SLuskin

You can have automatic enrollment in a Cafeteria Plan, if the documents so provide. But you have to offer a waiver form so the person can opt out. You should still be providing an SPD, or something which describes how and when a person can change his/her election, and some sort of statement about the possible reduction of social security benefits at retirement.

I would like to know how others view this expense - a woman had cosmetic breast implants in the past, but apparently they became infected and needed to be removed (and replaced?). Of course, it is the wife of the first name partner in a law firm. Any help would be greatly appreciated. Thanks.

We do our initial testing on the annual election. The testing should occur prior to the start of the plan year, so that any adjustments that need to be made to the key and hce participants can be communicated before the plan year starts. In your example, I think that the disbursement of $600 (which matches the election) fits the definition of pretax benefit, as that person will never be taxed on the $400 received but not contributed.

Yes, we permit both of these expenses. We require a physician's diagnosis of obesity for the weight loss. We only require the hypnotherapist's certification for the smoking cessation.

No. There are some limited uses of COBRA premiums in a Cafeteria Plan. For example, if your tax dependent child no longer qualifies as a dependent under your group medical plan, you may choose to pay those COBRA premiums for that child under your Section 125 Plan. The COBRA premiums that you are paying are part of another employer's group health plan, and therefore not eligible.

Sorry, but the Code Section 318 rules on attribution of stock apply here. In a sole proprietorship, since there is no stock or partnership shares, a spouse who is a bona fide employee can participate in a Section 125 Plan. But not the spouse, parents, children or grandchildren of the more than 2% shareholder. You only attribute stock once. So, if the owner's daughter and son-in-law are both employees, the son-in-law can participate (assuming the daughter has no stock in her own name).

I think it got lost in the post 911 environment. You will notice that none of the other health care issues have really been addressed either. Prescription drug price relief for senior citizens was a much hotter issue, and that also is on the back burner for right now.

Thanks!

Actually, it is the health insurance agent who called me in to assist. Apparently, he has a carrier that will do a carve out of this nature. The only question was, can we offer 2 different Section 125 Benefits to 2 classes? Class 1 (managers) pretax their portion of the health ins. premium, and make salary reductions into the medical and daycare fsa's. Class 2 (everyone else) seed their FSA with 45-50/month and have them participate only with respect to the flexible spending accounts? I was not sure how this proposed arrangement would pass the eligibility and availability tests.

There was legislation pending on this, but it never went anywhere. As far as I know, the use it or lose it still applies.

I have a client who has about 170 employees. They want to do a carve out for 30 managers (not owners, officers or HCE, these managers earn $30-$40,000) and offer them a group medical plan. They want to offer the other 140 employees $40-50/month to either purchase individual insurance on the market or else a "seed" into the medical reimbursement (fsa) account. Can they do this? If so, and the managers are required to pay part of the premium, can this be done on a pretax basis? Thanks. This is a prison ministry that can afford very little in the way of benefits. I would like to help them if possible.

I can understand how her payroll deductions could have exceeded what she intended, but how could her reimbursements exceed the amount that she had submitted and were approved? Also, the plan doc should state how many days after the status change the employee has to submit a change form. Changes should not be retroactive. I think she should just lose the money.

We do not reimburse unless the medication is available only by prescription. We do not reimburse prescription ibuprofen, and now we are not reimbursing prescription Claritin for current prescriptions.

We have put in several plans in the past 2 months with "insurance deductible account" fsa's and other plans with simple employer contributions to the medical fsa. Both employers and participants seem to like it. Of course, we have the docs, spd, etc. done.

Your Cafeteria Plan service provider should be supplying you with current election forms. You need a service provider, even for a simple POP plan so that you can be sure your documents are updated and that the discrimination testing is properly done.

It has been proposed and never passed for a few years now. Since the federal government is just starting its own flex plan, we might see some action on it as government employees start to complain.

George, I had asked our attorney the same question in1995, and found his letter with the answer. Although there are no cites, he says, "My experience is that a 'plan administrator' for ERISA purposes is almost always either the employer or a key employee or owner of the employer. My belief is that the employer is the most appropriate person to bear this responsibility. Many people confuse a 'plan administrator' in the ERISA sense with a third party which administers the plan. Normally when there is a tpa, the responsibilities of the tpa to the employer and the plan will be specified in a written agreement." It doesn't seem to say much except that the tpa is better protected not being the plan administrator. With the new privacy regs, especially the part that says that the employee can look at his claim file in the office of the plan administrator, we certainly don't want participants having the right to come here. We have started shipping old claim files back to the "plan administrator" for that reason.

Employers can contribute to a Cafeteria Plan. First of all, it could be a flex credit plan. Second, many employers "seed" the fsa accounts to beef up participation and pass some of the discrimination tests.

Inside the FSA, the employer contribution is subject to the Uniform Premium Provision. There is no carryover. The MERP outside the cafeteria plan can reimburse on a prorata basis, can reimburse for health insurance premiums and can carryover without negative tax consequence.

You can make an FSA as broad or as limited as you want. It just has to be described in the plan doc and the SPD. We have 1 client that funds a dental/vision only fsa for all employees, 1 that funds a hospital-inpatient copay only fsa, and others that simply seed the fsa for each employee and allow them to use the money for any allowable expense.

We like DataPath - both the software and the people.

GBurns, almost all of my "blue collar" clients have been approached by "the Aflacs" and many have gone with them If the health insurance agent pitches them (and they have a high commission incentive to do so) the employer will usually buy in. Plus, they advertise "free section 125 services". It is very hard to compete with "free". I agree that my lawfirm, cpa firm and private school clients do not have these offerings.

Is there a subrogation clause in the contract?

GBurns, could you clarify your response a little? Sometimes I do better with an explanation written in sentences rather than cite references. Thanks.

We are using that idea inside of the cafeteria plan, not outside like the new HRAs. We have custom-designed a number of them, and all seem to be working well so far. I anticipate doing alot more of that as premiums skyrocket and benefits plunge.