leevena

I have been involved in a few similar situations and have some thoughts, but not any concrete answers. I doubt you will get any of the information/documents pertaining to the sale. You should be able to get copies of the plan documents, both the old plan and the new plan. The statement about "the broker was to have processed the benefits as a transfer and not a new group" is strange. Hard for me to imagine that an employer would be so clueless that they were not able to realize that a new carrier/plan was installed. Whether there is a new carrier or not, a pre-ex does sound strange also. (I do not know all the details and particulars about your friends contract, state of issue, etc. so I cannot make a judgement) But let's assume that the employer was clueless about the introduction of a new carrier. Most carriers will usually waive the pre-ex for existing employees, even in a situation where a employer merges employees within a new company. Again, I cannot make any concrete statements about this, but it does feel strange to me. You may need an attorney to get involved. Good luck.

Don. Thats a good question, and I don't know the answer. I work on the benefits side only, and when we develop/install a plan such as this I ask that the financial/CPA staff get involved and make those types of decisions.

I don't think you need to worry about "hiding" the dollars. Let me go through an example and see if it helps. Let's assume that you have calculated that your maximum HRA funding amount for all your employees is $100,000. The probability of spending that entire amount is low, so let's further assume that you expect your actual payment to be $60,000. You know have two options, one is to actually place dollars into each participants accounts, or the second is to release the dollars from your business as the claims come due. All of my groups have chosen to pay funds as they are presented for payment. So if I end up paying out $60,000 in the plan year, that becomes my HRA Expense. If you use the "pay as you go" approach, you still need to carry forward the balances. However, since you did not fund the employee account, it is just a promise. At this point I always recommend to my clients that they speak with their accountants as to how to do this. You are right, this is more of a financial decision as oppposed to a benefit decision. Hope this helps.

GBurns...I assumed that when JMOR99 used the larger amounts in his question ($50,000 and $100,000) he was referring to the aggregate amount of promised dollars in the HRA portion. For example, if the employer promsied $1,000 per person and there were 100 employees taking single coverage, the total maximum risk for the employer would be $100,000. I hope that is what JMOR99 was asking.

There are a variety of ways that an HRA could be structured. The first step for the employer is to decide what amount will be given to each employee, such as $1200 for single and $2400 for those with dependents. A rollover provision is up to the employer. I have some groups with a rollover and some without. If the group has a rollover, the employer decides if they want a maximum amount rolled over or not. In most situations, the employer will want to max out the rollover amount, usually to the maximum out of pocket limits of the underlying plan. Another consideration is what to do with HRA dollars promised to an employee who now leaves. An employer could structure their plan with a retirement feature, and let the dollars go with the employee when they retire. For all other ex-employees, the HRA dollars need to revert back to the employer/plan. Any payment made to an ex-employee that approximates the HRA amount is subject to IRS taxation. (I am not fully clear on all of the aspects of this) Since the HRA is funded with employer dollars only, there are a variety of ways the employer can fund the accounts. They can fund it on a monthly basis, meaning that the employer makes available 1/12th of the $1200 dollars. So in month 1 the employee has $100, month 2 $200, and so on. The other way is for the employer to make the entire promised amount available from day one. The employer can also determine if they want to actually place the HRA funds into someone's account, or if they want a "pay as you go" policy. Most of my clients use "pay as go"...why tie up funds for the future? As for a taxing event, you may be a little confused. If for example, the entire promised amount of HRA dollars was $50,000 and the employer ends up paying out $28,000, then the $28,000 is the "expense" the employer books. The difference ($22,000) was never paid out, so it is a savings. Any HRA dollars the employee uses are not taxed either. Good luck, and hope this helps.

Woops, I wrote that wrong. THanks GBurns. Yes, the benefit would be taxed. Sorry.

Yes they are. An issue with these types of voluntary plans (AFLAC, Colonial, and others) is the tax issue. For example, if I have a monthly premium of $50 for disability insurance and I run it through the plan pre-tax I will not be taxed on the benefit, which is larger than the premium.

oriecat...I agree with your comments, but look at the question. It is asking "if a wet signature is required, how do other employers deal with this issue". That is why I asked if I was missing something.

Yes, electronic can be done. As for the second part of the question, "If a wet signature is requied, how do other employers deal with this issue?", don't quite understand what you are asking. Sounds like you are asking how to obtain "wet" signatures? If that is the question, just send out the forms and ask for them back by a certain date. Am I missing something in your question, if so, sorry?

Seems to you probably need an answer from someone who is familiar with the laws/regulations in the state of this company plan. I am in California and would not be able to answer questions about other states. Perhaps if you add some more information, such as state the plan was issued in, size of company, was it a self-funded or insured plan, etc. Also, if you could expand on what the term "a risk" means. I am assuming it means that the person has a medical condition that is likely to cause significant claim dollars. Good luck.

I am guessing that your question means you are looking for information on how many hospitals have begun to offer HSA's to their employees as a benefit choice. Is this correct? Data on what the popularity of HSA's within certain industries is not readily available. Often times this type of information needs to be obtained from a variety of sources, such as carrier, consultants, and survey's. Also, since HSA's are relatively new, any such data would provide minimal information. That said, California (which I am in) has a mixed bag of HSA enrollment. On the individual market, many such policies are being sold. In the group market, it is much less. Areas with high HMO enrollment and lower costs (such as San Diego, Orange County, etc.) will have less HSA enrollment. Areas with the opposite characteristics (northern Cal) will tend to have more Consumer Driven plans (hsa's, hra's, 105's). Also, at the group level, it might make more sense to install an HRA as opposed to an HSA. With the HRA the side-fund dollars belong to the employer, as opposed to the HSA where the side-funds belong to the employee. Not many employers would be willing to provide those dollars at 100% vesting to the employees if they could use a HRA and keep the dollars themselves. Hope this helps.

I have read your statement (This salary re-direction arrangement will continue until: The end of the plan year covered by this agreement. For future plan years, I will have the opportunity to modify this agreement;") and it seems to be saying that the election is good for the plan year only. Otherwise why would you have the next statement "I will have the opportunity to modify this agreement?" As for your second question, about making it automatic year after year, why would you want to do that. I can almost guarantee you that there will be all kinds of confusion and frustation in the future. There is always someone who will want/need to make a change. The yearly election process will be a good reminder for them to consider changes, and will provide you with the ability to avoid frustration/confusion on their part.

MJB I agree with some of what you said. However, according to Katieinny, the only dollars being redirected will be that of the HCE's contributions for dependent coverage. The single coverage is funded by the employer at 100% and none of the non-HCE's appear to want dependent health. If they choose your strategy (reducing pay to fund the dep cost) then there is no need for a 125 plan. Here original question was "could you have the 125 plan if only HCE's had redirected dollars".

Since the employer has not started the plan yet, you may want to take a survey of the employees and determine if there is a need for other benefits (FSA's) that might add some redirected dollars away from the HCE's and make your plan compliant?

An answer cannot be give with the information you supplied. The testing you are concerned about looks at the total amount of dollars re-directed, with a limit on the % that can go to the HCE's before the plan is discriminatory. I don't want to make any assumptions and give you an answer that is incorrect. Do you know what the % of re-directed dollars for HCEs is?

Thanks for your post JD, I now understand the question. These type plans are regulated by the states. For a more complete and comparative overview of this, go to the NAHU website (www.nahu.org). The first page has an "issues" section, and you will find Association there. I think this will help you. Good luck. Lee

Don Sounds like there might be some confusion. I replied that it sounds like JD698 is asking about Association Health Plan legislation, not Association plans that we are all use to. I assumed this is what he was asking from the sentencen in his question where he refers to the House passing bills, but that the Senate has not. If this is correct, than he is asking about a something that is not yet allowed. Your questions/comments are many of the same we all have. If the AHP legislation is passed, there is great concern about it's impact on employers, insureds, agents, and carriers. As I said in my first reply, I am assuming this is what JD698 is asking about. If I am wrong, than I am confused about the question.

It sounds like JD698 is asking about the AHP legislation that has been around for a few years. This type of legislation has indeed passed in the House, but never in the Senate. As such, it has never been created. There is some confusion surrounding Association plans, which have been around for years, and AHP. Association plans have been the responsibility of the state (in about 45 or 46 states) and as such needed to operate under state rules and regulations. The current proposal for AHP include changing oversight to the federal govt and allowing associations to self-fund their benefits. Hope this helps.

There are a variety of things you can do, but my suggestion is that you try and strike a balance between what you maximum liability will be and what the expected liability will be. The expected liability for a group your size should not be too difficult to determine. This will give you a good probability the cost/funding needed. I don't quite understand your question about funding monthly and the problem it presents. You choose the timing, inform the participants, internal staff, administrators, etc., and it should run. Am I missing something here?

My suggestion would be to review a list of all the eligible expenses that you fsa covers. Then review your past year and see if you have missed anything. You may be suprised at what you can have run through your plan. Good luck.

I am not a financial/tax advisor, but I would assume so. Should make the test much easier to pass.

Seems to me that it is for ease. If you run the dollars through a 125 plan the tax benefit is immediate and the administrative work does not have to be done by the employee.

Dear Katieinny It does sound like substance, not semantics. A section 125 plan allows for an employee to pre-tax the amount of money they contribute towards their eligible premium. So, if I am required to pay $100 per pay period for my health coverage, I can make it pre-tax as opposed to post-tax. This is commonly referred to as a POP, or Premium Only Plan, because that is the only componenet of the plan in effect. You could also offer Flexible Speding Accounts, such as unreimbursed medical and dependent care. By "adding a HSA component" it sounds like the employer will offer this type of a plan to the employees. If they employee needs to contribute towards the cost of that premium, they can use the POP. Your question states that it is no longer a POP. Is the employer eliminating the POP plan? As for the contributions made to the "side fund" of the HSA to pay expenses up to the deductible, these are always made on a tax-deductible basis. The emploees need to open an account for these funds. The employer can payroll deduct the amounts or require the employees to deposit it themselves.

You are asking about two seperate actions. The first is can you deduct the employees premium contribution from their pay, and yes you need their authorization. Most times the enrollment form will have wording on it allowing for it to occur. As for the second action, you are asking if you can make the premium contribution a pre-tax item. This is different and seperate from asking if you can deduct payments for the carrier. I have seen it done both ways; some employers do this automatically without asking the employee and I have seen employers ask the employee. Could never understand why an employer would do it without asking? My recommendations to all my clients is to have two authorizations, one for pre-tax and one for deductions. As for the format, that is up to you, but you might want to have two forms. It will provide you with flexibility if you make any changes later.

I am sorry, but it appears that you may be confused about this. You can have both a caf. plan and hsa, but it does require some work so that you do it correctly. There needs to be detailed planning when you have both an unreimbursed medical fsa and a hsa. You cannot just put the two in together without this planning. Employee premium contributions can always be run through the caf. plan and shown as pre-tax. It does not matter if these premiums are from a hdhp or not. I don't understand the second part of the first paragraph 'The other component of the cafeteria plan (or FSA) will be used to make pretax HSA contributions". The employer can deduct an employees hsa contribution via payroll deduction. Is this what you are asking?