Chaz

I'd like to revisit this thread. Situation: An employee terminates in 2011. She receives a lump sum severance payment of $10,000. The employee is rehired in 2012 and, under the terms of the severance plan, is required to repay 1/2 ($5,000) of the severance amount (because it was "unused"). What is the authority for the employer to issue a revised Form W-2, if that is what the employer is required to do? The closest thing I can find is IRS Publication 15, which discusses wage repayments, but that is only in the context of wages received in "error." Under those circumstances, the employer is required to file a Form 941-X or 944-X to recover medicare/SS and file a Form W-2c but I think my circumstances are different. Thanks.

If your plan is grandfathered under PPACA, you generally do not have to cover the child because the age 26 mandate does not apply to children who are eligible for other employer-based coverage for grandfathered plans. If not, you will have to cover the child, although under traditional COB rules your plan probably will pay on a secondary basis.

Hi Alexa, First, you should definitely give great weight to what your counsel advises. He knows your particular circumstances best and, after all, you are paying him for his services. Under the cafeteria plan rules, an election is generally irrevocable for the period of coverage. That means that, in effect, an election cannot (generally) be changed either by action of the employer or the employee. If you decide not to collect the full amount of employee's election in these circumstances, the IRS could deem this as an election change. In the cafeteria plan world we are dealing with proposed regulations that sometimes do not provide much guidance with real-world situations such as this one. I am not saying that the IRS will definitely say that "forgiving" the missed contributions will be impermissible but I think the safer, conservative, approach would be to make mutually agreeable arrangements for the missed amounts to be paid. That way, the employee will have salary reduced the full amount. I would defer to your counsel's advice, though. Chaz

I respectfully believe that this is not the safest approach. There is a risk that the IRS will deem this to be a violation of the irrevocability rule. I think the better approach would be to collect the missed contributions from the participant.

The service provider is correct that it is not a claims fiduciary (it may be a fiduciary for other reasons) to the extent that it does not make final claims adjudications. In such a case, it is only performing ministerial functions. Some claims administrators will agree to be the final arbiter of claims but in my experience they will charge an exorbitant fee to do so. I'm not sure what you mean by "Since claims are required to be reviewed by the appropriate fiduciary." A question I have that I have not seen addressed is to what extent that PPACA's independent review requirement will change the traditional medical plan fiduciary model. This is probably something you should speak to counsel about.

Partners can't participate in a Section 105 MERP.

A client just contacted me asking about a product marketed by an outfit called "Benemax." I am waiting for the details, but the brief description he gave me and the similarity in name made me think of this thread. Anyone have any experience or knowledge of Benemax?

The insurer is a covered entity itself under HIPAA and is subject to liability for violations of the rules on its own if the EOBs are put online as a part of the insurance coverage. I'm not sure if I am missing anything here.

The seller's plan would in effect be covering certain employees of two employers (the buyer and the seller).

You have the problem of possibly creating a MEWA.

I think we are reaching the point of diminishing returns on this thread. I bring up the 83(b) election just to illustrate my point that restricted stock is transferred to the recipient on the date of award. I think you and I may be saying the same thing: In order to defer a stock award, the award would have to be in the form of phantom stock or RSUs or something else and that the award could not be in the form of property subject to Code Section 83. Am I on the right track?

You switched from "restricted stock" to "phantom stock" in your response. Those are two different but related concepts. I agree with your description about phantom stock but restricted stock is property subject to Code Section 83 and is delivered (subject to restrictions) in the ordinary course upon award, not upon vesting. How can one defer receipt of something that one has already received? Another difference is that one can't make a 83(b) election with phantom stock or RSUs.

My question is really is it actually POSSIBLE (409A aside) to defer restricted stock? If there is a substantial risk of forfeiture until retirement (as in the example below), there really isn't any deferral. My question is whether a deferral election can actually be made (whenever it is made and, again, 409A aside). Here's why I think no deferral is possible: Restricted stock is received by a service provider under Code Section 83 at the time of award subject to restrictions on transfer. Absent a 83(b) election, the shares are not taxable as long as there is a substantial risk of forfeiture. Once there is no longer a SRF, the restrictions on transfer are lifted and the shares are now taxable. There is no way to "defer" receipt of the shares because they were "received" back when the award was made, NOT when there is no longer a SRF. Am I missing something?

Can anyone provide some software options for a small company who wants to administer its equity plan in-house? The company only awards restricted stock with service vesting so the administration will likely not be that difficult. If there are options with varying price ranges/capabilities, that would be especially helpful.

Does anyone have any thoughts?

I have been out of the 409A loop for a couple of years so I am a little rusty. I have a question that is not specifically related to 409A but touches on deferred compensation so 409A may be implicated. Can receipt of restricted stock (NOT restricted stock units) be deferred? Example: I am awarded a restricted stock award that vests in three years. Can I be given the opportunity to defer receipt of the shares until I, for example, retire? I don't think so because under Section 83, the shares are transferred to me at grant and when the restrictions lapse I can sell, etc. them. That's when they are taxable. Anyone have thoughts?

Employee is going on unpaid FMLA leave. Employee wants to keep coverage for himself while on leave but wants to drop coverage for his spouse. Is this permitted under the cafeteria plan rules (or required under the FMLA)? Or is it not consistent with and on account of the change in status? Thanks.

This is a shot in the dark, but can anyone point me in the direction of any analyses of the cafeteria plan provisions (Section 1032.06) of the new Puerto Rico Internal Revenue Code? A lot of the provisions mirror Code Section 125 but not all. In English, preferably, but not necessarily.

I don't have any theoretical objection to the concept of it and obviously you want to document the circumstances of election changes. I would need to know more facts, however, to come to a firmer conclusion.

Employees generally must provide notice of a divorce within 60 days to be eligible for COBRA coverage so no COBRA need be offered as long as the deadline requirements are adequately spelled out in the initial COBRA notice. The employer must send a notice of unavailability. Even under health care reform you CAN terminate the coverage retroactively but be aware that such an action may have an impact on an innocent party (i.e., the ex-spouse).

An employee affidavit (whether in writing or recorded) of a "mistake" is not sufficient in and by itself to revoke an election. If I was outside counsel I would push back on more than just the recorded phone call aspect.

The IRS cafeteria plan regulations do not specifically address election changes based on "mistake" but it seems reasonable to permit a change based on obvious mistake. What is "obvious," however, is in the eye of the beholder. If I were an employer, I would permit election changes based on mistake only in very, very limited circumstances (such as a childless employee setting aside money in a DCAP for child care for a non-existent child). Note that an employer generally does not "have" to permit any election changes at all.

1-Talk to your attorney. 2-Hope there is sufficient indemnification language in the services agreement with TPA. 3-Up to $100 per day per QB ($200 max for family) excise tax for each day not in compliance. 4-Up to $110 per day per QB ERISA penalty (no max per family) for each day not in compliance. 5-Possible liability for suits for incurred medical expenses.

Most cafeteria plans permit changes in these sort of circumstances.

You don't need to require an annual election (although it is common to and advisable). It's your choice what goes into the plan document. If the EEs can opt in and out of dependent coverage, you definitely need a cafeteria plan. I'm sure you know that EEs can't revoke their elections mid-year except in the event of certain changes in status, etc.