SLuskin

Thank you both. I did sit through the presentation. The scheme (which seems to me to be the same one that Harry Becker addressed) was to have the employees pay 100% of the insurance premium pretax through a POP plan. Then the employer was reimbursing the employee for the premium using a separate check. That reimbursement was being categorized the same as a mileage reimbursement, not taxable, no 1099, not included in the W2. They said the plan had been endorsed by Arthur Anderson, Peat Marwick and a few law firms. I still did not perceive the difference between this and the ones we have already addressed, in spite of the endorsements. I had also gotten a legal opinion from Fisher and Phillips, one of the labor law firms that we use. Fisher and Phillips also agreed that this scheme couldn't be done. I guess the point really is that these plans are continuing to be very heavily marketed, and we should be prepared for that.

A spouse changing jobs is a status change regardless, and it doesn't matter if the old company did or didn't have an FSA. If your spouse loses a job or if your spouse starts a new job, that is a status change, and the employee should be able to elect (or increase or decrease, if the plan documents permit) the FSA election.

We have been approached yet again by a marketer who claims that under IRC Section 106, an employer can save huge amounts of money by withholding 100% of the health insurance premium on a pretax basis and then also reimburse the employees for that amount on a pretax basis. Does anyone have any experience with this sort of "double dipping"? Thanks.

When a 25% concentration test is failed, I work backwards t find out the amount the key ees can have in total. I divide the total election of the non-key employees by .75. That tells me the total for the company. I then subtract the nonkey election from that total and communicate that number to the employer/sponsor.

The plan document would need to provide for this type of reimbursement account. It cannot be part of the medical expense FSA or the employer-sponsored premium conversion. The coverage needs to be owned by the employee. We accept premium notices with evidence of payment. If automatically withdrawn from checking account, we require something from the ins. co which shows the owner, type of coverage and premium due, along with copies of the monthly withdrawals.

The employee doesn't have the "use it or lose it" with the self-funded medical plan. Actually the self-funded plan pays the expenses for the employee, just like the fully insured health plan, and the FSA lets the employee pay his/her own expenses with pretax dollars.

Thanks for your help. I hadn't seen any changes either, but when the client is a law firm and gets insistent, it's nice to have you all out there for a second opinion.

No, if the premium is paid by the employer, any disability benefit is taxable to the employee.

I have a client who says the regs have changed regarding reimbursing expenses for weight loss and visits to the nutritionist. We have not been reimbursing for weight loss unless there is a previously diagnosed medically related condition.

Yes, that is stretching it. A doctor belonging or not belonging to a network is not a family status change. If all the ob-gyns in a county leave an HMO network (actually happened in Palm Beach Co, Fl.)the employees can revoke that election and join the employer's PPO. I have only seen that one case in 10 years of doing this.

No, you have to test for the DCAP plan on all the employees, even the part-timers. The test results don't change just because you put some of the employees in a different plan.

Prospective means the date that the Change in Status Form and a corresponding new election form are signed by the employee. It also ususally means the pay date following. Only adding a newly born/adopted child to a group medical plan can be retroactive in a cafeteria plan. Yes, the premium for a spouse can be paid "retroactively" on an after tax basis if permitted by the group medical carrier.

You continue to pay fica until you have hit the maximum to which it is subject. So, if an employee has an original starting income of $90,000, and is pretaxing $10,000 this year, all of the income that the employee receives outside the plan will be taxed at the 7.65% employee and 7.65% employer. Once the limit has been reached, if the employee still has more earnings (outside the cafeteria plan) he is only taxed the 1.45% medicare and the employer pays the matching 1.45%.

Yes, it is generally reimbursable assuming that there has been some medical diagnosis which prompted the therapy.

The IRS issued new regs in March, 2000.All of the changes had to do with changes in status. Some of the regs were "final", meaning they have to be implemented (and plans amended) for the most part by 1/1/01. Some of the regs were proposed, and although the docs do not have to contain them, as long as you are amending for the final regs, it makes sense to do them both at the same time.

Insurance premiums cannot be reimbursed under a medical FSA ever since 1990 - it became clarified at the same time as the uniform premium provision for medical FSA's took effect. I disagree with Joe's answer. You cannot run one employer's group insurance premiums (COBRA is part of the group, after all) through another employer's cafeteria plan. What you can do is this - an employee has a college-aged kid as a dependent on the health insurance. The kid graduates, and is no longer a fulltime student. So, the health plan says he can't be on the plan anymore. The kid elects COBRA. If he is still the employee's dependent for awhile (for income tax purposes), then the employee can run the kid's cobra premium through the cafeteria plan. Hope this helps.

Thank you all for your help.

I don't know about the coding, but if you can attribute the stock according to section 318 (I think that's the right number) then they are also considered key. You can only attribut stock once. For example. Dad owns the company. His married daughter and her husband both work there. The daughter is a key employee, but the husband is not. If it is the daughter's company and both her father and her husband work there, you have to consider them all key.

Do you need to file a Schedule H for a fully insured welfare plan which consists of group medical, group dental and group term life? All funds went directly to the insurance company. Nothing was self-funded. Thanks.

And of course you have to have a plan document which permits this, and file a 5500 for the Cafeteria Plan at the end of the year.

We have a video presentation which we offer to our employer-clients. I also (since most of my clients are small companies, and all under 1000 ees) do personal group meetings each year. We use a website and have staff here ready to answer questions during open enrollment.

I don't think you can. Only benefits which are new, not changes to exisiting benefits, can be elected midyear by participants who signed election forms prior to the start of the current plan year.

It is clear that the IRS permits this expense. However, an employer/sponsor is not required to include every permissible thing in a plan document. So you have to look at the document to see if it specifices what expenses the employer intended to have covered under the plan.

The health club membership dues are not reimbursable under a medical FSA.

Yes, premium only plans need to be amended. Many of the new status change rules only apply to the premium portion of the plan.