GBurns

Let me try some simplistic explanations. Employee benefits are provided under an employee benefit plan which is an arrangement or agreement by the employer to provide the agreed or promised benefits. These benefits may be insured or not insured (self-funded/self-insured). These benefits can be either pension benefits or welfare benefits. The welfare benefits can consist of health/medical coverage, vacation etc. These underlying benefits can be insured or not insured (such as an HRA). In other words, the HRA is not the welfare benefit plan nor is it the employee benefit plan. It is just 1 of the underlying benefits which requires its own documentation and which must also be allowed and referenced in the governing plan. Treas Regs 1.105-5 Accident and health plans states in 1.105-5(a): "In general, an accident or health plan is an arrangement for ......". So as far as tax issues go an arrangement and a plan are the same. Treas Regs 1.105-11(b)(i) states that a self-insured medical reimbursement plan is a separate written plan. ERISA requires that every employee benefit plan shall be established and maintained pursuant to a written arrangement. The start of the legal obligation has nothing to do with the taxation issue.. Medical expenses incurred or reimbursed before the date of the plan do not fall under the plan. In other words you cannot buy house insurance after the fire has started. The consequences could include disallowance of the tax deduction of not only the reimbursement but also of other arrangements that might be linked. There also is the danger that ther would be automatic examination to see if non-compliance was systemic, which in cases like this is quite possbile. Bu that is not the only problem, examinations for systemic issues tend to expand exponentially into many other areas,, leaving you very very exposed.

Based on your wording I have to wonder what you understand "arrangement" and "plan" to mean. Reimbursements are either tax free at the time of reimbursement or they are not. You cannot, in general, go back and make it so unless you are willing to "cook" the books. Reimbursements make before the effective date of the plan are not subject to the plan nor to any tax benefits derived from use of the plan. Retroactive adoption is generally not adviseable, but let a legal advisor opine on whatever you decide to do.

No. And I am also fairly sure that your your bylaws do not allow the CEO "generic authority" especially for something like this. Signing first then getting consent afterwards is dangerous. While you can back date some documents, you cannot do all. For example the date of the Board meeting might conflict with the other dates involved. I saw 1 case where the date of the first plan contribution took place before the date of the Board meeting. I saw another where the date on an insurance application and first rate quote conflicted with every possible Board meeting. Then there is the question of not being listed in the Minutes. And Yes, all Boards including those of small companies must keep minutes of meetings. Don't keep minutes at your oown peril. Having always done things that were/are not allowed does not mean that you will always get away with it. The consequences are not worth it.

Calling the bank and taking an answer from just anyone will usually get you a wrong answer. Make sure you talk to someone with authority, knowledge and the willingness to look into the matter and provide support of their position.

The decision to adopt/put into effect any new plan is not usually regarded as being within the day to day operation of a company and thus not an executive decision. This is why providers of plans require a Board Resolution adopting whatever plan it is. It has nothing to do with the plan or the IRS. It has to do with the corporate by-laws. The only way around the Board itself adopting is a resolution authorizing the executive to take the action. One resolution to avoid another resolution seems a waste.

The design of a pay stub is beyond the control of the employee. If a pay stub has only 1 line for 401(k) deductions, the employee has no way of knowing what the deduction is for. Employees usually assume that "regular' deductions are relatively accurate and do not compare the entries on each pay stub with copies of time sheets, order slips, salary reduction agreements etc. We do not know how much info regarding 401(K) salary deductions etc are on this pay stub, so we do not know how much this employee is to blame for not having noticed that there was n change in the amount of the deduciton, assuming that there was a noticeable change in amount. As a result I am hard pressed to immediately start blaming this employee or even assigning any fault to anyone, without more details. ************** Mark See if the management company will give you a copy or proof of what they used to notify your employer. They might never have been properly notified. I do not see how corrective steps can be taken without knowing where the system failed. I also would get a copy of the SPD and the Plan Document to see how the employer wassupposed to treat a loan payment delinquency etc, how a loan default is treated and when the 1099 should be issued. I feel that it is quite possible that proper procedures were not followed. I also questionwhether or not the 1099 should have been issued so quickly, but I really do not know. You should have this info before you threaten to or call the DoL etc just to make sure you are coherent and have some basis for complaining. A clear position always appears stronger than a vague one.

Now you have me really puzzled. ak2ary stated "..what you have described ... is a pop-up.." to which you responded that you ". should have thought of a pop-up benefit." How can you not have thought of something that you yourself described ? What have I missed ?

I have never seen a Plan Document that did not allow the employer to amend its plan. Are you sure that you are looking at the PD for the health plan / employee benefit plan ? Such a change in employer contribution should satisfy the requirement for a substantial change in cost allowing the employeeto change elections etc.

Hasn't 1.125-1 been repealed and replaced ? What do the new Proposed Treas Regs now say about the issue ? The IRS has opined in many PLRs that not being able to cash out or have a choice of cash, makes it not be deferred compensation. In any case it seems that pre-tax contributions cannot be made to a VEBA for pre-funding retiree health benefits according to what i have always heard. I suggest doing a Google search using the phrase "employee funding retiree health". You will see a number of links either addressing the issue or linking to existing VEBAs used for retiree health benefits. Those should shed some light n the issue for you.

I am not sure I am understanding your concerns on what seems, to me, to be a quite commmon practice. I also wonder why your client would not want to use CALPERS or one of the other long established and proven entities. What does "permitting individuals to choose higher contributions .." have to do with 105 ? Why do you consider the taxation of the employee election to be a 105 issue rather than a section 125 issue ?

What do you mean by "uses ..... to offset.." ? I thought that the contributions are employee contributions that are immediately and fully vested.

Who is offering large size GIC's ? The topic is PBGC and large unfunded penson plans. What Stable Value Funds would be available ? How would they help pension plan investment managers/Trustees ?

The employer messed up. I suggest that QRDO's solution be considered. A TriCare reimbursement plan following Rev Ruling 61-146 and new Propsed Treas Regs 1.125-2(m) (I think) could be considered. Why was the Tricare premium not pre-taxed through the cafeteria plan just like any other medical or health plan premium instead of trying to go through the FSA reimbursement routine ? I do not understand what you mean by "individual premiums are not offered through the POP section ". What says so ? How then do you handle AFLAC type supplemental policies ?

By the way, How did the employer tell this employee ? In writing ? On enrollment materials ?

What does the SPD say about insurance premiums ? You cannot reimburse premiums through an FSA. But why is there a need to reimburse ? Why aren't the premiums being paid through the POP section of the cafeteria plan? Does this person also participate in the employer's medical plan ?

BeBunk Re-read ALL the posts and stop getting hung up an emotional issues. I would hate to see the judge take hard line because of you possible attitude and demeanour and decide to "show you" something.

Whatever the particular line asks for, actives, retired etc. If you read the instructions to mean that an active is anyone eligible rather than meaning a enrolled participant, that is your decision. Usually everyone gets the information, but that is sometimes for simplicity and safety. If you have 80% participation, 85% eligible, why spend time sorting out the few remaining people ? What happens if, in sorting, a mistake is made ? It is cheaper, easier and safer to send the SPD and SAR to everyone.

Marriage certificate, birth certificates, guardianship papers, sworn affidavit are what I see, but tax return ? Is there a law that allows an employer to ask to see an employee's tax return ? What do you do if the employee refuses to show tax returns claiming privacy laws ?

You seem to mixing the disability payment into the pension/retirement benefit. As a result I am not sure what you are asking. As far as I recall, a disability payment is either a separate benefit (ancillary) or it has a pension offset. The pension benefit is always accrued, but I do not recall seeing an accrued disability benefit.

It might help if you tell us what sort of Plan it is and whether public or private sector.

"You should still be notified " as in being told prior to making a choice and preferably before the effective date of the change in options.

What is the perceived benefit of this arrangement ?

Andy What a way to destroy a thinking person's weekend. There probably were some people who were looking forward to having the week get off to a calm start hoping that any G-20 action would help. Here comes Andy blindsiding everyone by pointing out the elephant that was standing in the corner getting ready to charge the room. The PBGC failure would probably be more catastrophic than anything else so far. I wonder if there was any damage caused by any of the recent failures. Any would certainly put them close to the edge.

DNH What sort of taxes would be withheld from S corp distributions ? Distributions/dividends are not W-2 income, so I do not understand the request for a cite ? Cite regarding what ?

I am somewhat confused by the entire post. The health insurance plan is not the cafeteria plan. They are 2 separate things. The health insurance is not the employee benefit plan. The employee benefit plan is not the cafeteria plan. Any employee can pay after tax or pre-tax if they are eligible for coverage under the terms of the employee benefit plan and the policy terms of the health insurance coverage. If an employee is paying insurance premiums after tax, it has nothing to do with the cafeteria plan. An employer can pay for or reimburse insurance premium and/or medical expense frm a plan. If paid from general assets it must be according to a plan. I think that you are misunderstanding the meaning of "plan". It is simply an arrangement usually in writing. An employer can have separate health plan for part-timers only. The above are simplistic because I am not sure that I understand. What undustry or type of business would be helpful in order to possibly give you examples of what others are doing.