GBurns

For sole proprietors and self-employed individuals you should follow the guidance set out by the IRS in various Pubs and in this Coordinated Issue Paper: http://www.irs.gov/pub/irs-isp/all-cafh.pdf Note that the MERP is for the employees while the sole proprietor or self-employed individual is a covered dependent. Also note the warning that the "employee spouse" must be a bona fide employee. The ages of the children must be considered in determining whether they are eligible dependents or whether they can or are to be treated as employees. In the case of Item 2 there is a difference between an S and a C corp. You did not state which form was being used. C corps would be okay but S corps might in some cases be able to use the above method.

I am puzzled!! How could it have been decided what to offer and how to provide it etc etc without first having these guidelines established?

I am just playing devil's advocate just to get some feedback. This employee has elected to defer $200 per month. The employee has a balance of $50,000 from which he/she borrows $10,000 (or whatever amount). What stops this employee from "directing" the salary reduction of $200 towards loan repayment? If this employee is allowed to "direct" the application of the salary reduction to loan repayment, it is in reality repayment with pre-tax $. The questions are, Can the employee "direct" the salary reduction? Is this prohibited by the Plan Document? If the PD is silent, What stops the employee from doing this? Other than being able to "direct" the application of the salary reduction, Could this employee transfer amounts within the overall account, anyhow? If internal transfers can be made, the employee could accomplish the same repayment with pre-tax $ by such a transfer. How would the record keeper even know what was being done?

RE: "unless the company has a vehicle to have that employer contribution tax free". The vehicle is a section 105 MERP.

A suggestion. I have found that many of the large public sector employers that I see, have very good performance clauses in their TPA contracts. Why not utilize the Public Records Law or just ask for a look at their RFP and contracts? You should be able to get some appropriate performance penalties wording. You should also note that most if not all have a simple built in incentive to ensure good performance.... If the job is not done right, penalties apply. In other words, the incentive for good performance is that the TPA gets to keep the fees and the contract. I doubt that you will find anyone who pays extra to get the job that they contracted for done in a competent manner.

I would have thought that the plan would be subject to the CBA. Unless the CBA allows for a change, no changes can usually be made without at least agreement by the Union.

I assume you meant that CIGNA would be the Defendant in the suit. I think that your best sources would be the Plaintiff who is filing the suit and the NJ Dept of Insurance investigators and Market Conduct people who would have the record of complaints etc. If you are about to review the RFP, while these questions are being asked, I have to question the thoroughness of the RFP. Why did it not ask for disclosure of any lawsuits etc? Why did it not ask for info on Provider credentialling and monitoring? Have you looked at their Schedule F (Resisted and Disputed Claims) that they have filed with the Dept of Insurance?

Since pre-taxing can only be done on a payroll, I have to assume that this person is actively employed on a payroll although they are also getting Social Security. If that is the case then of course they can pre-tax eligible items. Payroll has nothing to do with receiving Social Security. What sort of health insurance premiums are they wishing to pre-tax? I hope it is not their Medicare premium.

The ONLY incentives that you need to give a TPA are: 1. Make them aware that you will consider use of a claims auditor or repricing service etc to ensure that they are doing an acceptable job. 2. Make them aware that you know that you can cancel their contract or change TPAs very easily.

Why do you think that any incentive beyond the TPA fees and/or the fees charged by any supplemental provider, is necessary or is even customary? If the item or strategy is provided by another supplier, Why would you want to or even be considering paying the TPA an incentive for something that they are not providing? A TPA very often uses these additional "freebies" as the reason for choosing them over another TPA who either does not offer such cost containment strategies, or charges extra. The securing of services are part of your negotiating NOT something you pay extra for. Bear in mind that these are services that a TPA most likely cannot provide. Usually items such as disease management are not supplied by most TPAs but are supplied by those with the necessary expertise, license and staff.

For purposes of defining "paid" you might first want to look at IRC section 61(a). The definition of "Gross Income" covers almost everything. Then look up the IRC section on "constructive receipt". I am not able to cite it at this time, so if anyone else can, please do so. Together the definitions should adequately answer your questions of compensation and "paid".

What you have described looks very much like the old "Zero Balance" medical expense reimbursement plans that were outlawed around 1976 by the IRS via a Notice etc and subsequently by IRC section 125. There should either be a section 125 FSA to which these Drs pre-tax an elected amount from which eligible medical expenses are reimbursed. OR there should be a Section 105 Medical Expense Reimbursement Plan from which the expenses that the Drs incur are reimbursed. The caveat being that a plan for the Drs only and not for all the staff might be disallowed under 105(h) anyhow. There is no connection in a MERP with the Drs compensation. Recharacterization of income as per your description is what was addressed as "Zero Balance" or more recently as "Double-dipping". An HRA is a section 105 MERP with employer only contributions and the "roll over" feature which would not seem applicable in this case. Or it is just like an FSA except ifor additional employee elections and the lack of the "roll over" but with "use it or lose it" instead.

From vebaguru's post, I would conclude that "paid" is synonymous to "compensation". Compensation then might be more than "gross wages".

MWA should have been MEWA as in Multiple Employer Welfare Arrangement. While it was stated that other corporations participated, it was not clear that the plan has any sponsor other than the S corp. Section 125 applies only to the employee pre-tax contributions and the choices made as to where those pre-taxed amounts are directed. Section 125 has to do with relief from constructive receipt of the salary reductions etc.Section 125 has nothing to do with participation in any of the underlying plans.

On 1 hand you say: "Our only basis for not paying the benefits is that the participant has not signed the form which acknowledges the plan's subrogation/reimbursement interest...." But, then you state: "but on the other they are relying upon a legally meaningless form to deny benefits. " I thought that it was your side that was refusing to pay the benefits because the participant would not sign the form. If that is the case and you just had a typo, then I have to ask how come you are witholding payment if the form is meaningless???

You only referred to a section 125 plan, What about the plans that provide the benefits for which the section 125 choice is being made? The medical etc etc? Also, You posted that this is a "plan that is being sponsored by an S-Corporation ". Can any of the employees of the other member companies of this controlled group really participate in a plan that the member companies do not also sponsor or even co-sponsor? Even if they do co-sponsor this plan, Would your state law regard it as a MWA or not?

Maybe, my brain is still on holiday, I tried very hard but could not understand your post. Why would an employer be doing anything with claims, Is this a self-insured self administered MERP of some sort? What sort of plan is this etc? If, as you posted, there is a TPA, Why would the employer be handling anything? Why would there be any amount of pre-tax unreimbursed claims? The amount pre-taxed is an amount that is set aside in anticipation of incurring claims which are then submitted for reimbursement. The pre-taxed amounts have nothing to do with any claims until eligible claims are submitted. Eligible claims that are submitted were never pre-taxed. If unsubstantiated claims are submitted, it is usual to reject or refuse reimbursement. What is there to be "written off"?

KJohnson, Maybe I should have stated "employees with negative election balances" which is what was indicated in the original post rather than just using the term "deficit balances".

KJohnson, After reading the content of your post, I would say that a plan design as described in the original post, which only goes after terminated employees with deficit balances, would NOT be permissible according to what Mr. Beker said. What "noise" from the IRS" are you referring to?

While I have seen many health/medical plans that have that ineligibility wording, I have never seen such wording in any MERP of any sort. Why would such a ineligibility clause be in a MERP? I am also not familiar with this 150% requirement. 150% of the cost of what benefits? I have also never seen where reimbursements from a MERP, whether FSA or other, were included in any calculation for eligibility or benefits related to SSI etc. Why would such reimbursements be a concern? Have you seen something somewhere that infers that such reimbursements would be regarded as income or as an asset?

Why would such things as the reviewing and analyzing provider contracts or reimbursement schedules etc require an actuary? The fact that any actuarial firm might provide these services does not make it an actuarial function.

Yes, but just go to www.freeerisa.com and look up any number of companies, large or small and you will see that there are very very few that name the Broker although a number will list some of the commissions.

Very few 5500s list the broker. If you are self funded, the actuarial services should be provided by the Claims Admnistrator not the insurance broker. If you are fully insured you should use a n actuarial service. There is much more to the insurance rates than that which is covered by actuarial techniques or underwriting analysis. In a self insured environment it is even of less value. Reimbursement schedules, provider contracts, provider placement, provider access fees, formulary, PBM fees, schedules and contract terms, claims adjudication, error checking of claims etc etc make up the vast majority of the expenses in a self insured plan, none of these items are subject to actuarial analysis. For health insurance very few states allow brokers, so you probably are referring to an insurance agent rather than to a broker. These are 2 very different services.

The employer should also face penalties for underwithholding and mis-reporting as part of the withholding obligations.

I do not remember ever feeling so confused after reading any post on any subject. What do you mean by: -- "consolidated front-end " -- "servicing of the two plans" -- "the recordkeeping platform" -- "fixed menu is put into place " Although your current 403(b) is "non-ERISA, individual contract based " you still have to have a recordkeeping system of some sort if only your payroll and salary reduction remittance records. Because its individual contract based you would have no other information, so what would you keep in this perceived "additional" recordkeeping system? Bear in mind that being "individual contract based" is not what determines whether your 403(b) is ERISA or not. What is there to put on a "front end? What sort of servicing are you contemplating that an employer could do in an individual based plan?