Brigid Anderson

The language of the preamble describing this transition relief seems to envision employers that did not offer coverage before: "Except as otherwise provided in this paragraph (3), during the coverage maintenance period the employer does not eliminate or materially reduce the health coverage, if any, it offered as of February 9, 2014." (emphasis added). The preamble also says this: "The Treasury Department and the IRS understand that application of section 4980H will involve changes for applicable large employers that did not previously offer coverage, or that did not offer affordable, minimum value coverage. A large percentage of those employers are in the smaller size range, such as those with fewer than 100 full-time employees (including FTEs)." (emphasis added)

Perhaps you mean a HSA; but even so, subject to some limited exceptions not applicable here, premiums cannot be reimbursed from an employee HSA. The word is not getting out to small employers about this but, in light of IRS Notice 2013-54 and DOL Tech. Rel. 2013-03 (both issued Sept. 13, 2013), there is really no way for an employer to help employees purchase individual market coverage on a tax-advantaged basis. In addition, while that guidance allows a salary increase, it must not be conditioned on purchasing individual health insurance (in other words, it must be open-ended, leaving the employee free to use the increase for other things); otherwise, the employer will be treated as purchasing the insurance, which is also prohibited even when done after-tax. Employers violating these rules are subject to self reporting of $100-per-day excise taxes on Form 8928, so the adverse consequences are real. Limited transition relief expires June 30, 2015 for certain small employers (generally those that employed an average of fewer than 50 full-time employees, including full-time equivalent employees). [iRS Notice 2015-17 (Feb. 18, 2015)] You should talk to your accountant or attorney (and bring this guidance to his or her attention if need be). Yes, good luck!

Only employees of the employer sponsoring a cafeteria plan may participate, so you are correct that sole proprietors must make after-tax contributions. As to the trust issue, the preamble to the final DOL regulation on when participant contributions become plan assets makes clear that Technical Release 92-01 also applies to after-tax contributions, such as retiree contributions and COBRA contributions, received in connection with a cafeteria plan: t is the view of the Department that the mere receipt of COBRA contributions or other after-tax participant contributions (e.g., retiree contributions) by a cafeteria plan would not by itself affect the availability of the relief provided for cafeteria plans in the technical release. DOL Reg. § 2510.3-102, as reissued in final form on August 7, 1996, 61 Fed. Reg. 41220. The other issue here, however, is that allowing an individual who is not the employee of the employer sponsoring the health plan to participate may make the health plan a MEWA (multiple employer welfare arrangement) and subject it to greater state insurance law regulation than might otherwise apply. But that is another story . . . . ! Regards, Brigid Anderson

I agree with Ray's COBRA conclusion--there has been no qualifying event. Assuming your are subject to HIPAA, certficates of creditable coverage are, for course, another matter. I also generally agree with Ray's concerns about employees not being informed about enrollment procedures. But what did this person know? Had they re-upped in the past? Is the enrollment option explained in the SPD and did this person get a copy? Unless the person can show she was totally in the dark, I wouldn't jump to the conclusion that you've got to retroactively enroll her, but without a whole lot more information about your plan, your procedures, general communications with employees and the facts of this particular case it is very hard to offer specific advice.

As far as we know, the third set of DOL Q&As is the first time the DOL has said that something as little as a 25% interest can create common control. So that's a big change since most practitioners probably have required an 80% interest, analogizing to the Code section 414 test. I'm no common control expert, but common board membership is one of the indicators of common control. Of course, conclusions are difficult because the test is so fact specific.

A dependent child losing eligibility is a qualifying event. Assuming the child was covered while living with the covered employee and lost coverage by moving away, I think that would qualify. It is analogous to an over-age child having continued eligibility while at college full time and then dropping out of school.

I am not aware of anything that would prohibit this under federal law at any rate. I have heard of plans that require a dependent child to be resident with the covered employee to be eligible, but not spouses. Note that the child's loss of coverage (assuming there was a loss) might trigger a COBRA right under the other plan.

In this regard, check out Community Ins. Co. v. Ohayon, 73 F. Supp. 2d 862 (N.D.Ohio 1999), in which the district court enjoined further distribution of insurance company booklets until they were revised to conform with ERISA's SPD requirements. (For reasons that were not explained in the opinion, the insurer in this case was the ERISA "plan administrator" and thus responsible for SPD compliance. In most single-employer plans, the plan administrator will be the employer/sponsor of the plan, and the insurer will technically not be required to comply with the SPD rules. This may be why your insurer is refusing unless the group is big enough--an insurer that includes the required information is agreeing to do more than it is legally required to do.) Many employers use what is also called a "wrap document" that, combined with the insurance company's booklet, constitutes the plan's SPD. The wrap document adds the ERISA-required terms and information often missing from the booklet prepared by the insurer. (A similar wrap document may be combined with the insurer's full policy to constitute the ERISA plan document.) Our publication, ERISA Compliance for Health and Welfare Plans, by Brigid Carroll Anderson, Darcy L. Hitesman & Sophia E. Chrusciel (EBIA 1992-2000) contains two sample wrap documents that may be used as the starting point for drafting by an employer that wishes to use this approach.

Need more information. At a minimum: How many participants are covered by the plans in question? Is there a cafeteria plan for the payroll deductions? What do you mean "premiums" are paid for claims as they are incurred?

It may be that you can properly terminate this individual's COBRA because of the other group health plan coverage--I don't think it matters that the other coverage began while the individual was still in his election period. However, I must assume a few things about the other coverage. First, that it was actual coverage: mere eligibility for coverage isn't enough. Second, that the other coverage began AFTER the COBRA election. (This appears to be so from the order of your facts.) Third, that the other coverage had no pre-existing coverage limitation, e.g., because of the individual's HIPAA creditable coverage, that would prevent you from terminating COBRA. Last, I assume that the reason for the termination was the other coverage. Because of the potential for administrative difficulties in applying the preX limit mentioned above, some plans don't cut off COBRA due to other coverage (it is discretionary not mandatory). I assume that your plan has a practice of doing so: you might run into difficulties if you cut it off for this reason for some individuals and not for others. Note that in the absence of the other coverage, it may not be enough that the individual elected and then waived COBRA (assuming he was still in the grace period for payment of the second month's COBRA premium). [This message has been edited by Brigid Anderson (edited 01-26-2000).] [This message has been edited by Brigid Anderson (edited 01-26-2000).]

I apologize that, due to time constraints in the last two weeks, I haven’t been carefully reading all the posts in this topic. Now that I have, I would suggest (as moderator of this message board) that we don’t need to hear any more on the "how large is large" issue. mls: thank you for your remarkable self-restraint in not responding to comments from Gburns. I hope it continues to hold . . . Everyone else: please be polite when posting messages on this board. We must disagree with each other, of course. That is what makes it a useful exercise. But our focus here is on content not personalities. Therefore, please confine your disagreement to what is being said—do not characterize the person saying it or question their motives. Also note that I have edited or deleted the posts that prompted this message. [This message has been edited by Brigid Anderson (edited 11-23-1999).]

Seems okay to me from a legal point of view. Morale, public relations--well that's another story maybe. But don't do any payroll deductions without employee's consent. It'll probably violate state law, and I think a lot of judges would say those sort of state laws aren't preempted. ------------------

Hell hath no fury . . . . Based just on what you say, if he terminates all the plans and just goes out and buys an individual policy for himself taking no business tax deduction for it, etc. then I think he can do it. But criminy, how long can he keep that up? How many group health plans did this guy maintain? For how many employees? If he puts them back in place again in the future (i.e., before the end of what would have been the spouse's 36 month COBRA period), I think you can argue that he is manipulating the rules to evade the COBRA rules and the new plans might be considered part of the old plans and liable to provide COBRA to the ex. See Prop Treas Reg. § 54.4980B-2, Q/A-6©("if a principal purpose of establishing separate plans is to evade any requirment of law, then the separate plans will be considered a single plan to the extent necessary to prevent the evasion." Also remember that if the group health plans were insured, the covered employees and dependents whose coverage will be terminating (including the ex's) may have rights under the insurance policy to individual "conversion" policies. Depending on the state law that applies to the insurer, these won't be as favorable (in benefits or cost) to COBRA coverage but they would typically be better than getting separate individual coverage. ------------------

Hell hath no fury . . . . Based just on what you say, if he terminates all the plans and just goes out and buys an individual policy for himself taking no business tax deduction for it, etc. then I think he can do it. But criminy, how long can he keep that up? How many group health plans did this guy maintain? For how many employees? If he puts them back in place again in the future (i.e., before the end of what would have been the spouse's 36 month COBRA period), I think you can argue that he is manipulating the rules to evade the COBRA rules and the new plans might be considered part of the old plans and liable to provide COBRA to the ex. See Prop Treas Reg. § 54.4980B-2, Q/A-6©("if a principal purpose of establishing separate plans is to evade any requirment of law, then the separate plans will be considered a single plan to the extent necessary to prevent the evasion." Also remember that if the group health plans were insured, the covered employees and dependents whose coverage will be terminating (including the ex's) may have rights under the insurance policy to individual "conversion" policies. Depending on the state law that applies to the insurer, these won't be as favorable (in benefits or cost) to COBRA coverage but they would typically be better than getting separate individual coverage. ------------------