GBurns

You do not set up ERISA plans. You set up plans which because of their nature become subject to ERISA. ERISA does not provide relief or exemption from taxation, only the IRC does in specified cases. In your original post you said that the program was 100% employer paid, if this is so then there is nothing to pre-tax. As far as imputed income goes, which would create taxable income to the employees, this most likely would be a de minimis fringe benefit and thus not taxable nor reportable. If properly designed it might even be deemed as being provided for the benefit of the employer, which would also relieve the reporting and tax issue, if any.

You either set up a special class under your existing MERP or set up one for the purpose. Guidance can be found in IRS Chief Counsel Advice 200206053 which cites a number of Rev Rulings.

It probably does not really matter what the SPD says partially because it most likely would be both ambiguous and in conflict with other items. It might also not really matter what the Proposed Treas Regs state in light of the many court decisions regarding their lack of legal weight. What might matter most is what the employee wants and was expecting. the case that you have outlined might be influenced by the funding of the FSA. Was it all employer money or was some employee money? If there is employer money, can it be rolled over from one year to the other? Is this what is being used to reimburse the employee? This case is almost identical to the Grande v. Allison Engine, with part in one year and part in the next year. You might want to take some guidance from this case. The end result is that the Court once again favors the employee over, as they put it, "merely" Proposed Regs.

It probably does not really matter what the SPD says partially because it most likely would be both ambiguous and in conflict with other items. Decisions would have to be in favor of the employee. It might also not really matter what the Proposed Treas Regs state in light of the many court decisions regarding their lack of legal weight. What might matter most is what the employee wants and was expecting. tTe case that you have outlined might be influenced by the funding of the FSA. Was it all employer money or was some employee money? If there is employer money, can it be rolled over from one year to the other? Is this what is being used to reimburse the employee? This case is almost identical to the Grande v. Allison Engine, with part in one year and part in the next year. You might want to take some guidance from this case. The end result is that the Court once again favors the employee over, as they put it, "merely" Proposed Regs or ambiguous SPDs..

What is the authority or precedent for rolling it over? PLR, RR, Regs?

I have never heard or seen any requirement that says that there has to be any reinsurance or stop loss insurance. That is why there are plans that are fully funded or fully self insured. The question might better be whether or not the cap can be different for each employee or whether it must be by class? This should raise discrimination issues. How is the cap applied?

Aside from the recoupment issue, which I guess is clearly settled that payroll cannot recoup, there is the issue of error. From what you said, these employees filed their objections etc as soon as they got their confirmation statements. It seems that this is the first opportunity for them to have been aware of any errors or discrepancies and they immediately reported the matter. They did the best that they could do. The company did not immediately correct the situation. The fact that it has taken so long for the matter to get to you should not be held against the employees and based on case history they would very likely prevail if they incurred medical expenses that would have been covered if they had been enrolled and decided that the employer was liable because of negligent enrollment and availability of the benefits. It is now only near the end of March less than 90 days into the year and has not been a long time. Prudence suggests to me that they should be allowed into the plan even on a pre-tax basis. An error is an error, a qualifying event is not always needed.

Why the PEO? Are you saying that the PEO is the plan sponsor or that the IRC recognizes an alleged co-employer arrangement? If the PEO is the plan sponsor, what is the relationship of this plan to the other plans that are co-sponsored with other clients? Would not a multiple-employer situation have created a MEWA or multiple employer plan instead of a single employer plan?

mbozek, What revenue loss concerns and by whom? If you mean The Treasury Dept (the Govt) all I can say is that that is the same thing I heard when section 125 plans and 401(k) plans came out. The 401(k) loss concerns were allayed by the realization that the deferral would eventually be taxed for a greater yield because of growth, provided the investments did grow. The section 125 concerns wre never allayed and that is probably why we still have "merely" Proposed Regulations that have not been able to stand up in the Courts, and which has now been aggravated by the Federal Gov. finally, after 25 years, putting in their 125 Cafeteria Plan.

An overall guide should be available from one of the national insurers such as United, Aetna, Humana or CIGNA. Try the large group or National account reps first. You might want to start your own guide by trying this link: http://www.insure.com/health/lawtool.cfm?C...FTOKEN=88329618

I am also trying to find out if such plans have actually been developed and are available, but there seems to be nothing beyond this reference in the ASPA testimony.

BCBS are not for profits usually. quite a few HMOs are also not for profit. Why the concern? Do you think that it affects the rates or benefits?

If the disability payments are part of a Salary Continuation Plan the I say yes. If the disability payments are from the insurance company and therefore not on the payroll, the answer is No. If the disabilty payments are on account of the personal physical injury or illness and not for the time absent from work, the answer is No. Pre tax deductions are really Salary Reductions and therefore must come through a payroll paying wages, salary or employee compensation for services (with a few exceptions).

papogi, In your research, What did you find under state law regarding the employee elections and salary deductions or reductions? There are apparently many state laws governing labor and payroll that conflict with section 125.

I have had a few emails requesting a link to the actual case, since the link in the above cite no longer links to the case. You can find the case itself here: http://www.insd.uscourts.gov/search_opinions.htm

How would you pre-tax it? There is no monthly premium, so you cannot do a POP. The fees for services are only due when used. The only way that I see is to use an FSA in which the amount would have to be pre determined, or use a 105 MERP, to reimburse the employee.

What is the difference between this case and Grande V. Allison? www.ebia.com/weekly/articles/2000/Caf000831Grande.html

susanyb, Why would you say that the employee is out of luck? From the responses given it seems 50-50, but the fact that the insurance company deemed it to be a 2000 procedure thereby making the co-pay a 2000 item, seems to be the swing vote in favor of the employee. I consider this to be not too different from the Grande V. Allison Engine case. The expense was incurred in 200 but the service was not completed until 2001, however it is the incurred that counts not the payment or the conclusion of the service.

A vast number of NQDC plans use life insurance or annuities which are all insured products. The protection from bankruptcy is a function of the plan design (Trust structure, ownership rights etc) not of the underlying products. You might want to consider getting advice from a competent person in the industry. Try Clarke Bardes at www.crg.comor www.crgworld.com

As I see it all apples are friuts but not all fruits are apples. All benefits plans are operational plans but some might serve some "strategic" purpose whether it be for a competitive edge, corporate image or otherwise. However, once the plan designed for whatever :strategic" purpose is put in place it becomes the operational plan. The benefits in either plan are the same. That which we call a rose would by any other name still be a rose.

It would appear that given that health insurance rates have usually increased each year, a COBRA beneficiary who is being charged at the 1999 rates is being undercharged. Why would they complain? If a beneficiary is getting Family coverage at the individual rate, Again, Why complain? Would you want them to retroactively pay any increase that they should have paid? In any event I remember that the rate must not exceed 102%, I do not remember anything that said it must be at 102%.

There are still some states eg NJ that do not tax deductibilty of section 125 amounts etc. These have to be reported in Box 13 as information and for use in calculating state taxable income if not already showing in the State section of the W2.

To repair the chipped tooth is covered. To make the newly repaired tooth match the others is covered. Why not regard the matching of all the teeth as part of the repair job. I do not see why you would not regard the whole job if done at one time to be a single "repair" job and cover everything. I equate this to doing body work on a car. If you had an accident and had to replace the right fender, the hood and 1 door, I am sure that you would find the color matching unacceptable and would want the whole car repainted so that the color was uniform. If we can regard the appearance of a car as being that important, how can we give less value to a persons appearance that will be disrupted if a partial job is done. The employee is not just getting it "bleached" for vanity, they are just taking the opportunity created by the repair of the chipped tooth to correct the damage done by the irregular appearance that the repair itself will cause.

Why would the client have an opinion from the lawyer that has no supporting basis or info?

Yes, the employer can contribute to an FSA and Yes the employee may also contribute through salary reduction and both can be to the same account. However, why would the employer want to contribute as much as $1,500 . Why would the employee need to contribute if there is already so much money in the FSA? What is the real purpose of such a plan design?