Don Levit

John: I have only a summary of the McGann case. If you would E-mail the entire case, I can provide specific excerpts. Here is the summary. The Fifth Circuit has held that retroactive modifications to the lifetime benefits available under an employer's health plan do not violate the anti-discrimination provisions of ERISA Section 510. The court decided that the plan sponsor's action in capping benefits was not discriminatory in that it affected all participants in the plan and not just those participants who were under treatment for AIDS. Sec 2590.702 would seem to confirm this action. Don Levit

George: I thought it would make the discussion more understandable. If the group thinks it would be more beneficial to include all relevant laws at one time, we can give it a try. Don Levit

Quicksilver: Once we finish with HIPAA, we can go on to other laws. One at a time makes the task a bit easier. Don Levit

vebaguru: I am curious if in the 409A regulations and section 79 if it specifically says that group term policies can include cash values? Don Levit

John: Thanks for providing those 2 citations. In 29CFR2590.702(b)(2)(i)© it states, "For purposes of this paragraph, a plan amendment applicable to all individuals in one or more groups of similarly situated individuals under the plan and made effective no earlier than the first day of the first plan year after the amendment is adopted is not considered to be directed at any individual participants or beneficiaries." Don Levit

John: No, I do not. Can you explain the distinction between HIPAA and ERISA in regards to discrimination? In particular, if a change is made to the plan which satisfies ERISA but not HIPAA. Don Levit

John: McGann v. H&H Music Co., 946F.2d 401(5th Cir. 1991). Retroactive changes to the lifetime benefits do not violate the anti-discrimination provisions of ERISA Section 510. Don Levit

John: When you wrote about discrimination, are you referring to reducing the lifetime max? I was under the impression that can be done, as long as it is in the next fiscal year. Don Levit

QDROphile: Thanks for providing that very interesting revenue ruling. It provides a definition I have been looking for: deemed compensation. CSB390: If the employees can verify individual coverage, do you have a "default" to provide another benefit, or can the employee select another benefit? Doing so can make the option of allowing the employee to use the cafeteria plan to pay his individual premium a relatively moot point. Don Levit

John: Can the state provide a definition of a group health plan that conflicts with the federal definition? Don Levit

George: If the policy is an individual policy, and is not subject to group laws, what difference does it make if the employer pays the premium for you, or I pay the premium for you? Don Levit

XTitan: Are you saying that the life insurance plan is not deferred compensation, because the employee has 2 current benefits: 1. The premium is paid by the employer, and 2. Cash value is available to be used. Don Levit

George: In regards to how the insurer gets paid, what does that have to do with state insurance law? I understand Texas and other states have laws or bulletins regarding how insurers get paid, but what do those laws have to do with the primary responsibilities that states have in regulating insurance contracts? Don Levit

QDROphile: I agree that your scenario could be considered a health plan. However, if the employee pays the entire premium, without being reimbursed, through a cafeteria plan, would you consider that a health plan? Don Levit

Sieve: You are referring to the particular insurer who is providing coverage in which COBRA applies. This particular situation concerns an employer in which COBRA was not offered. Don Levit

masteff: Excellent detective work! Should this person go ahead and apply for coverage, and submit page 12 with the application? The 63 day clock is ticking. Don Levit

George: Can you provide an example of contract language and state law in which premiums can be accepted in certain ways? Don't you think federal regulation would preempt these forms of payment? Or. do you interpret the proposed IRS regulations to read as written, "except if your state prohibits this from being done?" Don Levit

Sieve: Why would the requirement be a state law issue if it is in the Code of Federal Regulations? Don Levit

Matthew: You are absolutely correct. The only modification I would make is "If the individual has been offered the option of continuing coverage under COBRA, and he has elected and exhausted the continuation coverage. The "If" is important, for as you say, the employer did not have to offer COBRA This can be found at CFR Title 45, Sec 148.103. In sec. 148.102 it states, "The requirements of this part that pertain to guaranteed availability of individual health insurance coverage apply to all issuers of individual health insurance coverage in a State, unless the State implements an acceptable alternative mechanism as described in Sec. 148.128. Does your state have a high-risk pool? This is normally an alternative mechanism. Don Levit

LRDG: Can you provide any documentation to your assertion? The latest proposed IRS regs on cafeteria plans state that the plans themselves are not ERISA plans, but merely mechanisims for paying premiums. George, I am not suggesting the premiums be reimbursed. I am stating the premiums are paid entirely by the employee, through the cafeteria plan, with no reimbursement. Don Levit

QDROphile: Why would HIPAA be relevant if the employer did no leg work for the employee to secure the policy, including not paying any premiums? Don Levit

LRDG: For individually owned medical insurance, would discrimination, administration, and the plan being defined in a document be relevant if there was no ERISA plan created by the employer reimbursing medical premiums? Don Levit

R. Butler: Do you mean that compulsory contributions should also be exempt from FICA? Don Levit

R. Butler: That was a very helpful GCM. It described, as you mentioned, the mechanics of why SECA must be paid, while income tax is not due. "The fact that the underlying expense for a self-employed individual is treated as a trade or business expense for income tax purposes is relevant, but not necessarily conclusive, for determining whether the deduction is also one attributable to such trade or busibess for SECA tax purposes." "The deduction is taken as an adjustment to income on the Form 1040, and is not taken as a deduction from the self-employed individual's Schedule C income or from the computation to determine the self-employment tax on the schedule SE, Form 1040." "A deduction under SECA for contributions to a qualified plan is disallowed because it is not attributable to a trade or business." TAM 200305006 takes another unique approach to the payment of income and Social Security taxes in regards to qualified plans." "That broad interpretation of wages has justified the concept that in this context, wages for FICA tax purposes is a broader term than income for income tax purposes. Thus, even though employer contributions to a section 403(b) annuity are excludable from gross income, such contributions are subject to FICA taxes if they are made by a salary reduction agreement." "The Social Security program aims to replace the income of beneficiaries when that income is reduced on account of retirement and disability. Since the Social Security system has objectives which are significantly different from the objective underlying the income tax withholding rules, the committee believes that amounts exempt from income tax withholding should not be exempt from FICA unless Congress provides an explicit FICA tax exclusion." Don Levit

vebaguru: I was able to acess the case through your link. Thanks for providing it. I don't see where any material would contradict what I have written. Which excerpts, specifically, are you referring to? Of course, I still would like for you to address what I have cited through the IRS, as well as what George Burns provided. Don Levit