Chaz

Based on my reading of the ICHRA regulations, it would be mathematically impossible for an employer with, hypothetically, one full-time employee and nine part-time employees, to establish an ICHRA for the part-timers because the "class" for purposes of the ICHRA is fewer than 10 employees. Is this correct or am I missing something? Thanks and happy New Year!

I agree with Peter that you should discuss with benefits counsel. It sounds to me that there is too much employer involvement to make the benefit a voluntary plan not subject to ERISA's requirements. Instead, it is likely that the plan is fully subject to ERISA and it's just that certain participants have to pay 100% of the cost of coverage and others don't. But more analysis is needed to determine for sure one way or another.

I recall that it took us a while to connect with a knowledgeable person at the DOL but were successful when we reached out to the DOL's Wage and Hour Division, Branch of Government Contracts Enforcement in DC. The process involved us just submitting an email containing information about the plan (SPDs, etc.) and follow-up email exchanges and did not result in a formal PLR although our client did receive a letter blessing the arrangement. I recall that there is DOL guidance out there on the items that an applicant is required to submit. The DOL is most concerned about receiving assurances that the employer has policies in place to make sure the benefits are funded (in the informal sense) and amounts dedicated to paying claims are not diverted. There were the typical bureaucratic delays for "approvals" but our examiner was responsive to my client's concerns and the process was not unpleasant.

I recently obtained approval under the SCA for an unfunded, self-insured plan (i.e., the typical employer arrangement) for a government contractor client. The whole process took a few weeks. It wasn't tremendously difficult but I recommend reaching out to your benefits counsel to assist you in the process.

I would need more information about the specific contents of the letter to provide a more definitive answer but, in general, there is no need for the letter to have specific medical information in it to be considered containing protected health information. The definition of PHI is very broad and I would take the position that a sentence saying something along the lines of "Spouse X visited Dr. Smith on October 1, 2019" (with or without a date, in fact) is enough to meet the definition because it relates to "the provision of health care to an individual."

Speak with benefits counsel.

I have a deep in the weeds question with a narrow application that I wonder if anyone has come across: Background The Code has a concept of a "statutory employee," which makes an otherwise non-common law employee an employee for employment tax (but not for income tax) purposes. These employees receive a W-2 with box 13 checked. A common type of statutory employees are full-time life insurance salespersons. The Code also provides that a full-time life insurance salesperson is treated as an "employee" for purposes of participating in a qualified retirement plan and for Code Sections 104, 105, 106, 125, and certain other sections (which generally provide that an employer can provide welfare benefits on a tax-favored basis). ERISA generally subjects welfare plans that cover employees of two or more unrelated employers to state insurance law (among other things) because the plan is a MEWA. If an entity provides benefits to independent contractors, for example, it risks creating a MEWA. Question Can a life insurance company offer welfare benefits to its full-time life insurance salespersons (i.e., ones who are statutory employees) without creating a MEWA? While the Code provides for favorable tax treatment on providing these benefits, it does not appear as if ERISA will permit this type of arrangement without invoking the dreaded MEWA rules because these salespersons are not common law employees. (The Code is not ERISA and ERISA is not the Code.) At least, I have not found any DOL guidance that addresses this issue. Has anyone come across this admittedly obscure situation? Thanks

The Service Contract Act requires entities who have government contracts (I'm not sure whether the "government grant" you mention is a government contract subject to the SCA so it may not apply) to adhere to minimum standards for, among other things, employee benefits. There are specific hoops to go through to the extent that an employer wishes to offer an unfunded self-insured plan, which, of course, includes an HRA. FAR generally looks at, among other things, whether amounts allocable to benefit plans are reasonable (so the government doesn't get ripped off). Again, these requirements may not apply to your situation.

In response to your first post, I think your approach to count otherwise excludable individuals in the testing if they are eligible is correct. In response to your second post, I also think your approach is correct, although there are a number of other laws that you must take into consideration, of course, including the Service Contract Act and FAR requirements.

Anyone who has worked with Applicable Large Employers who have failed to properly file their Forms 1095-C, etc. with the IRS has seen letters from the IRS signed by Shan Montoya, Operation Manager. My question is simple: Does anyone know whether this person prefers to be addressed as "Mr. Montoya", "Ms. Montoya", or something else? Thanks!

Leaving aside discrimination based on race, sex, etc., there are no currently in effect nondiscrimination tests for fully insured plans. There are potentially issues under the cafeteria plan nondiscrimination tests, which are applicable. Although possible I suppose, I would caution is that is it not likely that "all the employees are NHCEs" because the company probably has one or more individuals who meet the definition of an "officer" under the section 125 nondiscrimination tests. That definition does not contain an income threshold. If these officers disproportionately receive higher company contributions, the employer might fail to satisfy the benefits portion of the cafeteria plan tests. Note that the consequences for failing the tests result in additional taxable compensation for the HCEs. So the company "can" have this plan design even if the tests are failed; it's just there are adverse consequences on the highly compensated.

Proposed Treasury Regulation 125-1(a) states that "The term cafeteria plan means a separate written plan that complies with the requirements of section 125 and the regulations, that is maintained by an employer for the benefit of its employees and that is operated in compliance with the requirements of section 125 and the regulations." I think in the absence of definitive guidance from the IRS (which I agree with Lee doesn't currently exist), the conservative approach would be to adopt separate plans for each employer.

1-You are generally correct in your summarization. 2-I would need to know more specifics about your cash-out question but I am skeptical that it will work because of constraints under a myriad of applicable laws.

I have helped clients respond to IRS Forms 226J and have not seen the IRS pursue penalties (late or otherwise) in any of those cases, although in certain cases they were arguably merited. This is a relatively small sample size, however, so others' experiences may differ.

Here is a good introduction to multiemployer funds (both pension and health and welfare); http://www.ifebp.org/news/featuredtopics/multiemployer/Pages/default.aspx

You wouldn't need to create a MEWA. You would not need to set up a VEBA, although the amounts will generally need to be placed in trust. A multiemployer plan is usually (but not always) governed by a board of trustees, half of which represent the union and half of which represent contributing employers. The structure will be a product of the collective bargaining process You need to engage experienced labor law and benefits consultants and counsel and probably are wasting your time seeking answers on this board (except, of course, with respect to my excellent advice!).

It appears as if the arrangement you are contemplating is a multi-employer health and welfare plan. That is a plan that covers union employees of two or more unrelated employers pursuant to one or more collective bargaining agreements. That is an entirely different concept than a MEWA or VEBA.

This is something to speak with counsel about. In general, I would hesitate in not complying with an executed court order, particularly this one if it has all the information required for the children to be enrolled.

Thanks for your response. The plan document/SPD/insurance policy all say that coverage ends as of the date of termination. The reference to July 30 in the second paragraph should be July 15. Any thoughts on how the COBRA premiums should be handled?

Employer is selling its assets to a buyer in connection with a bankruptcy. Pursuant to bankruptcy order, the buyer is not assuming any COBRA obligations as part of transaction. Assume closing is on June 20, at which time most employees' employment will be terminated. Health coverage (fully insured) for these employees will end on June 30 (end of month). A few employees will be kept on post-closing to perform wind-down activities until, say, July 15, and employer wants to continue to provide health coverage for them during that roughly two-week period. After the period is up, employer intends to terminate the health plan. If the employer were to terminate its health plan on July 30, it would not have any COBRA obligation but my reading of the rules indicates that it does need to offer COBRA for the wind-down period because it is continuing to maintain a group health plan for that period. My question is how should the employer handle the COBRA premiums for that partial month period? If the monthly premium for coverage is $1,000, can/should the employer provide in the election notice that an electing employee can pay a pro-rated amount for the coverage (i.e., $500) for that short period?

This is not something I would address without competent legal advice. I recommend that you and/or your client consult with an attorney experienced in welfare benefit and payroll issues. Although I do not have all the facts, I am skeptical whether the proposed "fix" will work.

In both situations in this thread, it appears as if the qualified beneficiaries' banks didn't make the scheduled auto-payment. I am not sure why not, but is likely that each of your beefs is with the banks and not with the health plan. There is no requirement under COBRA for a plan to "request payment" of the monthly COBRA premium. It is up to the qualified beneficiary to make them on a timely basis. Marcia may wish to speak with an ERISA/COBRA attorney. It is hard for me to completely understand the situation and there may be a problem with how everything went down. JJ may wish to investigate the possibility that the plan terminated COBRA benefits before the end of the 30-day grace period. I can't tell for sure how long after the due date the coverage was terminated.

Thanks! That's what I concluded, too.

(Facts changed and simplified.) Employee participates in a self-insured health plan with an HRA feature. Employee receives medical services from out-of-network provider and is balance billed $1,000 for the cost of services that exceeded what plan paid. Employee submits claim for $1,000 to HRA and receives reimbursement. Before employee pays balance bill, plan reevaluates the claim and pays the provider the $1,000, thus the employee now owes $0 to the provider. The employee did not initiate or participate in the reevaluation. What is the consequence of these events? Can the employer seek to have the employee return the $1,000? If the employee does not or the employer does not wish the employee to do so, does the $1,000 become taxable to the employee? If it does become taxable compensation is it the obligation of the employer to treat it as W-2 compensation or is it up to the employee to address? Anyone come across this situation?

I definitely would not do (b), at least on a retroactive basis. (c) is the correct answer from a legal standpoint.