Chaz

Are multiemployer health and welfare plans subject to the Americans With Disabilities Act?

Thanks for the kind words. I entirely agree that the original poster would be best served by engaging benefits counsel, particularly one familiar with Tennessee's MEWA law.

You are correct. Part-time employees cannot be excluded from the cafeteria plan nondiscrimination eligibility tests, even if they are not eligible for the underlying benefits. It's one of many testing issues that would benefit from IRS clarification.

I don't believe there is any specific guidance on this. If the employer made a mistake when it calculated the applicable COBRA premium (which appears to be most likely scenario in your case), it clearly could increase the premiums going forward but doing so retroactively would be very, very aggressive. You should probably consult with an attorney on whether you should decline to pay the increase. There is a good chance that if you do decline, the employer would not attempt to collect the outstanding amounts or cancel your insurance until the applicable COBRA period is up.

An employer can offer more than one cafeteria plan. It needs to make sure the arrangement does not run afoul of the cafeteria plan nondiscrimination tests.

Information about whether an employee is enrolled in a group health plan may or may not be PHI depending on whether the information is held by or on behalf of the plan (it is) or by or on behalf of the employer (it is not). Sometimes/often making this determination is difficult so it makes sense to follow HIPAA's requirements even though it may not technically be required. Encrypting emails disclosing this information seems to be a relatively easy step to take in this regard. If there is some reason why encrypting this information when transmitting it is not desired or practical, you might want to ask your benefits counsel for guidance.

You are correct but for non-ERISA plans, applicable state law must be examined. There is no ERISA preemption in such a case.

Hi - That section does NOT discuss what happens upon a termination of an FSA. It just states the rule that unused amounts at the end of a year in a participant's FSA are not refundable to that participant. There are separate rules regarding allocation of forfeitures, which generally cannot revert to the employer, which is the most analogous situation to the termination of an FSA. In any event, ERISA (and state law, in the case of non-ERISA benefits) will govern how employee contributions are handled in such a case, NOT the Internal Revenue Code.

Hi - I am never sure what you are referencing. There is nothing that I can find in Pub. 969 that addresses termination of a FSA.

You should discuss this with experienced benefits counsel. It is unlikely that leftover employee contributions can revert to the employer.

Dear America: The IRS accepted the delinquent filings and assessed no penalties against my client. Best regards. Chaz

I have a client who neglected to file the forms with the IRS. We worked with the client to respond to the IRS's inquiry and I can report that the IRS recently set a letter to the client stating that no further action will be taken. All in all, a good result!

An employer (large or small) who offers its employees minimum essential coverage under a group health plan can provide tax-free reimbursement of OOP expenses through the use of a health reimbursement arrangement. It needs to be done pursuant a written plan document and is subject to the requirements of ERISA. These arrangements are very common. You should speak with benefits counsel about setting one up.

This is an interesting question. Without researching, I question whether the employer would need to impute any income based on the forgiven debt. The employer's payment of premiums is tax free to the employee under the Code and employees can pay their portion on a pre-tax basis through a cafeteria plan. Wouldn't that mean that forgiving the debt would not be a taxable event?

Because of his income, the CEO will not be eligible for a tax credit or subsidy for getting coverage on the Marketplace so the company will not be subject to a penalty for not offering him coverage so that is not an issue. My concern is whether under the current scenario (i.e., not electing coverage and receiving the extra compensation for doing so) not what will happen if he for some reason elects coverage down the road.

Thanks for the response. But the question arises because the CEO will NOT elect coverage under the employer's plan. I'm trying to determine whether there is any adverse consequences to him or the company if he does so and receives additional compensation not available to other, non-highly compensated employees.

An opt-out provision complicates the analysis of whether coverage is "affordable" under the ACA. This is not an issue for the CEO here.

CEO (a highly compensated employee) and company are negotiating employment agreement. The parties wish to provide that, if the CEO opts out of the company's medical plan, the CEO would receive additional cash compensation in the amount of the company's cost of coverage for that plan. Assume that the individual's compensation is $200,000 plus he would receive an additional $20,000 if he opts out of coverage. The company does not offer the opt-out/cash-out benefit to other employees. I am fairly confident that this arrangement will fail the contributions and benefits portion of the cafeteria plan nondiscrimination tests set forth in 1.125-7 because it discriminates in favor of HCEs with respect to employer contributions for total benefits (which includes taxable benefits). My question is what is the effect of failing the nondiscrimination tests in this circumstance. 1.125-7(m) provides that in such a case, the HCE must include in gross income "the value of the taxable benefit with the greatest value that the employee could have elected to receive." In this case, whether the plan is discriminatory or not discriminatory, wouldn't the CEO have gross income in the amount of $220,000 either way? That would mean that failing the nondiscrimination tests would be meaningless, wouldn't it? I recognize that the agreement can be structured differently to give the CEO the same economic benefit as the above proposed structure but I wonder if anyone has any thoughts on the effect of this structure. Thanks.

Does anyone have any thoughts on what the likelihood is that the IRS will assess penalties under Code Section 6721 on a hypothetical ALE that failed (for no reason other than a lack of knowledge of the requirement) to timely file with the IRS Forms 1094-B and/or 1095-C for 2016?

There is no specific timing requirement for making election changes as long as they are "consistent with and are account of" the change in status. Most cafeteria plans have a set time period (e.g., 30, 45, or 60 days) and, if so, plan administrators have to follow this time frame when administering election changes. If there is no time frame in the plan, I suppose (in the very unlikely event it is challenged by the IRS), an employer can argue that the change was permitted because it met the consistency requirement but the IRS might find that any request made 60 days or later from the time of the event did not do so. In general, election changes must be prospective except in the case of HIPAA special enrollment rights, which in certain cases may be retroactive. I suspect without looking that entering a new CBA would NOT, by itself, permit an election change. If the new CBA caused one of the other events to occur (e.g., change in cost, etc.) the election change should be permitted on those grounds. I can think of no situations where a health FSA election can be changed due to a new CBA.

Without researching, I suspect you would need to get shareholder approval in either circumstance. The answer probably is somewhere in Code Section 423 or its regulations.

As mentioned above, you need to consider both the cafeteria plan and, if applicable, the self-insured medical plan nondiscrimination tests. If existing employees are disproportionately highly compensated when compared to new employees (which ordinarily is the case), there is a good chance that this arrangement will fail the tests. The only way to know for sure is to run the tests. Failing the tests will result in the highly compensated incurring additional taxable compensation, the amount of which depends on which of the tests (or sub-tests) are not satisfied.

I agree with the points that others make above. There is virtually no reason that the plan cannot be administered in the ordinary course even in the absence of ERISA-compliant updated documentation. That appears to be what is happening.

I'm not sure what you mean by "claims have been paid and denied." Who paid and who denied the claims and what sort of claims were they?

This is a case where the words "gift horse" and "mouth" come to mind.