GBurns

Then if you offer it to salaried only you face a possible discrimination issue and an availabilty issue.

What is the reason for including partners in your plan? If you offer the opt out it should be to both groups, anyhow.

Kirk, Would 2 separate plans work?

I know that you feel that the above references dont seem on-point, and I agree. I actually quoted you from the IRS CPE Manual on Cafeteria Plans, and that is essentially how they cite it. However, one of their top 2 experts explained the short cite and referred me to underlying reasoning. This is explained in Revenue Ruling 91-26 which is available from www.taxlinks.com. You might also look at the related 88-76.

Now you have a problem. You will have to visit your local public library or Law School library. I have mine in hard copy. Proposed Treas. Regs are not readily available with any of the law schools internet linkks or GPO Access because they are merely proposed and not really law.

You will need to do some research. Start with this thread : http://benefitslink.com/boards/index.php?showtopic=2238 I should have some info, when I find it I will let you know. My best recollection is that it can be done for all employees of eligible employers and I know of a number of states, hospitals, colleges and community colleges that have such plans for all employees and a few that have it for only seasonal and part-time.

What would you do if instead the employee who was healthy at the time they signed up for the policy, but now has developed a condition that would make them uninsureable? Is this Annual Renewable Term or not? If it is not : What is the position taken by the insurer? What are their requirements after policy issue and before the end of the contestability period? If it is ART then there is most likely a question on the application the answer to which would lead to a determination of eligibility by the insurer. The question of an employee's eligibility should not be a function of the employer. Why does it matter to you if the insurer decided to accept a nominal or minimal number of smokers as part of their underwriting? They probaby have a few smokers factored in anyway.

What is a "personal policy"? Is it an individual policy or is it a group policy? Nothing to do with who owns it or who pays for it.

No you cannot hold the employee responsible for the "excess". That is the risk sharing factor that allows FSAs in the first place. See Proposed treasury regulations 1.125-2 Q&A 7(a) and (B)(2).

Start with Proposed treasury Regulations 1.125-1 Q&A 4 which will refer you to IRC section 414 (B), © and (m). It also refers to IRC 401© regarding self-employed individuals. Then you might want to look at Treas. Regs 105 and 106.

I just love when it all comes together in a happy ending. Thanks for sharing with us. Good luck and best wishes.

Contribution to what?

Nothing happens to a Plan Administrator if no one files a complaint with the DOL or takes them or the employer to court. If they alter the documents during an Appeal and your lawyer does nothing you should consider suing your lawyer. People get away with breaking the law if no one enforces it. I would consider giving info to one of the aggressive class action law firms to see if it could be made big enough to warrant their attention.

What happened? Did you resolve your problem? Share the news.

A quick answer is No, they are in the same plan. But you still did not answer the valid question that Kip asked.

Are you trying to cut the cost from the insurer or are you trying to cut the employer's cost? How about posting this on the Health Plan section?

The audits that I have seen had the purpose of ensuring the integrity of the claims adjudication process, thereby keeping the TPA on its toes and also subtly warning the employees and providers not to pay claims. It seems the prudent thing to do when considering fiduciary issues. There should be no need to think of it or to cause the employees to think of it as being targeted at them. In fact the most likely result is that there will be much more that was improperly paid to service providers, either directly or through bad COB, than was paid to the employees. I suggest that you verify with the Audit firm the most frequent outcome of their audits, that should put your mind at rest by showing that there will be little effect on the employees. In fact you might discover that the amount related to the employees will be small enough to write off.

From what I have seen and read I agree. Considering when the documents were done they should need up grading. You might find that someone else might upgrade the documents at a better price, although price should be secondary to quality. It might also give you an opportunity to get an opinion as to the quality of the documents. I have noticed a large percentage of questionable and deficient documents out there. In fact, I am now tending to agree with MHM who claim that nearly 90% of the plans that they take over are defective.

Why would the employer send premiums to the TPA and not the insurance company? The termination of coverage for non payment pf premium is a decision of the insurer not the employer and definitely not of any TPA. What do you think would happen if the TPA shot off their mouth and told providers that there was no coverage and it turned out that the employer had sent the premiums directly to the insurer but never thought it any of the TPAs business so never told the TPA?

When an employer pays the premium for a health plan the value of the benefits received by the employees is excludible from the employee's gross income as per 105(B). It has nothing to do with 125. If an employee pre-taxes, through a salary reduction agreement, their portion of premium or any additional premium for an eligible plan, that is usually done under 125 so that the amount can be treated as employer premium to meet the requirements of 104, 105 and 106. If the employee has a choice between cash and a qualified benefit, 125 serves to provide relief from the constructive receipt rules of 451 and allows the elected amount to be treated as an employer contribution. 125 does nothing but provide relief from constructive relief Prop. Treas. Regs. 1.125-1 Q&A 6, 9 and 15, 1.125-2 Q&A 2, whereas, 105 provides the tax free nature of the benefits received, 1.125-1 Q&A 11, 16 and 17, 1.125-2 Q&A 4(a)1 and (2), Q&A 7, . In general you cant have a 125 plan without a 105 plan.

The E&Y Tax Alert and the William M. Mercer Grist Report debunking the Redwood Group, Inc, "version" of the Health Incentive Plan (HI Plan) are now only available from their subscription only sites, However, I do have these and previous articles available.

The amount of material that is available on the “bootleg” version of the Health Incentive Plan (HI Plan) is too extensive to be posted. I have been giving various pieces to some who have contacted me. The pieces vary by the reason that they need the info, prospective user, agent, advisor etc. The decision as to which is “bootleg” or not will be up to the individual who looks at the facts etc. I do not know what “due diligence” material you looked at or from whom, but I do suggest that you investigate and verify ALL claims thoroughly. 1. When, how and by whom was the plan developed? 2. When and how did the promoter, legal advisor, agent etc get involved? 3. What is the plan reimbursing or making the payment (the Incentive Allowance) for? If the claim being made that the tax free payment is not a reimbursement for the expenses of medical care, What is the process for claims submission, claim substantiation and claims adjudication? Is the claim being made that there does not have to be such claims processes because the pre-tax salary reduction is an expense of medical care as per the wording in Section 213(d)? This is one of the main false claims of the “bootleg” plan. Section 213(d) is in Part VII which is titled “ Addition Itemized Deductions…. “ whereas Sections 105, 106 and 125 are in Part III which is titled “Items Specifically Excluded from Gross Income”. Deductions are taken on a tax return and cannot be pre-taxed. Exclusions are taken pre-tax. The pre-tax deduction cannot be a reimbursable expense. There are many other reasons why the pre tax deduction (reduction) cannot be an employee amount. One is that 105(B) and 106 allows exclusion from the employee’s gross income of the premiums paid and the benefits received, but only if paid by employer contributions. That is why the amount has to be treated as employer contributions. In addition the amount of the salary reduction was never constructively received by the employee and therefore was ans has never been employee money. To treat it as employee money cause a whole new set of problems. I would hate to be taxed on the economic value of the medical treatment etc received. 4. Who is the TPA or Claims Administrator? Are they licensed in your state or any state for that matter? 5. Have you checked with your state DOI regarding any current ongoing investigations involving the promoter or that plan? Currently I am aware of 15 states that are investigating for unlicensed entities and insurance fraud violations. Georgia is not yet one of them. 6. Have you checked with the specialists (not the telephone reps) at the IRS. Mr. Beker or Mr. Zech will speak to legal representatives only regarding their investigation that has led so far to the inclusion of the plan in the Treasury Dept/IRS 2001 Priority Guidance Plan for the issuing of guidance as to why that plan does not work. 7. Have you read the numerous industry newsletters that have addressed that plan and its predecessor the MR106? The May 14, Grist Report by William M. Mercer addressed the plan and the promoter www.theredwoodgroup.com. While these articles have not been very good or accurate they should still serve to warn prospective users to investigate thoroughly ALL claims made by agents and the promoter. The sales literature etc all outline an Accident and Health Plan/Medical Reimbursement Plan that reimburses the expenses of medical care but in operation the “bootleg” plan has no expenses that are reimbursed. The only thing that is done is a payroll recalculation to reimburse the pre-tax deduction which, for many reasons, is not a reimbursable expense. There is much more to the issue, but I don’t think that I should take any more space. The point is What you see in the presentation etc is not what you get. Many clients have their legal advisors okay the concept, which is quite legal, but then they never get them to look at what is delivered. How do I know all this? I developed the original plan and filed the patent applications. That is why I am the central figure in the investigations by the IRS, the DOL, the FBI, the USPS and some of the state DOI.

The amount of material that is available on the “bootleg” version of the Health Incentive Plan (HI Plan) is too extensive to be posted. I have been giving various pieces to some who have contacted me. The pieces vary by the reason that they need the info, prospective user, agent, advisor etc. The decision as to which is “bootleg” or not will be up to the individual who looks at the facts etc. I do not know what “due diligence” material you looked at or from whom, but I do suggest that you investigate and verify ALL claims thoroughly. 1. When, how and by whom was the plan developed? 2. When and how did the promoter, legal advisor, agent etc get involved? 3. What is the plan reimbursing or making the payment (the Incentive Allowance) for? If the claim being made that the tax free payment is not a reimbursement for the expenses of medical care, What is the process for claims submission, claim substantiation and claims adjudication? Is the claim being made that there does not have to be such claims processes because the pre-tax salary reduction is an expense of medical care as per the wording in Section 213(d)? This is one of the main false claims of the “bootleg” plan. Section 213(d) is in Part VII which is titled “ Addition Itemized Deductions…. “ whereas Sections 105, 106 and 125 are in Part III which is titled “Items Specifically Excluded from Gross Income”. Deductions are taken on a tax return and cannot be pre-taxed. Exclusions are taken pre-tax. The pre-tax deduction cannot be a reimbursable expense. There are many other reasons why the pre tax deduction (reduction) cannot be an employee amount. One is that 105(B) and 106 allows exclusion from the employee’s gross income of the premiums paid and the benefits received, but only if paid by employer contributions. That is why the amount has to be treated as employer contributions. In addition the amount of the salary reduction was never constructively received by the employee and therefore was ans has never been employee money. To treat it as employee money cause a whole new set of problems. I would hate to be taxed on the economic value of the medical treatment etc received. 4. Who is the TPA or Claims Administrator? Are they licensed in your state or any state for that matter? 5. Have you checked with your state DOI regarding any current ongoing investigations involving the promoter or that plan? Currently I am aware of 15 states that are investigating for unlicensed entities and insurance fraud violations. Georgia is not yet one of them. 6. Have you checked with the specialists (not the telephone reps) at the IRS. Mr. Beker or Mr. Zech will speak to legal representatives only regarding their investigation that has led so far to the inclusion of the plan in the Treasury Dept/IRS 2001 Priority Guidance Plan for the issuing of guidance as to why that plan does not work. 7. Have you read the numerous industry newsletters that have addressed that plan and its predecessor the MR106? The May 14, Grist Report by William M. Mercer addressed the plan and the promoter www.theredwoodgroup.com. While these articles have not been very good or accurate they should still serve to warn prospective users to investigate thoroughly ALL claims made by agents and the promoter. The sales literature etc all outline an Accident and Health Plan/Medical Reimbursement Plan that reimburses the expenses of medical care but in operation the “bootleg” plan has no expenses that are reimbursed. The only thing that is done is a payroll recalculation to reimburse the pre-tax deduction which, for many reasons, is not a reimbursable expense. There is much more to the issue, but I don’t think that I should take any more space. The point is What you see in the presentation etc is not what you get. Many clients have their legal advisors okay the concept, which is quite legal, but then they never get them to look at what is delivered. How do I know all this? I developed the original plan and filed the patent applications. That is why I am the central figure in the investigations by the IRS, the DOL, the FBI, the USPS and some of the state DOI.

I recently checked with some of the largest 401(k) investment and plan providers to small group and could not find one that would provide a plan as you described. I did not bother to go into whether or not the IRC allows it because even if it did and you could not find a provider or administrator and trustee etc you would not be able to set up the plan. However, I did get the feeling that it could be done in certain restricted circumstances by some of them, but they just were not set up to do it. There was an article in the August 17, 2001 WSJ in the Mutual Funds section titled " The One-Man Band gets A Gift From 401(k) Rules". The article gives some leads to a few potential providers who are thinking of providing this. Maybe they can help. You might also want to ask Paychex they are probably the largest provider of services to very small groups.

rcline46 The point that you seem to miss is that you say that whenever someone says no they have to support their position. Why is it that when someone says yes they dont have to support their position in the same manner. As I said Fair is fair. It is only logical that all positions should be supported. Length of service does not experience give nor competence exhibit. As to the snide remark about doing battle etc, I will let that pass, I am sure the readers of this Board have their own opinions that decorum demands that they not comment. It is sometimes better to not say something than to open one's mouth etc etc.