GBurns

moehoward2, Responding to most of your last post seems pointless. The reason being that you seem to lack the basics of the issues. You do not understand what 106 covers. You do not understand what 105 covers. As a result any explanation would be pointless until you read those sections and especially their related Treasury Regulations. At the least read what the IRS gives at the link provided.

I suggest that you do not "Merge". The Plans should be separate. FSAs have a "use it or lose it" feature and would require advance funding. This advance funding along with universal availability of funds creates a complication of administering the 2 different sources of funds; presents ordering problems and confusion (which funds gets used first); has difficulties in communication to employees. These forfeitures should revert to the Plan and not the employer's general assets. As a result a "Merge" would cost much more than is necessary. 105 MERPS are usually operated on a "pay as you go" basis. If there are no claims the employer makes no payments. If there are claims the employee gets made whole up to the agreed limit. Everyone gets covered as needed. Keeping them separate keeps the employees funds clearly segregated and eliminates confusion. Additionally, FSAs under section 125 have many vague restrictions and the main guidance comes from the merely Proposed Regulations the validity of which even some Courts have questioned. Being Proposed for so long could also lead to changes or withdrawal. Whereas section 105 has has very minor changes in almost 20 years and have clearly established Regs and case law. Section 105 means less restrictions, clearer guidance, easier understanding and more profit. Re ERISA etc, Give me a few days to think about the necessity of reporting. I know of many that file no 5500, but I do not remember the logic. In any case, even if you have to file, it is onlya few lines other than the name and address section. A separate PD would be cheaper and easier to change than a "Merge" PD. There are no GHP requirements and HIPAA that I can think of.

b2kates, What is a "section 105(h) medical reimbursement plan"? AshleyL, It is just a simple Medical Expense Reimbursement Plan as per Treas Regs 1.105-5 and 1.105-11. The IRS does not require that the Plan be in writing however, it is an ERISA plan and the DoL requires that it be in writing. Common prudence should dictate that any such arrangement be reduced to writing so as to eliminate confusion and ambiguity etc. It is an ERISA Plan because of the type of benefits provided, the administration required and the amount of employer involvement etc.

Section 106 has nothing to do with the issue outlined. 106 only provides exclusion from the employee's gross income of the amount that the employer pays for the coverage provided to the employee. However, Treas Regs 1.106-1 directs you to "paragraph (d) of 1.104-1 and 1.105-1 through 1.105-5, inclusive, for regulations relating to exclusion from an employee's gross income ..." TWithin 1.105 including 1.105-11 you will find the definition and references to the definition of "employee". Reimbursing paid by the shareholder would be an issue for section 105. I have questions about your wording "paid just by the shareholder (for the shareholder)". Were the premiums paid by the shareholder or by the Corporation? You also did not state whether this was an S Corp or a C Corp. If an S corp, 2% or greater shareholders are generally not eligible to participate in most benefit plans. There is also the problem of his rendering services but not being an employee. Reimbursement can be done only for employees, former employees, their spouses and dependents. It cannot be done for Directors and non-employees. Employees get a W2. This person gets neither salary nor W2 and therefore is not an employee and so not eligible for participation in any plan. You might want to look at the section on Accident and Health Plans in the IRS FAQ: http://www.irs.gov/faqs/page/0,,id=83301,00.html#27 Pay special attention to 1.105-11

I am not sure what happens if an LLC is taxed as a C Corp. But, if an LLC is taxed as either a Parnership or an S Corp, neither partners nor 2% or greater shareholders can participate 125(d)(1)(A), 1.125-1 Q7A 4 etc. You might want to read what the IRS says: Re 2% Shareholders etc: http://www.irs.gov/faqs/page/0,,id=83301,00.html#27 Cafeteria Plans FAQ: http://www.irs.gov/faqs/page/0,,id=83301,00.html#4 Introduction to Cafeteria Plans: http://www.irs.gov/pub/irs-utl/introductio...aplans10-02.pdf fhatchett, As for a spouse of a PLLC who is a W2 employee. I have not done any research but my first impression is No. Is she a bona fide employee? Very likely not. Is there any attribution of ownership? Very possibly. bosco, I doubt that partners can also be W2 employees and even so they are still partners and therefore not eligible. Salary paid to partners are regarded as guaranteed payments subject to SE tax since they are regarded as being self-employed. See: http://www.irs.gov/faqs/faq12-1.html

Pesions in Paradise I am not a lawyer so Rather than attempting a lengthy discourse I suggest that you do a Google search to get expert opinions on which coverage is more appropriate and when/why etc. The Q&A has a section that discussed many of the issues: http://benefitslink.com/modperl/qa.cgi?db=...ional_liability

E&O (Professional Liability) Insurance should be very inadequate and inappropriate for any TPA, Administrative service provider etc. Your needs would be much better served with Fiduciary Liability Insurance. Loook at the BenefitsLink Q&A section on Fiduciary Liability Insurance and do a Google search for explanations of the differences etc.

Although there are no Federal requirements, OE is usually done annually for other reasons such as to allow changes in coverage (whether plan selection or dependent coverage), changes in Salary Reduction Agreements, changes in FSA etc election. Some also do it so as to observe state payroll and labor laws regarding salary reductions/deductions.

I do not quite understand your post. A single employer plan whether fully insured or self funded cannot ever be a MEWA and therefore neither state, DoL or ERISA MEWA rules would apply. As a result a single employer plan has totally separate case law etc from MEWA case law etc.

mbozek, Do you think that it would work if a nominal amount of the income stream from the annuity was "directed" as payment for the housing and car? Or, a nominal "consultant fee" equal to the cost of the housing and car was "paid" by the ex-employer, and which is directed to and usable only for the housing and car? This would be a "wash" to the exemployer.

As a general rule, the employee portion is not subject to FICA and FWT etc if done under a section 125 plan and the employer portion is not includible in the gross income of the employee under section 106. I use the term "general rule" because it is possible to do it otherwise, but needs unusual plan design and has been done by a very very limited number of employers, some of whom had to go to Court against the IRS. So it is not something that you would want to do. FICA is Social Security.

Speedbuggy, A section 125 plan is simply a device for allowing pre-taxing of contributions. It is not the DC, FSA, MR or any of the other plans. Technically a section 125 plan does not "include" anything but premium pre-taxing. It is simply a way of paying for whatever plans are chosen which are eligible to have their premiums pre-taxed under section 125. These "other" plans are really referenced rather than "included" From what you have posted, I wonder what you would do if Cancer coverage was being made available? Would you now have an additional section 125 plan? In most employee benefit plans there is a choice of medical coverage, and so the employee directs his/her section 125 election to whichever coverage was chosen. One employee might have chosen the HMO individual coverage, another the HMO Family coverage. while another the PPO individual coverage. The fact that there are multiple choices in the medical insurance coverage did not cause you to have a separate section 125 "package" for each possible choice. Why then would a choice of MR cause you to want separate packages? A single plan which is what is used by the vast majority has never caused communications problems, Why would it now, just because of the HSA/HDHP? The situation you outlined is no different from what is faced by employees who have to choose between fully employer paid coverage and partiallly paid. They have the same scenarion of differences in co-pays and deductibles which in turn need different set aside in the MR. I suggest that you look at the enrollment material used by any large entity in your area to see how multiple choices have usually been handled. Try the State, any large city or county, or a large School District. Their information is readily available under your state Public Records Law and easily accessible at their Benefits offices which are usually nearby.

What "consistency rule" are you making reference and connection to?

Shouldn't the whole problem, of whether to cover or not, be moot, in light of the issue raised by Alf? If partners cannot participate in an FSA, as questioned by Alf, and this is an FSA, then no reimbursement is possible because there should be no coverage of an ilegible plan participant in the first place.

IMHO, this sort of design probably would be so difficult to explain to the employee's and so difficult to administer that it would not be worthwhile. I understand you to be saying that the MERP will reimburse up to a stated amount per year. So that if, for example, the stated amount was $1200 per year, employees 1751+ hrs would be eligible for reimbursement of 100% of expenses up to the $1200 limit, whereas an employee with 1251-1500 hours would only get reimbursed up to $600. When would the employees be eligible? After accumulating the hours? What is the period of coverage for incurring expenses? Start of Plan year or only after eligibility date? What do you say to an employee who normally would work 1751+ hours but because of the same illness or injury that causes the medical expenses, is only able to work 1499 hours? You might be just adding insult to injury.

KJohnson has a point, If no FSA, What would the employee have committed to? However, I would rather consider a simple 105 MERP instead of an HRA etc. Then the employer would only have to reimburse any actual medical expenses rather than having to give the $100. The employee would not get the extra money but would also have no additional out of pocket expense up to the extra $100. The danger of a high deductible plan would also be avoided. The employer would have lessened their cost without endangering the employee and the employer could use the savings for a end of year bonus if he feels that the employees will miss, or resent not getting, the extra $100 which if they had contributed to the FSA would have been subject to the "use it or lose it" forfeiture rules and would have been of no use to some employees.

An FSA is basically a Medical Expense Reimbursement Plan within a section 125 plan. A MERP is also an accident and health plan as per Treas Regs 1.105-5. The retroactivity issue is partially addressed by the IRS in this link: http://www.irs.gov/pub/irs-utl/all-cafretro.pdf You might also want to read about Cafeteria Plans etc: http://www.irs.gov/faqs/page/0,,id=83301,00.html Your client probably is believing this CPA, mistakenly thinking that being a CPA means knowing about tax and employee benefit issues etc.

mpark I am curious as to your thinking. Why were you questioning the use of the EOB? What is the relevance of a receipt?

Why bother to "require" it or otherwise make it mandatory? Requiring it leaves the possibility of employee disagreement, resentment or litigation. It also has the danger of the accidental releasing of PHI etc. If the employees are not required to do anthing with the results, it serves no purpose to make screening mandatory and it makes no sense to spend money on something that is not wanted nor appreciated. If it is left as an optional benefit, those employees who see value and who will use the results, will make use of the screening. Those who see no value etc will not go and would have discarded the results anyhow. Why waste the money? There are many people who do not want to know and who feel better not knowing. There are also those who could be affected financially if the screening reveals a serious condition. If the screening shows a condition, this employee will now have a pre-existing condition which could seriously affect their ability to secure both health insurance and life insurance in the future. I would hate to be the employer who "forced" an employee into a position of having a known pre-existing condition.

Yes, possibly by all or at least more than 2 regulatory bodies and in each state of residence/domicile of the client. At least 1 state regulator and the NASD. Usually the Broker/Dealer and investment providers have "pre-approved" letters etc. The compliance requirements will vary depending on what you are offering. It will probably be difficult to separate your TPA Admin or record keeping services from the other items involved or related. I suggest that you find out what your State Securities people require for any and all solicitations even for strictly TPA administrative services.

Both are section 105 MERPS, the main differences being that the HRA allows the rollover of unused funds to the next year and is employer funded only. There are a few other technical differences and rules, but those are probably the main differences. Do a Google search using "HSA" and another using "HRA" and you should get a number of good articles from Segal, Miller Chevalier, Groom Law, Sullivan and Cromwell and a number of other top law firms.

I know of nothing in the IRC or Treas Regs that would prohibit an employer from doing this. However, it probably would not be of much benefit to the employer. For sake of illustration, let us assume that there are only 4 employees. Employee 1 who predicts $600 eligible medical expenses and elects a $50 monthly salary reduction really has $600 of expenses; Employee 2 predicts $600, elects $50 monthly but has expenses of $900; Employee 3 does not participate but has expenses of $400; Employee 4 also does not participate and has $0 expenses. If this employer contributes $400 to each it would be a total expenditure of $1,600. But, only $700 would actually be used for reimbursing medical expenses and $900 would be forfeited to the FSA. It would be better if this employer instead set up a standard section 105 MERP to reimburse those medical expenses that are not covered under the FSA up to this $400. The only problem might be that next year some employees might decide to reduce or eliminate their contributions to the FSA so as to make use of the employers money.

Aren't there severe compliance requirements placed by your state Dept of Insurance and the dept that regulates the sale of securities in your state, the NASD and the SEC etc, that any and all materials are subject to? As a result all the material that I have ever seen (that were legal) were provided by either the Broker/dealer or the Investment product provider. I suggest that you do not try to invent or create your own pieces before checking on the compliance requirements, the penalties are very severe.

Although he is purchasing the ex-wife's half, that does not mean that this property will be his primary residence or even his residence. He could have been removed from the property over 2 years ago prior to the divorce (under a restraining order etc) and might have purchased other property as residence or otherwise established primary residence elsewhere. Whether he will occupy this property as primary residence should not be just assumed, ascertain the facts first.

The plan was most likely set up for employees. If the Plan Document restricts participation to employees and former employees only, then participation ny Directors (whether compensated or not) would seem to be impermissible. Check the wording in the PD. The insurance contract also should define eligible participants and most likely Directors are not eligible. Allowing participation of ineligible persons could create a problem. Check the Master Policy.