GBurns

Why not just continue the tax treatment that you were previously doing for this now ex-employee? You deducted taxes and reported under this "improper" SS # so if you do the distribution and report using the same "improper" SS # you would be providing a completed audit and reporting trail for the IRS and SSA. The credits and debits all end up in the same place. If you do otherwise you will have reported to the IRS and SSA two (2) separate items that have no relationship. The employee no longer contributes and no longer will work for you. The SS# that got a tax break gets some tax withheld to offset it. Case balanced and closed.

I was not aware that 403(B) plans have a hardship withdrawal provision. Can anyone give an IRC or Treas Reg cite? I also thought that 403(B) employee contributions were 100% vested and available to the employee for "policy loans" if available, withdrawals (possibly subject to surrender charges) or even full surrender (possibly with charges and/or penalties). The loans, withdrawals or surrender were subject to the terms of the particular investment or annuity policy. Therefore getting loans or declines from a bank do not seem to have a place in this issue since the employee would be going to the issuer not an outside lender. Restrictions were only placed on employer contributions.

Since this is going to be 100% employer funded, why not just use a straight section 105 Medical Expense Reimbursement Plan? If you are using an FSA, I have not seen anything in the IRC or Treas Regs that would prohibit limits on what is eligible for reimbursement. You can have an FSA that does medical only, you can have an FSA that does Dental only, you can have an FSA that covers the PPO plan related expenses but not the HMO, so logically you could restrict what is in a medical only FSA.

Just because someone writes something in an article does not make it true. The FDA clearly stated their position in the Federal Register. A list of their actions are also on their website. Nothing from the FDA or the manufacturers use the term ban, instead the terms "voluntarily" and "by the manufacturer" are used. I personally do not believe that everything that I see in articles or on websites are true or factual and when I see statements that are contradictory or in conflict I try to determine which is the authority. In this case I would choose the FDA wording in the Federal Register and elsewhere as the governing authority over misc articles written by misc persons.

Katherine How do you determine a "good" "consultant"? Who determines what is "high level"? JanetM Have you considered the input from experienced insurance agents or from the insurance providers themselves?

If your plan provides coverage in Canada then it is covered because it is legal in Canada. Re your link: 1. It is Proposed Rulemaking. Therefore not law until after the comment period and issuance of Rule/Regulation or Final Rule/Regulation. This was never done. 2. In the link it clearly states that the removal was voluntarily done by the manufacturer not by FDA ruling or directive. Therefore is was never banned nor declared illegal.

Where did you ever hear that seldane or Seldane D were ever banned by the FDA? As I remember the FDA asked that a warning be placed on it re contraindications with certain other medications. Later the indicated that they would consider further action now that alternatives (then considered safer) were available. It was a voluntary withdrawal by the 2 manufacturers not a ban and there was no illegality that exists as far as I remember. However, it might no longer be on most formularies and that is most likely why it was not covered. It probably has nothing to do with illegality. That is also why a Dr issued the prescription for the medication, unless you do think that the Dr would prescribe an illegal substance, in the first place, especially when the patient has coverage from which to seek reimbursement. If there is no illegality issue, then it should not matter where a valid prescription was filled unless your PD states US only.

My first thought is Why do you need an HRA? The fact that you want to have employer only funding does not mean that you need an HRA, you can still have an employer only funded FSA. It is very very common. Second thought was why would you want to have the complexity, expense, compliance problems, account and deductibility limitations that you would have with a VEBA. By the way, What in heaven do you mean by "follow the VEBA concept"? Do not let anyone confuse you with .... Third, Would it not be much more expensive and beyond the employer's control to use a VEBA or anything that has to be fully funded in advance rather than on an "as you go" basis? In general the only reason for an HRA is to have unused funds rollover. If you are not creating a surplus then there is nothing that is there to be rolled over and therefore an FSA or a straight section 105 MERP should serve you better and be more cost effective.

Lisa, What would the IRS be auditing for since fishing expeditions would not be allowed?

Steve72 Whether done as a one time election or not, it could be done as under section 106 as per Express Oil Change and others. However, the risk of IRS contesting it is still great so it makes sense to get rid of the IRS issue and use a section 125 plan.

I must be too tired, but I could not find a reference to any state sponsored coverage (other than Medicaid) in 1.125-4, can you give a full cite?

It is just a payroll practice until you make it formal, whether in writing or not. Once you make it formal, it then will become part of your employee package, then you will have an ERISA plan and unless you are very careful you might end up with a FLSA issue as to whether or not this money is "expected to be paid" and become part of your hourly rate and overtime rate calculation. I suggest that if you are going to make a formal announcement and especially if you are going to do this or expect to do this again, GET a lawyer (not an attorney) EXPERIENCED in these particular issues especially FLSA.

It depends. I have had a few clients who got their spider vein and varicose veins surgically treated or removed with approval and payment by BCBS, Aetna and Humana. The various TPAs also paid reimbursement where applicable. The surgery was regarded as medically necessary because I advised the clients to have symptoms that the Drs could use as a basis for a diagnosis and treatment. Without this it would be cosmetic and not covered. So the real answer depends on Why and BY Whom? was she given the pantyhose. If she is self treating then it is not reimburseable, If she is being treated by a Dr for medical reasons to alleviate a medical condition etc, then it would be reimburseable. At first glance it looks like her own self treatment idea, so NO.

A much better suggestion is .... Do not hire Kirk or any other attorney...Hire me or any other friend of mine who is a benefits consultant and pay us instead. We would like to help tell you what to do just as much for just as much.

Carolyn, You have the classic problem faced by consultants and marketers of products to employers. The employer things that the consultants, auditors, lawyers, CPAs etc are doing all that must or should be done, while the consultants are doing only the limited items that they are getting paid to do plus many times do not even know what else needs or should be done. A good suggestion given was to offer your services through the existing consultants etc. However, since they usually will not market additional services even to their own existing client base you will have to be creative. You might want to set up various "packages" of your services, then offer to present it yourself to their client base on their behalf on a joint venture basis but as if you work for that consultant. In other words offer to act as their "in-house" specialist. Most will not readily allow you to use their client list unless they have their "good name" protected and also feel that you will not "steal" their client somehow.

Make sure that he informs Medicare of this other coverage and fills out the proper Medicare form, if not he will pay a severe penalty later on when he does go on Medicare.

Whether a cafeteria plan a 105 or if you deem this as being controlled by 106, it is prudent to have a Plan Document in every case. Kirk.... As to the IRS litigating and winning, I have to ask .. What was the issue of the litigation ? Was it as to whether or not a plan such as described by mrilao was a cafeteria plan or not or was it to determine if a cafeteria plan does need a PD?

There are many lawyers who take the position that this is a plan set up under Section 106 not 125 and therefore does not need a Plan Document. However, there could be the issue that although the IRC might not require a PD, the DOL usually does although this is debatable. The rationale behind the section 106 reasoning is the same that was used in a number of cases on this 106 vs 125 issue that the IRS lost even on appeal in at least 3 different circuits. An example is the Express Oil Change case which is one of the few in which the judge refused to the IRS request for an unpublished decision. If you look at any PLR issued since 1989 with a UIL 106 and which involves a cafeteria plan, you will see that every one makes the statement, in the conclusion, to the effect "Amounts by which an employee elects to reduce his compensation and which amounts are allocable to group health insurance coverage and medical reimbursement coverage are not includable in the gross income of the participant pursuant to section 106 of the Code". This wording is used in numerous PLRs. There is never wording saying "pursuant to section 125". This could be because there are no applicable Treasury Regulations for the majority of section 125. And as per the just released Revenue Procedure 2002-3 the IRS is still taking the position that they have been taking offically since 1989 that they will not rule as to whether or not the amount that he employee elects to reduce from his compensation is tax-free or not. Since Proposed Treasury Regulations are treated by a large number of courts including the US Supreme Court as having "no effect of law", many practitioners will go with what is actual law and that which is supported by a large body of case law namely that section 106 rules.

What do you mean by "sell information"? If you are going to "sell" and not do administration or investments, it seems to me that the only things left for you to be selling is the concept ( a plan salesman), selling plan documents or selling actuarial services. Maybe someone might be able to suggest something if you expanded.

You might want to try a search of the internet and visit some sites like www.401khelpcenter.com. I have never seen or heard of any connection between disability and rollovers. Rollovers are a form of distribution and distribution has nothing to do with medical conditions etc, but instead has to do with termination, whether of the plan or participation. Under "Hardship Withdrawals" a "distribution" could be made for unreimbursed medical expenses subject to the terms of the particular plan. It is also usually subjected to the requirement that it be major or catastrophic and that no other loans are available. Medical expenses might be caused by disability, but disability is not a medical expense. Hardship withdrawals are loans not rollovers.

COBRA applies to the insurance coverage not to the POP plan per se. Whether you have an employer pay all with no section 125, or a POP with employee contibution or anything else does not matter.

I must have really missed something here. This seems to be an FSA within a section 125 plan and not medial insurance premium, because Sheila talks about expenses not being submitted. If the deductions (reductions) had been taken from the employee at say $50 per month the employee would have contributed $350 to the FSA and now that the year has ended and no claims for reimbursement were submitted, the employee will now forfeit the $350. What benefit does this employee see in losing the amount deducted? It certainly is much more than the reduction in taxes. $350 vs $70. If however, the deductions were for health insurance premiums (forgetting Sheila's statement about expenses), the employee is not complaining about not having been covered for health insurance and therefore it must not be an issue... why would the employee now want to pay for something that he already got for free and for which no one was asking him for the money? In this case the tax reduction is even less significant that the salary deduction (reduction). Why would he want to "give away" so much money? Sheila.... Has anyone gone over the figures with this employee?

The original poster did not ask for an opinion as to what the employer should or should not do. In fact it does not matter what our opinion is on this matter, it only matters what employers choose to do. The morality of it is not the issue. MSMA posted the question: QUESTION: Is this fee to be assessed PRE or AFTER tax? Matt J followed up with: I'm curious why a participant would have to pay to join a FSA account. Do you mean the Employer has to pay $3 or $4 per month? It seems that the vast majority of public sector entities and no-profit entities let the employees pay the fee on a pre-tax basis. Add to this the many private sector employers including a few large Fortune 100 companies and it could be that the majority of employees do pay the fee (on a pre-tax basis). For 2003 you could say that since the Federal Gov employees now have an FSA for which the employees pay the fee, the VAST majority of employees do pay the fee and on a pre-tax basis.

Kirk Your scenario seems to be missing a few pieces. If the employer stops paying the health insurance premium but the employee then assumes the payment of the full premium, that would cause a drastic and sunstantial reduction in the employee's paycheck. For example if the total premium was $350 per month the employee would take home about $250 less. Unless they were getting that much ($250) per month in reimbursement the employee would be losing. What happens if the employee has $0 medical expenses? What is the reason than why any employee would participate? How would the employer "sell" this loss to the employees? Vebaguru Doesn't Rev Ruling 2002-41 and Notice 2002-45 also prohibit HRA participation from conditioned on health insurance plan participation? In the scenario given by Kirk it seems that health insurance participation is a requirement.

I trust that you have now seen Revenue Ruling 2002-80 which was published 12/9. It expands on Rev Rul 2002-3 and explains the IRS position on the way medical expenses are treated in the plan that you are looking at. If you cannot use medical expenses the way that they do, and there are very few if any employees qualifying for tuition, parking or transportation etc, How viable is the plan?