J Simmons

I would not do this. The situation you posit suggests that the ER paid those expenses thinking it was bearing those expenses, and not thinking it would be reimbursed by the VEBA. That is, the ER was the payor, not just a conduit for payment. So what you are suggesting looks to me like using the VEBA assets for the ER's benefit. I think it might be a different matter if you have evidence that already exists that the VEBA trustees told the ER that the VEBA had no such funds to pay the benefits in question, so then the ER stepped in and paid them. In that instance, both the VEBA trustees and the ER were acting under the same misunderstanding. Borrowing the mutual mistake of fact concept from the world of contract law, this might allow the VEBA to reimburse the ER.

Has the IRS explained yet how 457(f) and 409A are going to work side-by-side in a situation? If not, good luck trying to find a 457(f) doc vendor that doesn't disclaim that the doc you are buying as not compatible with 409A.

Sniffles, get out your tissue. That $60 unless per plan terms may only be used for dental/vision/preventive/other ancillary health care disqualifies you from making contributions to your HSA for April, May and June. The plan might have such a limitation on your FSA $60 that applies because and automatically as a result of your HDHP coverage. (I suspect not, because you said you made no contributions in late 2010 after going HDHP coverage, and your having an FSA in place that year.) If no such plan provision, that $60 FSA is preventing you from tax savings through contributions to the HSA. Get the $60 spent up and a reimbursement claim in before June 30 so that the July well for HSA contribution is not poisoned as your April, June and July ones are.

Yeah, you need to make corrective contributions. There's no de minimis that I am aware of for not doing that. You'd need to allocate it to the benefit of the one participant for whom it is made. If that participant is no longer an employee, and would forfeit it (it's not a QNEC, QMAC or other immediately vested type of benefit and he has too few vesting years), then you'd treat it like any other forfeiture under the plan. If the plan says so, you can apply it to plan expenses. If it doesn't, you reallocate it among the accounts of the other participants at the right time. (Many plans have IRS-approved provisions that allow you to suspend reallocation until the amount of the forfeitures reach a certain minimum amount, such as $1,000, in the aggregate--so that you are not having to pay more for the reallocation calculations than the amount that is being reallocated. Check your plan docs.) If he's entitled to payout of it, you might think of it as a 'corrective' distribution since he should have received the amount earlier, after it had been contributed and his employment terminated. That way, you do not have to process it as a distribution if the costs of doing so would equal or exceed the amount involved (and it is under $75). You'd just treat it as a forfeiture described in the paragraph just above.

It sounds like the problem stems from the fact of how the SPD is arranged as a single, mega document, not from the fact that it is online.

Certainly they'd have to recalculate the benefit for the already terminated employees.

Check out IRS Notice 2007-69. There was an exception to the anti-cutback rule allowed for raising the NRA to 62 for pension (DB or money purchase) benefits.

So do those of you who think that the 'signed, sealed and delivered' election should not be followed always call the distributee the moment before issuing the rollover check to make sure the distributee is yet alive (and thus that the death beneficiary provisions do not override that election)? I doubt it. Here, of course, the Plan officials have learned of the death before the election was acted upon. Does the death beneficiary of the rollover IRA have a claim against the PA for being dilatory in effecting the turned-in election before the EE died? I think that the death beneficiary provisions are for benefits left when the EE died and had not set some payout in motion before his or her death. It's for those instances where the death occurred before the EE could make arrangements. Here, the EE made the arrangements. I am coming down in favor of following the election over the death beneficiary. Of course, if the plan provides specifics about which should apply--a turned in election or the death beneficiary provisions--then I'd follow that. I don't really see this as a tax qualification rule, except following the written document and giving it reasonable interpretation. So I do not see an IRS ruling being authoritative on this question.

I think that colloquially if the unused part of an EE's benefits that an ER is willing to pay expire at the end of the plan year, then it is generally called a MERP, and if the unused part will carry forward then it is generally called an HSA due to the 2002 rulings using that term and by which carry forwards were first allowed. Both are ER promises to pay health expenses of EEs, their spouses and their dependents. Both rely on 105(h) for their tax-free treatment.

I have separately come to the same conclusion as you, Larry, that Section 106(f) will apply to MERPs as well as other types of HRAs, given the reliance on Section 105(h) for the tax-free nature of benefits under either.

The charge for issuing the debit card seems like an administrative expense for the flex account, and as such would be permissible if reasonable.

I think that the estate may do so via a court appointed personal representative for the estate of the EE. The father of the EE, by virtue of that relationship, would not have authority to act for the deceased EE.

My friend, a chiropractor, is certain that his services are 'essential health benefits'. I think with the insurance industry going both ways on the issue until regulations are issued, it is probably reasonable and in good faith to consider chiropractic not 'essential health benefits'--at least as long as the insurance industry is not lopsided towards including such benefits. Keep in mind, HHS is under no obligation to give a reasonable good faith pass, and may not do so if it is perceived to result in too much erosion against the purposes of the 2010 Health Care Reform. So the real question is whether imposing this limit would be worth risking the loss of grandfathered status, given the uncertainty. Most employers that I advise are clinging to grandfathered status for dear life. I don't think they'd take the risk, just for the relatively minor benefit that would come with capping or requiring pre-authorization of chiropractic benefits.

I agree with vebaguru if the ER pays the premiums it will be a welfare benefit plan covered by ERISA. ERISA does not however impose a nondiscrimination requirement. If the coverage purchased is through individual policies that impose pre-existing conditions, the group health plan might be in violation of HIPAA special enrollment rights. Under current Code section 106(a), the value of the coverage would be excluded from the employee's taxable income and under section 162 deductible by the ER (to the extent it does not cause total compensation package to be unreasonable). This is so whether such coverage is provided for all, there is varying coverage or only the highly compensated employees are recipients. There is currently no nondiscrimination rule. If the group health plan is subject to all of the new Health Care Reform (i.e., is not grandfathered passed portions), then there is a new nondiscrimination requirement imposed for group health coverages. It was supposed to take effect 1/1/2011, but it's implementation has been delayed by the IRS pending further notification (when the IRS gets a few rules sorted out). If an ER keeps its involvement down to a very minor level and lets EEs choose their individual coverage and pay for 100% of the premium through a bare bones cafeteria plan (IRC section 125), then it will not be either a welfare benefit plan for ERISA purposes nor a group health plan for HIPAA and new Health Care Reform purposes. The ER can then bonus extra money to the targeted employees so that they can afford to elect payroll reductions to pay for the individual coverage--or whatever else those employees, on an individual basis, may choose to do with the bonus money. This approach is like threading the needle, but there is that much of an opening if done right. John, I agree with your comments, but have a questions. If the employer is operating a 125 plan (which it does not appear so) wouldn't the 125 discrimination issue arise here? Or am I missing something. Thanks Hey, good to hear from you. The type of 125 plan that it would have to be to have so little ER involvement would be a POP. Flex accounts simply require too much involvement by the ER to fly under the radar of ERISA as a welfare benefit plan or COBRA, HIPAA and the new Health Care Reform as a group health plan. In the 2007 Proposed Regs, sec 1.125-7(f)(1) provides that a POP "is deemed to satisfy the nondiscrimination rules of section 125© and this section for a plan year if, for that plan year, the plan satisfies the safe harbor percentage test for eligibility in paragraph (b)(3) of this section." If this option to select his own individual policy and elect to pay 100% of the premium cost through elective salary reduction is made available to all non-excludable employees, then the Plan satisfies the safe harbor percentage test for eligibility. (Note, the offsetting bonuses, boosting the earnings, would yet only be made for those the ER desires.) In the Preamble to the 2007 Proposed Regs, under the heading Proposed Effective Date, it is specified that "Taxpayers may rely on these regulations for guidance pending the issuance of final regulations." See page 27 of 124 pages in the 2007 Proposed Regs.

I agree with vebaguru if the ER pays the premiums it will be a welfare benefit plan covered by ERISA. ERISA does not however impose a nondiscrimination requirement. If the coverage purchased is through individual policies that impose pre-existing conditions, the group health plan might be in violation of HIPAA special enrollment rights. Under current Code section 106(a), the value of the coverage would be excluded from the employee's taxable income and under section 162 deductible by the ER (to the extent it does not cause total compensation package to be unreasonable). This is so whether such coverage is provided for all, there is varying coverage or only the highly compensated employees are recipients. There is currently no nondiscrimination rule. If the group health plan is subject to all of the new Health Care Reform (i.e., is not grandfathered passed portions), then there is a new nondiscrimination requirement imposed for group health coverages. It was supposed to take effect 1/1/2011, but it's implementation has been delayed by the IRS pending further notification (when the IRS gets a few rules sorted out). If an ER keeps its involvement down to a very minor level and lets EEs choose their individual coverage and pay for 100% of the premium through a bare bones cafeteria plan (IRC section 125), then it will not be either a welfare benefit plan for ERISA purposes nor a group health plan for HIPAA and new Health Care Reform purposes. The ER can then bonus extra money to the targeted employees so that they can afford to elect payroll reductions to pay for the individual coverage--or whatever else those employees, on an individual basis, may choose to do with the bonus money. This approach is like threading the needle, but there is that much of an opening if done right.

Changes to spouse/dependent premium payments by the ER might impact the grandfathered status. 29 CFR § 2590.715–1251(g)(4), Example 7

yes, if before the day P will be 70 1/2.

I agree with Baker & Daniels, the loss of grandfathered status would be immediate.

What do you mean by "IRA LLC"?

If an employee has a distribution trigger, like termination of employment, in the meantime, I'd process the distribution. I would hold off on any distributions based solely on plan termination as a trigger until the IRS issues the d-letter. You have to have some trust corpus to amend, if the IRS insists before it will issue the d-letter. You also do not want to be discriminatory in applying the plan termination as a distribution trigger.

I do not think anything would prevent it. But if you drop the employer contribution, increasing the employee share, vis-a-vis the 3/23/2010 levels, you'd lose grandfathered status under PPACA.

Contributed amounts shouldn't be; they're held in trust by the custodian. 'Earnings' paid from later ponzi contributors might be subject to claw back.

If the bank and Title LLC truly are not a controlled group, then you'd have a multiple employer plan (not to be confused with a multi-employer plan). In a multiple employer plan, an employer other than the plan sponsoring employer (the one with authority to amend and terminate the plan, appoint the administrator and trustees) are usually referred to as a 'participating employer.'

I agree with your interpretation.

I am advising an ER that has a health plan that has been in place since before 3/23/2010 and continuously covered EEs since. The major medical benefit is provided through a high-deductible ($10,000 per year) insurance policy that once met, provides coverage with co-pay and co-insurance responsibilities of the EEs. The health plan also includes a buy-down MERP--the ER pays for dollars $2,501-9,999 of the health expenses applied to the insurance annual deductible, yielding a net annual deductible to the EEs of $2,500 per year. The health plan does not call for the ER to pay any part of the co-pay or co-insurance responsibilities of the EEs under the insurance policy. The ER would like to preserve the grandfathered status of the health plan, avoiding many of the new PPACA '10 requirements. In assessing the plan design for 2011, and what can be changed without jeopardizing the grandfathered status, we've discovered a quagmire that the regulations (Treas Reg § 54.9815–1251T) do not seem to address. The problem is that the TPA has been since before 3/23/2010 determining employees' claims as though the ER is responsible for paying 50% of those co-pay and co-insurance responsibilities of the EEs. Granted, the TPA has not been operating the health plan as written. To keep the grandfathering, the regulations make clear that there can be no increase to the EE's "cost-sharing" of the co-insurance and only moderate increases in the EE's "cost-sharing" of the co-pays. If we instruct the TPA to operate the health plan as written from this point forward, are we increasing the co-insurance and co-pay obligations of the EEs and jeopardizing our grandfathered status? Or is that type of administrative correction to bring the operation in compliance with the health plan's documents allowed without compromising the grandfathered status of the health plan?