SLuskin

Dave, lot's of large employers use flex credits, which are employer contributions. We have many employers who either contribute a per payroll amount or a flat annual amount to the FSA accounts for their participants. We also had a client who wanted to be "an employer of choice" in their region. They matched DCAP contributions dollar for dollar.

I was always under the impression that if you bought or sold vacation days under a Cafeteria plan, that those days were bought or sold with after tax dollars. I have been given a plan document by a client that shows a BeneFlex plan saying that the vacation days are pretax. Does anyone know about this?

I believe that this is NOT allowed. You cannot drop your elections without a qualifying change in status. There are no hardship provisions in Section 125.

I met with a prospect the other day. A law firm has a pop plan "administered" by their payroll service. For their health insurance, in the base plan, the firm pays 100% of the employee premium for all, and 100% of the dependent premium for attorneys only. All of the firms HCE are attorneys and none of the non-attorneys are HCE. I told them that this was discriminatory, because not all of the pretax benefits were equally available to everyone. I know that you can offere benefits to some classes of employees and not others, i.e those in New York but not in California, or mechanics but not shipping clerks. I didn't see this as being the same because in the 2 examples I just gave, there isn't a clear division of HCE and non-HCE. In this case, if I am a secretary who wants to cover my family, it will cost me $800 per month and if I am an attorney, it will be free. The secretary can pretax her $800. If the attorney buys up, the attorney can pretax the difference between the base plan premium (free) and the richer plan premium. Any insight would be helpful.

The regs are much easier on daycare than on premiums and medical FSA. When your mother is no longer in daycare, you no longer have a qualifying individual and you must stop your contributions. If she recovers to the point when she can resume daycare, you then have the option of restarting your deductions. If she goes to a nursing home or assisted living facility, you cannot claim her daycare expense, because this would then not be employment related.

The participants are charged more for any tobacco use. It is an alcholo distribution company, so most of the employees are warehouse, distribution and truck drivers. We don't do their Section 125, only their COBRA, so I don't have the salary information. I am trying to use this as a way to get the Section 125 business, because it doesn't look right to me. However, the person who referred the business to us is the broker and she may have been the one who suggested the tobacco premium in the first place.

I haven't seen your plan documents or SPD, but you should have a period of time during which you can still submit claims for expenses you incurred prior to your termination date. Maybe you purchased some over the counter drugs and medicines, and you can get receipts from many of the retailers like CVS if you used your CVS care card. I think Target can also bring up the purchases if you used a credit or debit card. Other than that, the use it or lose it will apply, and there is no way that you can get the money back.

We have a COBRA client and the carrier has a 4 tier rate: employee only, employee + child, employee + spouse, employee + family. The employer is charging the employees different amounts for the premium based on whether or not the employee/or spouse uses tobacco. They are pretaxing this premiums through their pop plan. For example, employer pays 100% of employee only for non-smoker, and 85% of the employee only rate if the employee smokes. What sort of discrimination testing would you have to do for that?

In the almost final regs issued August 2007, there is a provision that states that an employer can require employee contributions to be pretax if the employee wants to participate in that benefit. We have never drafted a plan that way, however.

Here is a health insurance challange. Employer has 42 employees. 10 are in Florida and the other 32 spread all over the country, mainly in rural areas. Employer wants to offer health insurance to all, but the carrier benefits outside of Florida are awful. There aren't enough people in any of the other states to offer anything meaningful. Employer wants to provide group medical to the Florida group, and then have everyone else purchase private individual health insurance. Employer wants to reimburse the non-Florida employees an equal percentage of the private premium and allow them to pretax the balance of the premium in a separate private insurance reimbursement account. They will also have a medical FSA and a DCAP. I advised that employer participation like this makes it an ERISA plan and also makes the individual plans subject to COBRA. Does anyone have any comments or suggestions for this type of situation? Thank you.

Isn't this the purpose of an HSA account anyway? I cannot imagine not approving this claim. I have been in the Section 125 business since 1990 and with HSA's since their inception. You can use HSA funds to reimburse an expense incurred in another year as long as you had the HSA when the expense was incurred.

Thank you all. I ended up asking our attorney for an opinion, which I have pasted below: I agree with you that I do not find this situation is not covered in the regulations. I also searched a couple of secondary sources and don't see it addressed. In my mind, it seems clear that the grandfather is not capable of caring for this child, regardless of whether he can technically care for himself. But the test is not whether he is capable of caring for the child, but rather whether he is capable of caring for himself. So to properly document the decision to permit these expenses to be reimbursed (i.e., to protect the plan sponsor), do you think that there is any way to try to get some type of doctor's note indicating that the grandfather DOES meet the "incapable of self-care" standard once a 4-year old is factored into the scene? Perhaps that latter analysis can be performed as a hypothetical factoring in the rigors of a pre-schooler left solely in his care, with the result being that he would no longer be able to care for himself.

I have a situation where the participant is the child's grandmother. The child is the grandmother's tax dependent and the child's parents are not in the picture. The grandmother is employed full time. The grandfather, however, is retired, but older. He is not able to take care of a 4 year old at all. Can she participate in the dependent daycare account, or is she prohibited because she is married and her husband is not gainfully employed? (I personally would never leave a 4 year old with a 70 year old). Thank you.

Susan, what does the Cafeteria Plan document say about eligibility to participate? If the doc says over 20 hours, this employee cannot "buy" into it pretax. Also, is the carrier going to allow this sort of thing? Generally, the eligibility for the 125 Plan mirrors the eligibility for the group medical plan. Otherwise, there is a phantom benefit which would certainly be looked at very strangely upon audit. Also, are there any other under 20 hour employees? Are they offered the same opportunity? I would be inclined not to permit this at all.

Would anyone allow a claim for insurance on a hearing aid? Of course, we reimburse for the hearing aid itself. Thanks.

That sounds like a status change to me because the cost of coverage has changed. Florida has "free" pre-k 4, although that is only about 1/2 day of a daycare day. So, if a child were to qualify for this state subsidy mid Cafeteria Plan year, the parent obligation has changed. We allow that.

You cannot do that and I don't think you ever could. There is always some legislation or another pending to permit this, but it has never passed. You might be thinking of the once in a lifetime ability to roll FSA balance into an HSA (not a qualified plan) as long as the Section 125 document has been amended to permit this.

Wasn't this one of the changes made in Obama's Stimulus package? I thought all Section 125 Plans had to be amended to include a special 60 day HIPAA enrollment/disenrollment right for SCHIP.

YOu are correct. A pay cut is not a status change. If the document so provides, an employer may change the contribution to the group medical/dental plan. The employee may change the election to pay the increased amount, may elect a less expensive plan if offered, or if the change is significant (not defined by the IRS) then the employee can drop coverage.

If a 66 year old, who is not receiving SS retirement, and is enrolled in Medicare Part A, but not Part B, goes to Medicare and dis-enrolls from Part A, can they then make a contribution to an HSA account? Do you know is there is any negative in getting out of Medicare Part A, is there a penalty to get back in if they were employed and covered by group insurance.

Thank you, everyone. That is exactly what my research told me.

We were asked today what happens if a company has had a number of involuntary terminations, sends the notices correctly to those affected, and then has to shut down completely? The group plan would then be gone. I thought that there would be no COBRA at that point. But the person who asked me told me that Ceridian said the carriers would have to continue those plans as if the employer were still in business. I haven't seen anything about that in anything I have read. I don't think they are talking about conversion, but I welcome any comments you have. Thank you.

We have been using the rule of thumb that if it is a police action, or the person is arrested and charged with a crime while on company business, that is gross misconduct.

March 1 is a Sunday. Is that really the date? I am a NAHU member. Thanks.

What do you do about family members who must also receive the initial notice? Is the CD sent to the employee's home and addressed to the employee and any participating family members?