SLuskin

You are correct on both.

Your first example is not a family status change. It is the same as electing $2500 for lasik and then finding out that you are not a candidate. The IRS position on this is "too bad". Your 2nd example is a status change, and I would permit the participant to change the election. Note that the regs do permit daycare if 1 parent works the dayshift and 1 works the night shift. and they have accounted for sleeping time.

I see that for the daycare credit starting next year, you can consider $3000 of expense for 1 child and $6000 for 2 or more. But the limit for cafeteria plans is still $5000. What would then be the advantage of someone with 2 kids using the cafeteria plan? Will you be able to run the first $5000 through the cafeteria plan and the last $1000 as a tax credit? thanks.

You have to choose another doctor. The only way that you can change your health plan would be if an entire category of doctors drops the plan. That happened to some of my Palm Beach county clients. It seems that all the ob-gyns dropped out of the Blues HMO, so we allowed those people to elect the PPO midyear. Also, the Blues just dropped 2 hospitals there, and we are waiting to see what some of the choices might me.

You can definitely reimburse private individual health insurance premiums - if your document provides for it and as long as you have a separate account for it (ie not in the medical reimbursement account). You cannot pay COBRA through this account, because COBRA is not individual, it is part of another employer's group. There are 2 good uses for this account. One example would be if a small employer doesn't offer, for example, dental, and you went out and bought your own individual dental plan from an agent. Another good use would be if your employer only offers an HMO, and you have a college student in another state, you might want to buy that student a plan in that state. The administrative software that we use provides for this account as well.

There are generally no nondiscrimination issues for health insurance (outside of a cafeteria plan). That may be why you can't find the law. My advise would be to check with your carrier and see if they permit it. Since there is no employer contribution contemplated for part time employees, it seems that only those who would expect to have claims might sign up.

Doesn't it matter what kind of plan it is? If you are filing the 5500 just for non pension welfare plans (ie fully insured health or dental), I thought no audit and no schedule H was required.

Most of the documents I have seen contain some wording to the effect that if a person's payroll check is insufficient and the deduction cannot be made, it is permissible not to take that one deduction. There is nothing in the change of status rules that I have seen which allows for hardship. There is a big difference between postponing saving for retirement (401K) and the pretaxing of dollars which would be spent in any case. I do not thing this is permissible at all.

We do not require proof of payment. We require proof that the expense was incurred. We ask that the receipt show the name of the patient, the nature of the service, the date of the service, the charge to the patient and the name of the service provider.

EBIA is having a 2 day advanced Cafeteria Plan seminar in Portland Ore in July, This is one of the things I hope to learn there. I do know that the company has to appoint a privacy officer (me).

Also, you have to make sure that nothing is retroactive. We make it the pay period following the date on their change of status form. If they terminate employment, it is the paydate following termination.

For the Daycare, the 5% or more shareholders cannot have more than 25% of the pretax benefit. If it's an S Corp, more than 2% shareholders cannot participate at all.

Actually, there is something pending about this every year, and it has not been passed yet. Other pending legislation is talking about permitting Long Term Care Insurance to be pretaxed in a Cafeteria Plan, but that hasn't happened yet either.

You can look at a sample claim form on our website, which is http://www.div125.com. We do administer many small plans and would be glad to help with yours.

We have our documents drafted by an attorney. We have an agreement with him whereby we can change the name of the client and the client data. Whenever there is a change in the regs, or I read of something which I think should be included or changed, I send it to him and he either makes the appropriate changes or lets me know why his language is preferable. We have been using him for about 10 years, and he is one of the top ERISA attorneys. He has provided us with 3 different sets of documents and SPDs. One for premium only, one for Flexible Spending, and one for the full "benefit credit" cafeteria plans.

We use both DataPath and the EBIA manual. The new matrix that came with the March 2001 inserts to EBIA is very good. We find ever penny spent with both of these companies to be far more than worth it.

Who is "they", a TPA that you were wiring money to for claims payment? Do you have a written service agreement with that company? There is usually a statement in the service agreement which addresses disagreements and how they will be handled. Ours mentions arbitration first, with the costs being split. This is one more reason why we do not accept client funds, and have many other ways of reimbursing the claims.

Would it clear up the problem if payroll were switched to the last day of each month? ie, payroll for January paid 1/31, payroll for December 12/31. Then you would have lots of administrators asking for your business.

How would the prompt payment rules affect the length of the grace period offered in a flex plan? For example, most of our employers choose 90 days. If an employee waits until the 89th day and we reimburse the day after the claim is received in our office, isn't that prompt payment? Some of the employers only want a 60 day grace period. I think that the prompt payment starts when the claim is received in our office, and not the number of grace days chosen by the employer/sponsor.

At this point I would get an attorney immediately.

This looks like a merger/acquisition thing to me. Did your company become part of different corporation? Is the name of your employer different now? Whenever there is a merger or sale of a company mid cafeteria plan year, the issue of what is done with the flex accounts should be covered in the merger/acquisition documents. In addition, anything which affects the participants' accounts should be communicated to the participants by the benefits department (of either company). Hope this helps.

You would think the wife would want to increase her life and AD&D, as she is now the primary breadwinner. But if there were good answers to the questions as to how the reduction in those benefits makes sense with the change which occurred, then yes, you can increase one benefit (I assume the husband lost his dental coverage) and decrease the other. What about adding the husband to her health insurance?

Does your client mean a straight medical expense reimbursement plan (employer pays) or a Section 125 Flexible Benefits Plan (can be employer contributions, employee contributions through payroll deductions, or a combination of the 2)

I agree. This would really be a stretch.

From what I understand, you can't run medicare premiums through if the employer sponsors a group medical plan due to some HCFA rulings. If an employer does not sponsor any kind of group medical plan at all, it looks to be permissible.