GBurns

You lost me somewhere. 1.105-1(e) gives a clear mathematical (mechanical) formula, just plug in the numbers where they tell you. 1.105-1 deals with "Amounts attributable to employer contributions." It applies to all accident and health plans. The point at which a self-insured welfare plan becomes discriminatory is a different issue so there is no I.e as you put it in your post. What are you trying to find out?

For purposes of an FSA section 213 only provides the definition of what comprises a medical expense, it does not provide a list of expenses etc. A medical expense under 213 is an expense whose primary purpose is the diagnosis, cure, treatment, mitigation etc. etc. Section 213 does not, per se, dictate or provide any "analysis" of what is reimburseable under the HFSA. Whether the item used is a drug or biological is irrelevant. What is relevant is what it is used for. I suggest that since you are not able to follow what is set out in Pub. 502 or in the Proposed Treas. Regs, that you look up IRS Information Letters 2000-0410 re Treatment by Christian Scientist and 2001-0102 re 213 Expenses. Unfortunately, these are PDF files and so I cannot attach them to this response. These Information Letters might be obtainable on the EBIA website www.ebia.com or if you give me an email address I will forward them to you.

Look in IRS Publication 502. What is the relevance of a definition of drug or biological anyhow?

What did you find to be not entirely accurate?

Aside from the issue of an SPD for the 125 plan, do you give an SPD for the underlying qualified benefits?

I see that they remove the older files to the clerks office for archiving. Unfortunately the document is in PDF format so I cannot attach it to this post. If you send me an email with a return email address I will send you the PDF file with the text of this case. In the meantime here is a summary that was done by Spencer one of the leading information publishers in the industry, their website is www.spencernet.com

The difference or the new employee contribution amount (depending on how you look at it) is still pre-tax under the section 125 plan. A new salary reduction depends on the wording of the existing SRA. Some SRAs have a fixed amount and some allow an increase or decrease without a new agreement. Check to see what your existing SRA says.

A lot of what claims administrators or FSAs do is very questionable. Look at the cited case and compare your situation to it. If you think it is comparable give a copy of it to the Claims Administrator and hint that you are considering pursuing in based on the case such as this. There are a number of other similar cases. Let us know the outcome. A Lesson In Drafting: Court Orders Health FSA to Reimburse Expenses Paid But Not Incurred During the Plan Year [Grande v. Allison Engine Co., Inc., Case No. IP00-0378-C-H/G (S.D. IND. 2000)] For a copy of the case: http://www.insd.uscourts.gov/opinions.htm (scroll down; the case is listed under Judge Hamilton).

What the duties of a TPA is is whatever the TPA is contracted to do and which they decide to do. I suggest that we hope for some input from some of the many TPAs who participate in this Board. One of the problems that the public faces in calling the IRS is that they do not realize that there is no guarantee of any expertise from the telephone customer service person who takes your call. The Tax Code is difficult enough for seasoned trained professionals, how much expertise can you expect from a random CRS? Various reports including reports from the GAO have claimed that as much as 75% of the answers given are wrong even when being read from the CSR guide. I suggest that you look at the governing Treas. Regs. 1.125-2 Q&A 7 (5) and (6) which cover Claims substantiation and Claims incurred. They clearly state "only if the participant provides a written statement from an independent third party.." and "and not when the participant is formally billed or charged for, or pays for the medical care." There is no requirement that payment be made therefore there cannot be a receipt. The determination that a written statement has been presented might not be within the jurisdiction of the TPA but the employer, with the TPA being simply a service provider not a claims adjudicator.

Sandra, Can you provide a cite or reference that would explain why the COBRA rate should be used rather than some other calculated rated? Also, do you have any guidance regarding how to calculate the COBRA rate?

Now that is a whole different ball game. All accident and health plans, including STD, LTD, medical, dental, vision, cancer, FSAs etc etc are all 105 plans. The Health Incentive Plans are supposed to also be 105 plans. Note the use of the word "supposed". There are 2 plans being sold under the same Health Incentive Plan name. Which one are you talking about? The one from the Redwood Group (TRG) has been under investigation by the IRS and Treasury Dept and was included in the 2001 Priority Guidance Plan for the issuing of a ruling explaining why that "version" does not work. It has also been the subject of many articles from the EBIA, the ECFC, Ernst & Young, PwC and William M. Mercer warning that it does not work. TRG, the Redwood Group, the TRG Marketing Plan and their activities involving their HI Plan is also the subject of over 30 current state Dept of Insurance investigations. This issue has been addressed, recently, a number of times on this Board and related Boards. You might want to do a search to read the previous posts.

Well, you said that the client called in you did not say the employee did. In any case it is the employee who is not to make frudulent claims and not to make ineligible claims. Amounts in excess of actual claims is gross income to the employee, so it is the employee's area of control.

Good question. The audits reports that I have seen place the onus on the Plan sponsor (the Employer) for underwithholding and misreporting taxable income and a little burden on the employee for underreporting. The emphasis is on the employer because that is where there is more money to be gained. It is possible that even if the employee reports the ineligible reimbursement on his tax return, it might not create any new tax because of exemptions and deduction etc. However, the employer was supposed to withhold FICA, match the FICA and is liable for penalties for not doing so. Also it might not be enough for contesting so the IRS wins even by default. The TPA as a service provider carrying out the instructions of the Plan Sponsor who usually is also listed in the Plan document as the Plan Administrator, is not liable in this regard. I would hope that an affected employer would sue the TPA for poor professional advice and conduct etc.

I agree that verbal should not be adequate, but note that the poster said that the client calls it in not the employee. Maybe the TPA is relying on the client as the substantiating third party which is all that is required of the TPA. When the claim is called in the expense is specified which is when the eligibility could be decided. A bad system but not illegal.

I have not found that there is any required time period, but, health insurance quotations have an expiry date and the health plan has an enrollment period that must be finished before the plan start date. These dates would automatically provide a limit to the time given for review. If the employee does not respond in time they would miss the enrollment.

Why would the TPA care that an employee committed fraud? I am not that familiar with DCAP but as far as medical expenses go, the first question is... Why do you think that the code requires a receipt for medical expenses??? While it is wrong to make medical expense reimbursement without substantiation, there is no law requiring that reciepts be submitted, in fact the law does not even require that the employee must first pay before reimbursement. So it is possible, by law to get reimbursed without a receipt. It is also sensible that the employee keep receipts in case of an IRS audit. Your IRS audit is no concern of the TPA. If the TPA keeps your receipt what would you use in an audit? I am sure that the TPA meant that you should keep a copy if you sent in the original or vice versa. In a nutshell, you keep copies of your receipts and the law does not require the TPA to get receipts.

There a quite a number of "plans" that fit the so-called Defined Contribution category. The National Center for Policy Analysis, in trying to produce a paper on the subject, decided to try and group them into models. I think the ended up with 5 broad categories with many different variants in each model. Managed Care magazine tried the same thing and ended applying the term Defined Care, because there were so many varieties of plans and concepts that fit "Defined Contribution". Even within the Ehealth phenomenon there are variations. Definity - Vivius - Myhealthbank etc etc are all different. Which specific one are you talking about or are you talking about a fixed amount benefits credit Section 125 Cafeteria Plan or the Health Incentive Plan?

pax's post raises the question of what periods did the prior posters smooth? I got the impression that they smoothed only 1 year with a method applied for that 1 year only and did not bring into play the "same actuarial assumptions and methods" used in the proir year. How was the smoothing accomplished and applied?

No. The expense does not have to have been paid. However, it must have been incurred, in other words the day care must have been already provided. In addition, the plan you are under might require the submitting of a receipt for reimbursement, which would mean that the bill would have to have been paid or the provider be willing to trust you with a receipt.

The term Section 105 plan is very vague. What do you mean by a Section 105 plan?

I do not see where the use of the term or word "coalition" is proper. My major concern is whether the "association" is eligible to offer benefits to employees. The employees are not employees of the association so I question whether they are offering benefits to employees or are they offering benefits to the association members. Vastly differnt tax issues. My next concern is whether or not the grouping causes the creation of a MEWA and what are your state laws regarding MEWAs. The next concern is whether or not the "association" meets the state requirement for associations and the requirements of associations formed solely for this purpose. After all these have been resolved, Then I would address the other issues and raise questions regarding the level of control over the association and TPA that is available (not exercised) by the employers. This level of control etc will probably decide the fiduciary responsibilty issue. I am also concerned that there was no SPD given to the employees. An SPD is not required in an association plan because it is not a plan for employees. An Outline of Coverage is sometimes used for associations and what you described sounds like one. So that again raises the question of whether this is an employee plan or an association member plan.

Since it is not for a medical reason, not by prescription and not for the care, treatment etc etc, but is arbitrary and capricious etc it is not an expense of medical care and therefore not a reimburseable item. Unless SLuskin eventually finds the reference.

While 100% of the plan participants are your client's employees I still see the issue of contributions that are not employer contributions from an entity that is not the employer. How do you account for these ineligible contributions? If these employees worked for the unrelated entities for more than 1 year does that not raise other issues? If your client has accepted these contributions over mulitple years and reported them as employer contributions would the plan not be disqualified for, among other things, being in operation a defective multiple employer plan? Whether or not the other entities deducted their contributions (for tax purposes) what did your client account for the monies received as being?

Since the rules have not changed, I have to ask amm19 to explain what they mean.

Who sells these 401(a) plans? I keep hearing about such plans but have not seen any marketing activity.