GBurns

The OP stated that this was not an employee only issue, the coverage would be spouse and employee and that they were interested in reimbursing for the cost of this additional coverage, however much that might be. But, there is also the complication which would be caused if the spouse's coverage tiers did not include an "Employee and Spouse" but instead had "Family". How would the OP know how much to reimburse for their employee's portion? I think that the OP could get some guidance from the public sector plans.

hr for me raises some very important points to consider even if you decide to reimburse your employee since it is not feasible to reimburse their spouse's employer, anyhow. You would only be able to reimburse your employee AFTER proof of the expense is provided. However, the employee most likely might not be able to get usable proof, because all that there might be is the line item on the spouse's paystub. A cash out option might be what you really want to offer. The best examples are found in the public sector, especially with the large school districts, universities and state plans. Take a look at those in your state.

A trap that many fall into is to forget that by reducing FICA also reduces the eventual SS Retirement benefit and by not paying into the Medicare Fund might also cause a future problem. I have not seen any retirement investment that beats the "return" from paying into SS through FICA. I have not seen any retirement investment that beats the "return" of SS Retirement Benefit PLUS Medicare. Considering the cost of health care coverage at older ages, Medicare is a great bargain. I suggest that you also look at the overall end result and not just focus on reducing current tax liability. Have you seen any proof of, or have you even seen, the actual historical performance of any 403(b) product ? Remember that past performance is not an indicator or guarantee of future performance. When you select your 403(b) investment and amount, use the SS Calculator on the SSA website to project what his SS Retirement Benefit would be if he instead contributed.

I have never seen anyone "reimburse the spouse's employer", Are you sure that this is what you want to do? If, Yes, I must ask Why? Usually the spouse would be charged by her employer for the additional coverage and you would reimburse your employee for the additional cost incurred by their spouse.

Look to your agreement. Almost every minimum funding arrangement that i have seen is regarded as being fully insured.

Doesn't that depend on the type of insurance policy and its "investment account type" such as allocated, unallocated or pooled? IUL, VUL, VL, GVA and others have pooled separate accounts. If the cash value is part of the insurance company's general assets and therefore subject to its creditors, How can it be treated as a plan asset? From previous discussions: http://benefitslink.com/boards/index.php/topic/30274-reporting-cash-value-of-life-insurance-policy-in-retirement-plan/ http://benefitslink.com/boards/index.php/topic/15630-question-on-schedule-i-financial-information/ http://benefitslink.com/boards/index.php/topic/21010-ins-cash-value-reported-on-the-5500/

Isn't it likely that there would be a timing conflict if the SAR is mailed with the Q4 Account statement? It seems that the SAR must be provided "Automatically to participants and pension plan beneficiaries receiving benefits within 9 months after end of plan year, or 2 months after due date for filing Form 5500 (with approved extension). This might not fit with the timing of the Q4 Account Statement, especially if participant directed accounts.

That few participants read what is sent to them should not be a concern for a fiduciary, when regulatory compliance is the issue. But, as you point out reducing expenses should. Many decisions place fiduciaries between a rock and a hard place.

Chris; I think that you should give the points raised by hr for me some thought. I do not recall that the Cash Value of LI policies are reported on 5500s or anywhere, however, premiums, death benefits and distributions are.

Doing them together might leave the door open if a proof of mailing issue arises. It is always better to have separate mailings for each item.

I think that it depends on the level at which it is being wrapped. I keep getting different definitions of "documents" etc. The following is a simplistic explanation of what I mean. There is at the top level the "Employee Benefits Program" which states what it is that the company is offering. This would include retirement, plans, vacation plans, H&W plans etc. The second level is the description of "How" these items will be made available such as whether through a CBA, A VEBA, self insured or fully insured etc. The third level describes the "What" of each item. Each of these levels has "documents" and each item could have its own separate describing or explanatory "document" or could be a section within an all encompassing "document" which "wraps" them all.

I have not noticed anyone doing this. Why does HR think that this is: 1. Legal? 2. Cost effective? 3. A good idea?

NO., you should not be okay with this. Medical and prescription insurers do not provide SPD's, they provide product descriptions and Outlines of Coverage etc. I have never seen an insurer's information that met the SPD requirements of ERISA and now we have ACA. The Medical and prescription insurers are how the Plan provides its coverage. They are service providers to the Plan. They are not the Plan. The SPD is a Summary Plan Description, in other words, a summation of the Plan Document.

While there might be law firms which plays such games, in the private sector/business world this is not usually possible, not only because of the consequences, but also because of the difficulty of hiding the name of the partner in the name of the business. I expect that soon, a few law firms will find out what "substance over form" means.

While you might be able to exclude them from the plan, I must warn you against trying to keep them in "contract worker" status. Employee misclassification can carry severe penalties and you have said that the IRS has already ruled on the issue. Exclude them as employees if possible, but they can no longer be "contract workers" or "independent contractors".

I suggest that you consider using a lawyer on this one. mbozek referenced a spousal waiver, but I do not see that his cite is applicable: Q-27: Are there circumstances when spousal consent to a participant's election to waive the QJSA or the QPSA is not required? A-27: Yes. If it is established to the satisfaction of a plan representative that there is no spouse or that the spouse cannot be located, .... " You said that "information surfaced that would indicate that the participant was still married, but probably estranged from his wife." which could go either way if you need to establish whether or not you should, by reasonable standards, know that there was a spouse. But, you also said that she signed a spousal waiver after the death. So in reference to mbozek's point, there is a known spouse and you already do have a spousal waiver, even though it might be inapplicable. You also should be able to locate her through the US Embassy of the country to which she has returned. I do not understand why a spousal waiver signed after the death of the participant would be valid. I thought that a waiver had to be executed prospectively. As Bird asked What is she waiving? She could not be waiving consent to the participant's election of a QJSA or a QPSA because the participant is already dead and benefits are now payable or should have already been paid. So what did she waive and did she know what she was signing, if in fact, she really did sign some sort of waiver. I have some suspicions about her signing a document that is not notarized and which might not be applicable. Did she get this "waiver" and any instructions from you or the plan administrator? Is she aware that the benefits normally should have been paid to her long ago? Why was the distribution not done years ago or escheated to the State ?

Whereas, from an accounting, auditing or IRS or DoL dispute resolution. point of view, it is usually much better to handle when each entity or thing can be identified or segregated under its own indentifying number.

What is there that allows this partner to get a 1099? I know of no way that a partner could also be an IC. Partners get a K-I and that is the end of the story.

FCG. I add to MoJo's comment, just because you/the Plan states that ERISA governs the Plan does not make it so. There can be challenges to almost anything, especially since ERISA does not define everything. Why leave a door open, which could be used against you? Just choose your state of domicile, so that any legal challenges will be local. It is much easier to handle a local case, than a case in another, maybe even distant, state.

If you frontload, it must be credited to the employee at the same time, otherwise front loading makes no sense and really did not happen and would not be deductible by the employer, absent the use of a Trust. As far as I know, the funds have to be deposited before the expense is incurred. The employer cannot and should not be making deposits in response to the expenses.Accounts must be pre-funded.

This makes no sense. The deducted amounts were sent to a closed account, which means that they were never accepted or credited to the named account (now closed). The money is either still in the employer's Accounts Payable (Payroll Payable), just like any uncashed check, or it is in a Suspense Account at the entity which provided the HSA account. This is just like any other check that is not received or is not cashed. The audit trail is similar and there should be no problem in finding out where the money is, since the are only 2 places where it could be. Since this is a salary reduction done through your cafeteria plan and subject to those change of election rules. Closing the account to which the funds are to be deposited does not cause a change in election. The salary reductions continue for the election period. Where do the funds go, now that the original account is closed? I suggest that you inform the employee, in writing, of the requirement of an account for the deposits. Usually, I see an agreement between the HSA holder and either an HSA Bank or Administrator. This agreement would give instructions regarding what to do in a case such as this. Usually, an account can be opened on behalf of the HSA holder. Have you seen any such Agreement? Have you informed the HSA Administrator of the situation?

If this employee have a choice between cash and qualified benefits, he has to be in the cafeteria plan. Even if you take this Key Employee (HCE) out of the cafeteria plan he would still be subject to the employer's Employee Benefit Program/Plan which is where I think that you have one of your problems. I also think that you have a problem with your state small group/employer health insurance laws especially regarding employer contribution. Doesn't the group health plan state the employer contribution arrangement under which it was issued? Not that this means that it meets the state requirements. I doubt that the insurer issued the policy with 100% ER contribution for a single employee.

It takes longer to make the appointment and even longer if you have to call to ask for any information.

I would get legal advice about this arrangement. I would think that your state small group health insurance laws do not permit this discriminatory treatment. I also think that this would disqualify your Cafeteria Plan even before you get to the issue of testing. But, you did not say whether or not the amount paid is reported as income to the EE and whether or not the EE's portion of the premium is pre-taxed through the cafeteria plan.

I think that some clarification is needed. A Schedule C is for use in reporting and reconciling Profit and/or Loss from Business for self-employed and not incorporated individuals. Why would a Pension Plan be on a Schedule C ? From the Instructions: Line 19 " .... If the plan included you as a self-employed person, enter contributions made as an employer on your be-half on Form 1040, line 28, or Form 1040NR, line 28, not on Schedule C." I also wondered, in general, why this person would be eligible to use a Schedule C, in the first place, other than to claim the extraterritorial income exclusion on F8873 which would be reported on Schedule C as per the instructions for F8873.