GBurns

I strongly disagree. Severance is employment related compensation whose calculation is based on wages and service etc. Severance packages are for terminating employees as part of their agreement to terminate, they are not for terminated employees. People who are being terminated as opposed to people who already have been terminated. It might be delivered upon termination or shortly after, but that is an irrelevant timing issue. In any case, if the Plan document says W2 wages is countable compensation, How can you selectively choose to ignore the amount that is clearly on the W2 and taxed as being wages/earned compensation at that? If instead the insurance company issued a 1099, then I could agree to not include it, but a W2 from the employer is a W2 to an employee.

If a W2 is something that is only given to employees and FICA matching is related to employee wages, then the person is not a terminated employee.

Are you sure that fiddling is covered for non-exempts ?

I have heard that Plan Sponsor is helpful.

Good reply John. But if a C corp and the Board does not want to pay the full cost, a cafeteria plan can be used to pre-tax the employee share.

I doubt that any sarcasm was intended. I almost made the same respponse with no such thought, just pointing out the obvious. I have also used Tax Analysts (sp) and BNA Management Portfolios.

Try Judy Diamond & Associates. One of their links is: www.freeerisa.com

I wondered about the general tone of the resoonses. The Forum is for Cafeteria Plans and the OP posed a question regarding 125 plans, but the responses seemed to have overlooked both.

I have never thought about this before, so never looked it up. How is the shareholding % calculated ? Authorized shares or issued shares or what ? Edit: How is it supposed to be calculated, in general ? The question is not directed at Dan, but to the general audience.

I did not think that ineligibility was caused by just being a shareholder but rather is triggered by being a 2% (or more) shareholder. What is the shareholding % of each of these persons ?

I don't get it. Payrolls are, as far as I have ever noticed, are paid AFTER the work is done. So payroll on January 1st 2009 is for work done in 2008. The work was done and the money was earned in 2008. Shouldn't this be on 2008 W2 ? If it is going on 2009 W2, I still do not see a problem. If constructive receipt causes it to be 2009 income then it is deferral from a pay advance. If you can make a acceptable deferral from partnership draw, SE advances etc, then why not from a payroll advance.

I am curious as to not only why a "newbie" would be doing this, but also why ? I also noticed that among the people that you have spoken to is "our department of state" ? What is that ?

If they are partners they are not eligible to participate in the section 125 cafeteria plan. If that is correct, what does it matter if they are 1% owners in the partnership ?

In some of the cases 32 states took action, in some of the cases only 18 took action. Not all states took action on all the cases. Some took action on all, some took action on a few. As for baseball, it is quite conceivable that 10% is physical and the remaining 90% is split with half of the 90% mental and half luck. Maybe that's what that baseball student meant.

Are you sure that all employees are salespeople ? Who answers the telephone, does the order processing, payroll, bookkeeping, order fullfilment etc ? Are you sure that ALL salespeople are highly compensated ? What about newer salespeople who are not yet up to par or underperformers ?

Sorry. It should have been 1.125-6 (a)(3)(iii) on page 43961 of the Federal Register version.

Why is there an HCE problem with law firms ? Aren't the HCE in law firms usually partners ? And aren't most law firms partnerships of some sort making the reference to 1% owners, moot ? I doubt that the separate plan idea would work in light of 1.125-6 (3)(iii) Other arrangements.

Reimburse the employee for what?

Is your LTD insured or self-funded ? I usually see LTD as fully insured and so there is no issue of over funding. What rationale etc has the IRS given ?

I do not understand what you are concerned or confused about. Supplemental means additional. Medicare is either secondary to employer provided coverage or it is primary coverage. If Medicare is primary, all it means is that the employer cannot provide additional coverage that pays for items already covered (paid) by Medicare. In other words, no duplicated coverage. Duplicating coverage and payments provide no allowable benefit to the insured and would only serve to enrich providers. As a matter of public policy, CMS is trying tocontrol unnecessary costs. Additinally since the initial medical expense is already paid by Medicare, there technically is no remaining medical expense for which the secondary (employer provided) coverage would be paying. So additional (supplemental) coverage serves no rational purpose if it covers the same as Medicare. You did not state why you think that an employer cannot provide an HRA or flex credits. Why not and What says so??

I hope your advice works out for your client. I can think about 10 cases where Florida took action on behalf of Florida residents who had problems with out-of-state policies. I also know of 18 to 32 states taking action in 3 to 5 out-of-state cases.

So what happens if the state regulations that govern the out-of-state group product dictate that notice be given ?

The new 125 Proposed Treas Regs: http://edocket.access.gpo.gov/2007/pdf/E7-14827.pdf Page 4 has a blurb on eligibilty.

A bad idea, aside from the fact that there are some taxing entities under whom it might be taxable. NJ as a state comes to mind and I recall that many Ohio munis also tax it. In such cases it would have to be on the payroll. FSA money is for the reimbursement of incurred medical expenses. The IRS has very often stated that an employer cannot advance or loan money in advance of or in anticipation of the incurring of the medical expense. RevRuling 2002-80 for example and I think there is reference and example in the Proposed Treas Regs.

Which means that no one can point out what you might have missed. This reminds me of another thread where the issue of the infallibility of lawyers was raised. In my state of Florida, we have both the Florida Statutes and the Florida Administrative Code with which to regulate insurance. There are other states, such as Texas, that have similar dual structure.. Often people look at 1 and forget about the other. There are also some issues that are vaguely or faintly addressed in the regulations but are addressed in the policy form etc that is approved by the State for that particular insurance product. Whatever is approved for the policy form etc become regulated issues under state insurance regulations making it not just a simple common law/contract issue or an ERISA issue but a state regulation of insurance issue. Also, some group products might be "out of state" products, so while not subject to the state in which sold are still subject to the regulations of the state of domicile or origin of the product.