SLuskin

It is 100 eligible employees who are actually participating in the plan. It does not count dependents.

I agree w/ Papogi. Just wanted to add 1 thought. If the employer is going to terminate the plan, I would think that the employees should be given adequate notice just out of common decency. For example, if I were an employee there and was going to get my eyeglasses on July 15, and found out that the plan was terminating on June 30, that would give me the opportunity to change my appointment and still use the money, rather than lose it. Sometimes, even if it's not in the regs, there are still "proper" ways to conduct business.

States have varying laws regarding unclaimed funds. This operates very much like a dormant bank account. Once the funds are unclaimed for the required period of time, they are turned over to the state. The state then tries to find the participant.

Yes, there should be a separate Cafeteria Plan document. It is a fringe plan and not an ERISA plan. As far as I know, the SPDs can be combined. The SPD is just the plan document in language that the participants can understand, with certain required stuff like the ERISA notice. So, it makes sense that there should be an underlying document.

I agree with papogi. The educational assessments are just another diagnostic tool. Payments made to a special school for a mentally impaired or physically disabled person can be reimbursed if the main reason for using the school is that its resources and programs are used to relieve the problem (ie schools for the blind, deaf). ADHD is a recognized disorder, and a parent may choose some educational programming as an alternative to prescription medication, which has come under alot of scrutiny lately.

It is my understanding that the funds have to be "general assets of the employer" funds. That would make putting them in the name of the medical plan taking them out of the general assets before any reimbursements are made to the employees. My read is that this would be funding.

Thanks, mroberts. I remember the thread, and I had some concerns. However, valued clients are now really interested, and since things change so fast in the 125 world, I wanted to know specifically who you (all) were using, pitfalls, etc. Still reading alot about the merps outside of section 125 and would like to know if any of you are doing that at this time.

You cannot participate in the Cafeteria plan, either. Section 318 of the Internal Revenue Code deals with stock attribution. That means that shares of one person's stock are "attributed" to that person's spouse, parents, children and grandchildren. So, even though you do not own the stock, you are treated for Cafeteria Plan purposes as though you do.

Are any of you currently using the debit cards for your flex administration? Recommendations for a particular company? What have you liked and disliked about them? Also, are any of you administering Section 105 Plans outside of a Cafeteria Plan? Thank you!

So, you all agree that we need to have the participant go back and get us a diagnosis from the chiropractor - just the fact that we have alot of copays for "manipulation" from that same office isn't enough? I guess my problem is that, in our area, at least, chiropractors (and dentists) have started selling alot of products to supplement lost income from managed care situations. My adult sons both go to chirpractors for "tune ups" and they are always being told to buy stuff.

Did you mean Medicare or Medical?? If Medicare, the agency formerly known as HCFA (can't remember its new name) has said an employer can't do anything to encourage employees to drop employer-sponsored group medical coverage and take Medicare instead. That included letting the employees pretax their share of the Medicare Part B premium and also pretaxing Medicare supplemental insurance if the plan docs provide for Individual Health Insurance Premium Reimbursement (an account separate from Out of Pocket Medical Expense Reimbursement).

Right, and in addition to that, the daycare must be employment related. Once the employment has terminated, it becomes difficult to determine if the terminee has obtained and retained new qualifying employment. Our plans do not permit daycare reimbursements for days after termination. We do still have a grace period, however.

The advise that I have gotten from them (EBIA) agreed that the underlying welfare plan could have different eligibilities, ie managers eligible for group medical upon hire, and everyone else at 90 days. If contributory, pretax deduction eligibility then had to be the same, and at 90 days, not upon hire. So, the managers would make post tax contributions for the 90 days, and then, in effect, get a raise by moving that to pretax. They are having a 2 day advanced Cafeteria Plan seminar in July, and I faxed them this thread. I was told to bring it up in the general Q&A following the prepared outline. After all these opinions, I am anxious to hear what they have to say.

One parent has to have custody more days in a year than the other one. That parent would get the full $5000. I could see how, if there are 2 children, and Mom has 1 child more days in the year and Dad has the other more days in the year, and all daycare is truly employment-related, that they could each get up to $5000. Dad couldn't be remarried to a stay-at-home spouse and still get the deduction. Married filing separately is $2500.

A participant has submitted a claim for a Tempur-pedic pillow. He has numerous visits to a spine center. There is no other info in the file. I know that every chiropractic office sells them, and that you can also order them on tv. No prescription is required. Would you reimburse this expense? Thanks.

To answer the question, I was getting my info from the EBIA Cafeteria Plan manual, p. 201 which says, "Whatever the plan's actual employment requirement, it must apply the requirement equally to all employees. For example, the plan cannot provide that one group of employees is eligible to enter the plan immediately, while another group must complete 6 months of employment." On p. 828 of the same manual, EBIA gives more examples of the same. Are they incorrect? Or am I misunderstanding what I am reading?

Sorry, I don't agree. Section 125(g)(3)(B)(i) says that if the plan has an employment requirement in order to be eligible to participate, it must be the same for all employees. For example, you can exclude part time employees if you wish, but if you include them, they can't have a longer waiting period than fulltime employees. Also, you can't have managers or salaried eligible at 30 days, and hourly or bourgeois eligible at 90 days in the same cafeteria plan.

We very much like EBIA's Cafeteria Plan manual.

In South Florida, at least, these infant fees are to reserve a spot for your child for a school or daycare at some future time. For example, when the child is born, you can pay to have them on the list for the 3 year old class at "Harvard Kiddie Kollege". Clearly, this is a payment for a benefit which will not be received during the plan year. You also have to find out which year this waiting fee is for before you can consider it. We do reimburse registration fees for the plan year in which the daycare was actually received. In our area, almost all of the daycares charge it as part of the daycare.

Those are actually pretty easy to design in a Cafeteria Plan. You have to decide if you want to give dollar for dollar - not the best idea - or some kind of reduction, like 75%. You also have to decide if you want to require some sort of proof of other coverage before you let someone opt out. Then, you have to decide if you want to allow that money to go to the medical FSA only, or if daycare and cash are options.

We include a Private Individual Health Insurance Reimbursement account in Cafeteria Plans that we design and administer. We do the discrimination testing. This way, the reimbursements are pretax.

The key seems to be whether to put some of the employer contributions to the employee accounts inside of the Cafeteria Plan or outside. Since our company specializes in Cafeteria plans, the ones that we design are inside the plan. I have a number of employers doing some funding of health care accounts, and have recently done alot with plan design to help other employers who are being squeezed by escalating premiums.

It depends on the plan document. Some are written for daycare that they can submit claims until the end of the plan year, even after termination. Promotion to partner is viewed the same as termination. The documents that we use don't permit that. They permit claims up through the date of termination. We have a 90 day grace period after termination for the person to submit claims for those expenses, after that, they lose the money.

You would need to file a Schedule C if the plan administrator were paid more than $5000. You will also have to have the plan audited if the trust exemption explained in Technical Release 92-01 is violated. By the way, this isn't new.

I have never had a client's cafeteria plan audited as the primary reason for an audit. I have had 3 clients (in a 12 year period) whose plans were audited because of improprieties in the 401K and some I9 or other problem which alerted the auditors. I have had any number of clients with 401K audits, and the auditors did not look at the cafeteria plan. Certainly if it is a flex plan, daycare in particular, which does show up on the W-2, why risk not testing. We test our plans and send the clients letters to show that they have passed, or not. If not, the remedies are in the letters as well. Our clients are glad that we do the testing, as well as provide guidance on change of status issues, etc.