GBurns

many?s What you have stated sounds more like the application form rather than the enrollment form. Those questions have to bearing on enrollment. The employer should never have a copy of the application. Since sounds like this is a very small group (under 50 lives) there should also be some state Small Group Laws that are also applicable in this PHI situation. Have you checked?

I do suggest that you seek a response in writing (not the agent's word) from a few of the potential providers both medical and supplemental.. From what I have been seeing over the last 2 years, AFLAC, Colonial, Allstate (American Heritage) and American Fidelity have all been rewriting their previous PEO plans to be the employer's (the client) plan. Most of this activity has been on the supplemental side but I have also seen BCBS Illinois and Florida do the same. If the insurers won't write business as the PEO's policy that should tell you what is what. It does not matter what the 125 Plan Document says if there is no coverage available under it.

papogi, The post stated "as part of their cafeteria plan" and "This allows you to use tax-free dollars to pay for certain tax qualified individual insurance plans that are not offered by the District." I read that to mean that it was not outside purchases but pre-tax through the employer purchases. This therefore distinguishes it from 61-146 and falls under the explanation of what should not be done a la 2002-3. Ric, Mr. Beker disputes ever having said anything that supports what you are advocating. I am going to make an attempt to have one of the 2 gentlemen post a response. Refer to 61-146 and the extensive explanation given in 2002-3 in addition to the numerous articles that have been written explaining that if the premium is deducted tax free through the cafeteria plan it is not reimburseable because there is no medical expense etc incurred by the employee. 61-146 and reimbursement of premium is only applicable if the employee pays the premium with after tax dollars. In addition 61-146 was issued in 1961 a very long time before section 125 and logically could have nothing to do with 125 which was not yet in existence. Rev Ruling 2002-3 refer to and distinguishes 61-146. SLuskin, While it is acceptable and very popular to allow pre-taxing of individual plans, especially for supplementals from AFLAC, Colonial, Allstate etc., I suggest that you get guidance on the reimbursement of that premium that was deducted on a pre-tax basis. The sole purpose of Rev Ruling 2002-3 was to explain that it was "double dipping" to reimburse premium that was deducted on a pre-tax basis. In other communications from you, you even indicated that your lawyer had explained to you in writing this same reason why the "double dipping" plan that had been presented to your clients did not work. If you could reimburse premium that was deducted on a pre-tax basis there would have been no need for 3 years of negative articles, an IRS investigation and 2 Revenue Rulings.

Try posting it on the Form 5500 Forum.

Rev Ruling 62-146 does not cover insurance premiums that were deducted on a pre-tax basis under a cafeteria plan. Reve Ruling 2002-3 explicitly states that premium that was deducted on a pre-tax basis is not reimburseable. ALL FSA's whether in a cafeteria plan or not are subject to 125. In the post by tonjer, it is stated that "Pursuant to one employer, "This allows you to use tax-free dollars to pay for certain tax qualified individual insurance plans that are not offered by the District. This could include expenses for individual medical plans, Medicare Part B, etc." I think that it is a misunderstanding of that employer's plan to think that that employer is reimbursing anything. The employer seems to have a simple POP cafeteria plan which allows the employees to pay (on a pre-tax basis) for supplemental plans. There is no mention of any Premium Reimbursement. The Premium Reimbursement Accounts seen elsewhere are another matter that probably have nothing to do with the plan of the cited employer. tonjer, Can you cite a few of the internet sites, please? I would like to see what they are offering.

Lisa, Since you mention the "Double Dipping" schemes, What is your comment on the "Premium Reimbursement Account" post that is currently on this Board? If Rev Ruling 2002-3 explains that premium that was deducted on a tax free basis cannot be reimbursed tax free (Double-Dipping), What premiums are being referred to as reimburseable in an HRA?

CORRECTION The original plan is Exec-U-Care not Exec-U-Med. Exec-U-Care is still being sold by that same TPA out of Iowa and is using the E&Y opinion letter as a replacement to the old KPMG letter. Both opinion letters skirt the issue of whether or not and how, if at all, the plan qualifies as insurance. Instead the try to avoid a dirct answer by stating that the plan "is not" a "self-insured" plan. Exec-U-Med is available through the west coast insurance company. I also noticed that Boston Mutual has a version that is available in some states with somw restrictions.

Then I have to agree (go) with Katherine. You picked the wrong vendor and should self administer the claims from last year.

Not because an insurance company sells a plan that they claim to be an "insured" plan makes it so. The original plan seems to have been pioneered back in the late 80's by Monumental Life under the name Exec-U-Med. They gave it up after learning that there were very serious questions that could not be answered satisfactorily. Years later a plan with the same name appeared from another insurance company (Guarantee I think) with a KPMG opinion letter. For various reasons a small West Coast carrier, Lincoln National and Security Financial started selling similar plans. Guarantee and Lincoln have since ceased. The TPA who sold the Guarantee product is still selling the plan but now with an opinion letter from Ernst & Young. I suggest that you ask yourself why there were not other players in this market and why some companies withdrew from the market. Then read the opinion letter and do some research. The opinion letters try to address the first issue of whether or not the plan even qualifies as insurance. Most researchers should opine that it does not, even if only because there is no "risk exposure", which is a needed feature for qualification as insurance. There are many other areas that are very questionable which is probably why the old KPMG opinion letter had such a very long disclaimer. I question whether or not any of the promoters could be able to get a new or current opinion letter of any credibility now that there are the new Treas Regs, Circular 230 Rules, AICPA and ABA ethics rules governing these opinion letters. Anyone thinking of using these "insured" plans would be well advised to seek competent legal advice first. mbozek, I am sure that under the new rules only an opinion from the clients own legal advisor, which is based on the specific facts and circumstances of that particular client and that client's plan, could possibly maybe protect them from penalties if any at all. The rules are now such that these opinions give very little protection from penalties. Of course, opinion letters provided by the promoter have absolutely no value at all.

What does your choice of TPA have to do with the "vendor"? What does this "vendor" do? As far as I know transit passes and public transportation "tickets" are sold by the transport providers, and parking is sold by the parking space provider, so what does this "vendor" sell and what is this "sign up with the new vendor" ? I am wondering what it is the employees have to sign up for with anyone other than you the Plan Sponsor and why there would be anyone other than the transit and parking providers from which to buy anything?

The revision or update dates seem to be different depending on how you access this same site. Try this link: http://www.access.gpo.gov/nara/cfr/cfr-tab...ble-search.html

In accounting, bookkeeping and actuarial assumptions, it is normal prudent practice to rerun (rebalance) your figures after you have made any significant changes. In the case of testing where ratios and percentages etc come into play it would be prudent and advisable that you rerun your testing. Although "the results could only improve" It is easier and much safer to rerun for accuracy than to later find out that it still failed.

It depends. There are apparently still states and other taxing authorities that do not allow deduction of these amounts and who need disclosure. The disclosure form is the W2. The calculation of EITC and some other Welfare benefits require that these amounts be added back as "income". The employee therefore needs the amounts and the grantor of the benefits needs substantiation. The W2 is the best and most convenient place to show these amounts.

While I think that this TPA is doing a disservice to his client and leaving the client and employees at risk, they are really just exploiting the law and ignorance of it. mbozek points out something that I have always wondered why people in the employee benefits world seem to miss. Proposed Treasury Regs have "no effect of law" etc. This has been stated by a number of Courts including the US Supreme Court. Therefore, as mbozek points out, the IRS cannot penalize an employer for not following the Proposed Treas Regs. At the end of any Proposed Treas Regs is usually the disclaimer that the taxpayer "may" follow the Regs. It is optional not a must. The IRC, a number of General Counsel Memoranda, Audit Guidelines and other IRS documents that state what the IRS (auditors etc) must follow in prosecuting or persecuting a taxpayer. In general, the IRS must follow the items that provide substantial authority. Proposed Regs are not substantial authority and therefore the IRS cannot follow them unless the taxpayer uses them and even then their use is severely limited. I doubt that the list in the EBIA Manual was taken from the IRS Audit Guidelines (and I guess that I should go and take a look) but were nore likely taken from the Training Manual. However, regardless of whether or not the 125 Proposed Regs are law or not, an FSA is still subject to rules of section 105 and while section 105 does not go into detail, logic dictates that you might have to prove that the reimbursement was made for actual medical expenses incurred and that the money receved was not otherwise reimbursed of deducted (such as on Schedule A). In other words 105 can be made to be even more problematic than 125. Receipts and/or Third party substantiation should be done along with the employee statement if necessary.

Apparently you do not read very well, the post was... "The usual reason why a 401(k) is associated with a Cafeteria Plan is so as to use up any "surplus" that is left over in a Benefits Credit plan design, or to keep the tax free nature of any "opt out" payment." It clearly states that the purpose of a 401(k) (in a Cafeteria Plan) is to "use up" "or to keep the tax free nature of any "opt out" payment." In other words to make it simpler for you to understand...If there is no 401 (k) to "use up" "or to keep the tax free nature" THEN the payment be taxable income. I will leave it up to the Moderator and the other posters to make any comments that they think are deserved especially regarding your personal attack.

Why would you need a new Plan? What does changing your TPA have to do with the account balances? You are changing TPAs not your Plan. A TPA provides you with services to administer your plan because you do not want to do it yourself. The TPA is not the Plan. The Plan is yours, the Plan stays but the TPA changes whenever you feel like changing TPAs. Or is there something else that we missed?

Thanks for the info and I hope that it seves as a warning to readers who seek info from Regulators or who read articles by so called "experts" etc. It has always amused me when I read articles etc that quote things that some employee of the DOL or IRS is supposed to have said. Why anyone gives comments made by some unknown employee has always puzzled me? They do not know the training level, the competence or the experience of the person but yet are willing to accept the statements made as "gospel". A 20 year employee might have been in the Publications Disbursement Center for 10 years and in Communications for the remaining 10 years. That is length of service not experience.

What earlier post? An "opt out" payment to an employee is taxable if the employee takes it in cash or in many cases even has the option of taking it in cash (constructive receipt). That is why the plans usual have as a sole option the deferral to a 401(k).

If this employer is paying 100% for the employee medical insurance, How can there be some that are pre-taxing an employee cost? What is your differentiation between "medical insurance" and "traditional coverage"?

It is one thing to run benefits through a VEBA but a very different thing (if at all possible) to run payroll expenses through a VEBA. What payroll expenses do you mean? What do payroll expenses have to do with the apprenticeship benefits? Are you paying benefits to the employees or picking up (reimbursing) their expenses?

Sheila K Is there anything that you can share with us about what the DOL person said?

Moe, An "opt out payment" is that amount that an employee receives for not taking the qualified benefits (in those plans that have the feature).

The 401(k) or any other "choice" of qualified benefits in a Cafeteria Plan should not be included in the Cafeteria Plan's PD, and I have never seen 1 that had it in there. Each "choice" or "component" should have its own PD, where applicable (such as an FSA or a MERP), or it has an insurance policy that serves as the PD for that "choice". The usual reason why a 401(k) is associated with a Cafeteria Plan is so as to use up any "surplus" that is left over in a Benefits Credit plan design, or to keep the tax free nature of any "opt out" payment.

My reference to Lawyer vs Attorney was partially tongue in cheek. For many years I have observed lawyers trying to get people to refer to them as attorneys, I have always wondered if they were embarassed to be lawyers and were seeking to hide or disguise themselves as being something else. Why someone would be embarassed to let everyone know that they were a lawyer, raises other questions, and I wonder if they are afraid that Shakespeare's alleged suggestion to "First kill all the lawyers" might become a reality. Or they might just be embarrased by the relationship to "ambulance chasers" "Shylocks" etc. Years ago I noted that Black's Law Dictionary (4th edition and earlier) pointed out that Attorney meant agent or representative and stated that"properly used" the term should be : Attorney in fact Attorney at large Attorney at law Etc Etc To me that meant that any other use was "improper". However, as we "dumbed down" our standards it eventually became common for terms and words to have new meanings. So now Black's 5 th Edition onwards states that "in common usage" attorney means attorney-at-law unless a contrary meaning is clearly intended. To many people of my generation this is a "sell out "of standards. If I were a lawyer I would be embarassed to have to disguise what I do and be ashamed that I had to refer to my occupation as something other than what it really was. As Katherine (possibly a lawyer in a defensive mode) points out. a lawyer is not an attorney until he/she is representing someone. As per my post, when not representing a client the person is only a lawyer. AFTER that lawyer's services is engaged THEN and ONLY then does that lawyer become an attorney-at-law. NOT BEFORE such engagement. I did not intend any disrespect for lawyers, I was only trying to get Erin, PHR away from the hype of those who were apparently embarrased by their calling, and onto those who could adequately represent Erin in the particular issue. It is my opinion that if you are too embarassed by what you do so that you have to disguise it, chances are you are not competent enough to represent me. For the record, I have been a named party in over 20 lawsuits since 1980 and as a result have seen a whole lot of incompetent and/or inadequate legal representation. I will stand by the old definition and not succumb to popular usage. The English language has suffered enough and I will not contribute to its further demise. I have had enough of mis-quotes etc etc. Gay now has a new meaning and we can no longer "Don we now our gay apparel" "Eat your cake and have it too", a major challenge is now "Have your cake and eat it too", an easy thing to do. We have really "dumbed down" America and I will not be a party to this.

Lets think about this. What line on the 1040 provides the amount of SE Income? Is this before or after the 179 deduction? If SE income is determined before then you could not deduct the 179 expense for this purpose. If it is after then you have a reduced SE income.