SLuskin

Yes, this makes sense. They probably have different plan numbers, etc. For the Cafeteria Plan, all you need is the 5500 and Schedule F. You don't make reference to the underlying plans.

If you are not eligible to participate, then deductions stop. The situation you are describing sounds like there is no employment related daycare, so there should be no payroll deductions. Scenarios like this are also covered in the new status change regs.

It seems like the former participant lost the money. If he is not eligible to participate, then he can't submit claims for expenses incurred after his termination date. When all else fails, consult your plan document. Also, make sure this language is clear in your SPD.

You cannot pretax anything in a cafeteria plan for a person who is not a tax relative. Example. You pay your mother's medical expenses out of the goodness of your heart. No 1040 deduction, and no Section 125 reimbursement. Your mother is your bona fide dependent for income tax purposes. You pay her medical expenses. Either deductible on your income tax or you can run her expenses through your cafeteria plan (not both for the same expense, of course). There are times when a child may still be your dependent for federal income tax purposes, but for whatever reason, does not satisfy the dependent requirements of your health plan. Those COBRA premiums can be pretaxed. Once that child is no longer your dependent for federal income tax purposes, all those payments are gifts.

Here's the statement that we use - "I understand that if my required contributions for the elected benefits are increased or decreased while this agreement remains in effect, my compensation reduction will automatically be adjusted to reflect that increase or decrease." Caution - both our plan document and the SPD have the appropriate corollary language.

I can't find the site - have been looking for awhile. But I remember that it came in one of the EBIA Weekly updates. We discussed it at one of our weekly staff meetings here, and lucky for me, the employees remember it. Sorry I can't find it exactly right now, but will keep looking and let you know when I do.

Yes, the new regs provide for a change in residence that affects eligibility for a benefit, such as an HMO that does not provide any benefits in another state. Does your document include that new provision??

Cafeteria plans are fringe benefit plans, not qualified plans, so the docs and spd's don't have to be filed. They should always be up to date, signed and somewhere you can find them quickly if an IRS or DOL auditor comes to the door.

We used Mayer Hoffman dos version for 10 years and liked it. When we went to Windows, we changed to DataPath, and I could not be happier.

Yes. It is the same as any other event which would make a participant ineligible for the plan.

Actually, EBIA was citing IRS saying that umbilical cord blood storage would qualify under Section 213.

The only retroactive thing permitted in a Cafeteria Plan is the HIPAA reg regarding adding newborns retroactive to date of birth. All else must be prospective - generally effective the pay period following the date of the election form or change in status form.

I don't believe this passes the availability test.

We amended every plan that we have after the IRS issued the final regs. I think that the timing was pretty close, as the regs were issued at the end of April and all the attorneys were scrambling to get the language just right. We did free upgrades for our clients who had purchased within the past 6 months. But the docs do need to be updated.

This double dipping scheme was a big topic of conversation at the EBIA 2 day Cafeteria Plan Seminar that I attended. We were told that the IRS is now aware of these schemes and we can expect lots of activity soon. We were told that IRS Cafeteria Plan guru Harry Beker did not think much of these plans and the consensus was don't sell them to your clients. I have been advising agents who bring me business not to touch those plans, even when they complain that they are losing business to competitors who are putting in these plans. It is better to lose a client than to lose your license.

You are correct. If the document allows immediate entry upon rehire, then the employee can make whatever election he wants, and the payroll deductions will go from the election date to the end of the plan year. You can't look back at what he did before.

I am finding "Yes" to air purifiers, but only if prescribed by a physician to treat a specific medical condition such as a severe allergy. IRS Private Letter Ruling 8009080. It should be the same thing.

If a person is paying the premium after tax, it is because he did not want to be bound by the change in status rules. The only restrictions would be those imposed by the health plan.

I don't think this can be pretaxed because the ex-wife is no longer in the employee's "tax family". Contrast with this situation - health ins. says your kid has to come off your health plan because he is only taking 6 credit hours a semester. He is still your dependent for federal income tax purposes. The kid goes on COBRA, but you are paying the premium. That can be pretaxed until he is not your tax dependent anymore.

The one we use is long and complicated because an attorney wrote it.

What does the plan document say regarding rehires? Usually if the rehire takes place within 30 days, the employee just moves back into his/her previous election. However, if it is longer, the document should state whether or not that person is eligible to participate for the remainder of the plan year. In any case, you cannot "over withhold" to make up the employer loss.

This is one of those awful real life situations that the ivory tower folks who make the regs haven't really addressed. If the shift looks to be permanent, then I usually recommend a short year for the 1 month period, and then change the plan year to the open enrollment period.

Does anyone know if the VCR for the pension and welfare plans can also be used for Cafeteria Plans? WE found a company who has not filed a 5500 since 1994 and want to tell them what kinds of fines and penalties they would be subject to. Thanks.

I have a client who wants to change health ins. carriers mid plan year. They have a PPO, and it looks like they will be getting a PPO. They are changing because the employees are complaining. I do not believe that there is either a curtailment or the addition of new coverage here. So, the question is, can employees add spouses, children, or enroll themselves when the new carrier's plan is effective and pay on a pretax basis? I do not think they can (pay for newly enrolled family members pretax or drop anyone without a real status change). The health agent is saying they can do whatever they want.

EBIA provides an example in their ERISA guide. You can contact them at www.ebia.com.