SLuskin

I just read a long and complicated discussion of this issue in my quarterly update from EBIA. It seems like we need direct IRS guidance, but that both kinds of plans have some problems.

Yes, the employee can add both the newly acquired dependents and the ones he had before but didn't have on the plan.

Partners cannot participate in a Cafeteria Plan. They might be able to participate in a noncafeteria dcap, subject to the discrimination tests - 5% or more owners cannot have more than 25% of the benefit of the plan, and the average election of the nonhighly compensated must be at least 55% of the average election of the HCE.

I thought that the eligibility had to be the same for everyone, of if not, that it did not favor a category of employees that was "highly compensated". So, if you have no highly compensated hourly ees and highly compensated salaried ees, you may have some trouble.

I also read something like that in one of the publications that I get. (can't remember which one). However, it was just some amendment on a bill which has been pending for a long time and I haven't heard anything new for 6 months or so! So, it certainly hasn't passed and I don't tell my clients about it at this point in time.

That depends on what the document says. Most sponsors will put something in the document and the SPD which talks about pro-rating. If the document is silent, you have to assume that there is not prorating.

We have been reading about this issue, and it seems that for some plans, the PEO and the employer are co-employers. Meaning that either one could sponsor the plan. I do not like the idea of the PEO sponsoring the plan. HOw would they do the discrimination testing? When is open enrollment? Can you offer POP for some employees and flex benefits for others?

Yes, the plan administrator can make these changes. The problem is that the employee-participants cannot make corresponding changes to their elections until the next open-enrollment period. For example, if an employee elects $500 in the Medical Reimbursement Account because that is the deductible in the employer-sponsored PPO, he cannot reduce that amount if the employer switches midyear to a $10 copay HMO. That employee would lose whatever money he couldn't use.

No, all prescriptions are not permitted. Examples are "cosmetic" prescriptions like Renova and Retin-A, and one new one, I think Kinerase. Also, Meridia is generally not permitted.

EBIA has a sample Transportation Benefits document in its Cafeteria Plan manual. They are careful to state that the 2 are entirely separate. One thing about the transportation. It seems that the election is monthly, and that there is no use it or lose it.

Generally, the elections are annual elections and not per pay period elections. You have to make sure that you stay within the plan year. For example if the pay period missed was the last pay period of the year, you have a bigger problem. As far as whether you take it all out in the next pay period or prorate it throughout the year, you should develop a procedure and then be consistent.

Generally, the elections are annual elections and not per pay period elections. You have to make sure that you stay within the plan year. For example if the pay period missed was the last pay period of the year, you have a bigger problem. As far as whether you take it all out in the next pay period or prorate it throughout the year, you should develop a procedure and then be consistent.

I think that you need more documentation. We have seen orthodontic claims that show a large amount for impressions, records and putting the braces on, monthly fees for the monthly visits, and then something at the end for the retainer. I think that the dentist will cooperate when the client doesn't get reimbursed and you tell him/her that the dentist is the one holding us the reimbursement.

We have been using MHM Software for almost 10 years. Recently, DataPath has been sending information which looks very interesting. Does anyone out there use DataPath? If so, I would like to ask you how you like it and how it fits certain situations. Thanks

Even if there is a significant increase, the employee can only revoke the election if he/she prospectively elects similar coverage. If there is no alternative coverage, the employee is stuck with the increase.

The test for daycare is 5% owners, instead of key. Also, with the 55% average benefits test, you test on highly compensated. You can use the top 20% election to help pass the test. I think that you can't have 2 plans like this to get around discrimination issues.

I agree with Joe. We have a separate individual premium account in our documents. The employee (not the spouse or the dependent) must be the owner of the policy. COBRA is a different issue, and the interpretations seem to be tightening. I attended an EBIA conference, and COBRA premiums of spouses are definitely prohibited. COBRA premiums to a former employer are a gray area. COBRA premiums you pay for a dependent who came off the health insurance (not a full time student anymore, for example) can be run through.

Yes, different states have different public school requirements. For those states which require kindergarten, kindergarten tuition is not a permitted expense. Some states still start their public schools in 1st grade, and then we would allow kindergarten. We do allow preschool and preK tuition. The upper age for a nonhandicapped child is 12.

We also do not require originals. We receive many faxed claims, and as long as we can read them, they are processed.

Yes. the employees must be offered the choice for 2 important reasons. The first is the possible diminution of Social Security benefits, such as they might be. The second is the inability to drop the coverage during the plan year, or add or drop family members without consistent family status changes. Even in cases of a negative election (which I do not like), the employees must be given an opportunity to opt out of the pretax plan.

This is a good question. Doesn't the parent company have to offer flex to everyone, or can they just categorize your client separately - for valid business reasons? We are having lots of our small and medium size client being bought, and in each case, we have terminated the plan. We have also lost the clients, as we cannot administer plans as large as those of the parent companies.

We also have relied on Harry Becker for this and have, for the clients who want it, included a totally separate reimbursement account for these premiums.

I think the first thing that needs to be done is amend the plan so that the open enrollment periods of the health insurance plan and the Section 125 Plan are the same. Otherwise, you can't help but violate something during health ins. open enrollment.

Is this self-funded medical reimbursement plan done on a pretax basis? I had someone ask me about that the other day, and I do not know enough to answer the question. Thanks.

Try the Federal Register dated November 7, 1998