Chaz

I'm sorry, you are totally correct on that. No cafeteria plan is needed for the employer's contribution. I totally withdraw that part of the sentence. A cafeteria plan is only required in order for the employee to pay his or her portion pre-tax. Good catch. I have no excuse except that it is 70 degrees on a Friday in February.

There is no requirement under health care reform to amend cafeteria plans for adult children. The law only requires plans that provide dependent coverage to provide coverage to age 26 children. The law permits plans to provide such coverage on a tax favored basis. So, you wouldn't have to amend the cafeteria plan but if you didn't, participants would have to pay their percentage of the premium after-tax and you would have to impute income for the employer's share.

For what it's worth, I agree with leevena and oriecat. The employer can charge COBRA participants 102% of the cost of coverage; the discount only goes to the amount of employer contribution, which of course does not need to be given to COBRA participants. Just my two cents.

Under COBRA, if similarly situated employees are given an open enrollment period in which they can change coverage, COBRA participants must be given the same opportunity to change coverage. This is clear black letter law and there doesn't need to be a new qualifying event. The OP doesn't say whether upon renewal of the contract, participants can elect to change their coverage, so a clarification might help answer the question for sure.

Participant receives FSA reimbursement check in 2007. He loses it and finds it in 2011 and wants a new check. Plan has the forfeiture language spelled out above. Nonetheless, the Company wants to cut the guy another check. That would be taxable income, correct?

Good for him, I guess, but bad for the rest of us. Do we need a new moderator for the forum?

Is Mr. Maldonado still around? He used to provide a lot of good material in this forum but I have not seen anything from him in at least a couple of years. Just wondering . . . .

If the plan is a church plan, yes.

Does anyone have any thoughts?

It is my understanding (and has been for quite awhile) that health FSAs are self-insured medical reimbursement plans and are subject to both the nondiscrimination tests under Code Section 105 and those under Code Section 125. In fact, see Proposed Treas. Reg. 1.125.5(l), which states, in the first line, "Section 105(h) applies to health FSAs."

This makes sense but the 105(h) nondiscrimination tests I am referring to are not the Section 125 tests but are the ones that are generally required for health FSAs because health FSAs are self-insured medical plans. Does this change your answer?

Must a church-sponsored health FSA satisfy the Code Section 105(h) nondiscrimination tests?

PPACA Section 9013 changed Code Section 213(a) to raise the threshold for the itemized deduction for medical expenses from 7.5% to 10% of AGI starting in 2013. Note that seniors and their spouses are exempt from this increase through 2016.

This is all helpful. The ultimate help, however, will have to come from the regulators on this.

You're not missing anything; 132(f) limits for mass transit revert back to the pre-ARRA limit of $120/month unless and until Congress acts. I noticed that you asked your question in the "Cafeteria Plan" section. Note that you cannot offer a qualified transportation plan under a cafeteria plan.

Thanks for the response. I am really looking to see if there is any new information about whether these plans are truly fully insured.

Does anyone have any updated information about ExecuCare (Exec-U-Care? Execu-Care?) plans? I have clients telling me that Principal Financial has been telling them that the arrangement is fully insured and that the clients don't have to worry about the nondiscrimination rules because the arrangements are grandfathered under PPACA. Thanks.

I'm betting the form referred to the COBRA subsidy, not to COBRA in general.

We don't know how the IRS and the other regulators will apply the tests but I imagine that your scenario will be problematic.

It is likely that if an employer pays a higher percentage of the premium for fully insured medical coverage for highly compensated individuals than for other employees, the arrangement will violate PPACA's new nondiscrimination rules. Of course, we need guidance on how the tests will be applied. Note that the new tests do not apply to the extent that the plan is grandfathered. Also note that this arrangement likely violates the Code Section 125 nondiscrimination rules to the extent that the HCIs pay a portion of the premium on a pre-tax basis through a cafeteria plan. If it is a self-insured plan, the arrangement likely will already fail the 105(h) tests.

There is nothing in Code Section 105(h) or any other federal law that prohibits discrimination AGAINST highly compensated employees.

Note that the IFRs state that a plan loses GF status if the employer "decreases its contribution rate based on the cost of coverage" and does not discuss an increase in the employee's share of the cost (except perhaps by implication). More and more I am convincing myself that this is not an issue, lvena's well-taken thoughts notwithstanding. This situation arises, by the way, with respect to a plan that disproportionately benefits HCIs, so there is an incentive for the employer to keep the plan grandfathered as long as possible so that it won't be subject to the new nondiscrimination tests.

Another thought is that in my scenario it is not the medical plan that is being changed; it is the cafeteria plan, which is not a group health plan under PPACA or the interim final grandfathered plan regulations.

Most of the wording I see is "cost-sharing", not premium. Let's look at an example. The cost for my share of medical family premium is $400 per month and my tax is 20%, so my savings is $80 per month. If the pre-tax feature is eliminated, my "cost-sharing" just rose by $80 per month. To play devil's advocate by using a somewhat ridiculous example, if premiums were paid after-tax before PPACA and the employer gives the employee a raise such that the employee is in a higher tax bracket causing the employee's "cost-sharing" to go up, would that cause the plan to lose grandfathered status?

Does anyone have any thoughts on whether a change in plan design for 2011 to require participants to pay for medical coverage outside a cafeteria plan (i.e., on an after-tax basis) might somehow cause the plan to lose grandfathered status under PPACA? I don't think it would but I wonder if an argument can be made to the contrary. (This possible change is an attempt to get around the cafeteria plan eligibility nondiscrimination tests, which would likely be failed on a control group basis.)