004-08a.html. I can also fax the opinion to you. Don Levit

One fellow in another chat group said that any number of health plans are available, as long as coverage is not provided under the deductible. As Joannc stated, the other plan cannot cover benefits under the HDHP. It looks like any plan other than "permitted insurance," is a very limited benefits plan. Don Levit

G Burns: While Moe is rereading the posts, you should do so as well. I will, too, if you deem it necessary. We know that a MEWA does not equal a single employer, for one is less than 2 or more. The question is not mathematical. The question, I pose is regarding self funded plans, regardless of the number of employers involved. Regarding the exception to state regulation, in that state laws cannot conflict with ERISA, I have 2 questions. First, what parameters are involved regarding whether a plan conflicts with ERISA? Second, is there any difference between single employer self funded plans and MEWA self funded plans in applying these parameters? By the way, I do have (at least some of) the parameters listed from a couple of court cases. Don Levit

George and Moe: Single employer plans are not MEWAs, for a MEWA, by definition, includes 2 or more employers. The MEWA could be one ERISA plan with several employers, or as many ERISA plans as there are employers. But the fact still remains that a MEWA is comprised of 2 or more employers. So, George is correct, a single employer plan is not a MEWA. The states are allowed to regulate self-funded MEWAs, but not single employer plans that are self funded. Fully-funded plans, whether single employer or MEWA, can be regulated by the states. States can regulate MEWAs with any laws that regulate insurance, except for those laws inconsistent with ERISA. I have several court cases which define how state regulation could be inconsistent with ERISA. Each of these cases involved, I believe, fully-funded single employer plans. I was wondering if the same standard for fully-funded single employer plans could be used for self-funded MEWAs, in determining if the regulation is "inconsistent with ERISA." I would be happy to provide those standards, if it would be helpful. Don Levit

I agree with Moe Howard. Moe, could we correspond offline, and then we can submit material to back our "claim?" I have some court case information I would like to share with you. I am curious if you have similar material, or maybe specific ERISA or IRS regulations you can cite? Don Levit

According to the IRS publication 15B, Employer's Tax Guide to Fringe Benefits, under Accident and Health Benefits it defines an employee as: 1. A current common-law employee 2. A full-time life insurance agent who is a current statutory employee. 3. A retired employee 4. A former employee that you maintain coverage for based on the employment relationship. 5. A widow or widower of an individual who died while an employee. 6. A widow or widower of a retired employee. 7. For the exclusion of contributions to an accident or health plan, a leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control. Don Levit

I am discussing with the OIC in WA regarding the degree of state regulation for self funded MEWAs. Sec. 514(b)(6)(A)(ii) says in the case of any other employee welfare benefit plan which is a MEWA, any law of any state which regulates insurance may apply to the extent not inconsistent with ERISA. The OIC believes that MEWA case law would be totally separate from single employer case law. When considering the standard "inconsistent with ERISA," would different levels be applied for self funded single employer plans versus self funded MEWAs? Don Levit

Rev. Rul. 82-196 states that employer contributions for an accident or health plan for the employee, spouse, and dependents before and after the employee's retirement and for a deceased employee's surviving spouse and dependents are excludable from the gross income of the employee and the survivors under Section 106. It also states that the taxation of health benefits paid to survivors of a deceased employee-participant is determined under Section 105. The revenue ruling considers an employee-participant to continue to be an "employee" for purposes of Section 105 and 106 even after termination of employment. It seems that the key here is the employer-employee relationship, regardless of who is the primary insured, and the number of policies involved. Don Levit,CLU,ChFC

The ECE stands for Entities Claiming Exceptions. These are organizations that are not sure if thy would be MEWAs. They must file the form M-1 for 3 years. At that point, I believe, they need not file the M-1, unless contacted by the DOL. Don Levit

If the plan is fully insured, then the insurer, if licensed to operate in that state, has the license. If self insured (or partially self insured), the MEWA itself would need to be licensed. Regardless, the M-1 must be filed, if it is a MEWA. Don Levit

Section 411(a)(8) defines normal retirement age as the earlier of (1) the time a plan participant attains normal retirement age under the plan or (2) the later of (a) the time a plan plan participant attains age 65, or (b), the 10th anniversary when a participant started participation. Rev. Rul. 78-120. (which modified Rev. Rul. 71-147). Rev. Rul. 71-147 says that normal retirement age is the lowest age stated in the plan in which the employee can retire without the employer's consent, at the full rate set in the plan. However, retirement benefits starting prior to age 55 may not exceed the maximum amount payable under Section 415(b)(1)(A). It appears that normal retirement age can be decided on a plan-by-plan basis. Don Levit

You are not getting carried away. If the benefits are similar to a pension or annuity at mandatory or voluntary reitrement would be classified as other benefits. Other benefits do not include deferred compensation payable by reason of the passage of time rather than because of an unanticipated event. Treas. Reg. 1.501©(9)-3(f). Don Levit

Looks like a Voluntary Employees' Beneficiary Association (VEBA) could be an answer. "Other benefits" a VEBA may offer are those similar to life, sickness, or accident benefits. A benefit is similar if it is intended to safeguard or improve the health of a member, or it protects against a contingency that impairs a member's earning power. A contingency is an unanticipated event beyond the control of a beneficary. Social, recreational, and cultural benefits for retirees, designed to promote their physical, mental, or emotional well-being are permissible benefits. I would be happy to continue this discussion with you; probably offline would be better. Don Levit

I have a similar interpretation of the legislation. In fact, I view the legisalation as actually allowing 2 separate plans, with identical coverage. Let us assume that there are 2 group plans. Plan 1 is not coordinated with any other benefits (a COB provision is not included). Plan 2 is your typical group plan with a COB provision. Assume that plan 1 has $25,000 of benefits. Plan 2 would have the qualifying $2,000 per family deductible. However, because it pays second, the pricing for the deductible would start at $27,000, instead of $2,000. In order to qualify for a single HSA, plan 1 must have a $2,000 family deductible. Don Levit

Does any one know if there is a floor or a ceiling to catastrophic coverage in the legislation introduced (and likely to be approved)? A few years ago, I talked with Bill Archer about the Archer MSA. Even he did not know of a maximum and a mimimum on catasrophic benefits. I am not referring here to the out-of-pocket costs limit for the HSA. I am asking that once the coverage pays at 100%, is there a particular maximum or minimum the plan must offer, in order to be deemed catastrophic coverage? Also, does any one know of any state regulations for MSAs that define catastrophic, other than the "definition" in code section 220. Thanks, Don Levit

Because VEBA contributions must go to a trust, they must be made on a cash basis. Don Levit

I am asking the group to look at my proposal from a different perspective. I am saying that if an employee has a converted individual policy from a previous employer which would be the primary payer, if another (group) policy exists. In this case, with the group plan paying after the converted policy pays all its benefits, the group plan has lower exposure on the front-end. For example, if the converted policy would pay out $50,000 in benefits, the group insurance company would be at-risk at $50,001 of family benefits. If the group plan typically would pay family benefits after $1,000 of expenses (assuming no employee had other in-force medical insurance), its at risk exposure is higher (than if it started paying benefits after a $50,000 "deductible"). Because the insurer has a lower up-front risk, this particular employee should get a significantly lower premium from the group insurer, by virtue of his having additional (primary) coverage. I am only trying to point out that group insurers could charge different rates for different "deductibles," due to the presence of additional primary coverage. These varying premiums would not be based on health status. They would be based on different at risk status the group insurer would incur, depending on the amount of coverage of the primary policy. Don Levit

When we talk about different premiums can not be assessed due to health risk, what about different premiums due to the "amount at risk?" Assume an employee converted a previous "limited benefits" plan from his former employer. This plan has a $50,000 family benefit. It does not coordinate benefits with any other policy, so it will pay first. Now, with this policy in force, his amount at risk under his present employer's plan is lower, for the benefits would start at a $50,000 deductible (instead of a much higher exposure of, say, $1,000). Couldn't this employee receive a "credit" of around $200 per month, because his group plan's risk begins at a much higher level? Instead of the premiums being tied to health status, here the premium is tied to a different "at risk" status? What do you think? Don Levit

Sandra mentioned FAS 106 liability for the employer on a retiree full-pay premium. Why would the FAS rule be pertinent here, if the employer has no liability for premiums? Are you referring to liability for claims, in the event the plan is self insured? Don Levit

The last several years, I have been collecting information applying to retirement and medical plans. Enclosed is an excerpt from Rev. Rul. 65-178. I am curious if anyone knows if these provisions are still applicable. (g) Burdensome Contributions Sec. 1.401-3(d) - if a contributory plan is offered to all employees, but the contributions required of employees are so burdensome as to make the plan acceptable only to the highly paid employees, the classification will be discriminatory. For example, if the plan requires employee contributions of 10% of compensation, one must determine if lower paid employees are kept out of the plan because of such a requirement. If so, the plan may be discriminatory. As a general rule, however, employee contributions of 6% or less are not deemed to be burdensome. Don Levit

Regardless of how long coverage is offered (through the group plan and as a COBRA extension), if the medical expenses "continue" from the disabling accident or sickness - the medical bills must still be paid by the group insurer, even if premiums are not paid, right? Don Levit

Mbozek's answer is correct, as long as you are not part of a multiple employer self-funded plan. If you would like for me to locate the corresponding provision in the Texas Insurance Code, please e-mail me. Don Levit

Yes, you can have different annual and lifetime limits for different diagnoses, as long as those limits apply to all employees (and former employees, if subject to COBRA). IRC Sec.105(h)(4). If a change is made, it must be done at the same time each year, and not in the middle, say, of the plan year. I do not have a code section to back up my response, only through a lot of the "research" I have done over the years. However, Treas. Reg. 1.105 - 11 ©(3) can provide some help. Also the benefits must be available for all participants after the same waiting period. Let. Ruls.8411050, 8336065. Don Levit,CLU,ChFC

I was under the impression that normal retirement age could be any age cited in the plan document, as long as the person was fully-vested for retirement benefits. According to Tax Facts, "The normal retirement age in a pension or annuity plan is the lowest age specified in the plan at which the employee has the right to retire without the consent of the employer and receive retirement benefits based on service to date of retirement at the full rate set forth in the plan (i.e.,without actuarial or similar reduction because of retirement before some later specified age)."

A Roth IRA involves non-deductible contributions. All withdrawals, for tax purposes, are first, return of contributions. So, if you have contributed $2,000 a year for three years, your "cost basis" is $6,000. No income tax is assessed on the first $6,000 of withdrawals. The 5 year rule applies only to earnings, not contributions. I will be happy to provide the IRS code section, if you wish.