GBurns

I see two separate issues, funding and the incurring of expenses. While it might be permissible to make the payroll change to accomodate the salary reduction, there still is the issueof using the money. The child was born 6/17 and the notificaton/plan change date would be 6/18 at the earliest. When were the eligible expenses incurred. The FSA cannot reimburse expenses incurred before plan change effective date. In any case, Is there enough money involved to warrant the effort to correct?

Somehow I see no change of status. Employee A has Family coverage which would include the new child C. Nothing changes as far as I see except to list the name of the additional family member. Coverage is unchanged. Since the coverage is unchanged I see nothing that would allow employee A to drop coverage. But maybe approaching it like masteff suggests might work.

Declining to enroll is different than dropping coverage. To be able to drop coverage the employee must first have been enrolled. The problem then is stopping an election for premium during the plan year. The OP does not state whether there is either a cafeteria plan or an employee share of premium. I think that more info is needed. It also seems that B had dual coverage. But there is also the question of whether B can change his coverage at this time. The OP does not state whether the coverages (both employer plans) have a dependent tier or a Family tier etc. If the birth of C allows a change to Family then A would be covered along with C by default.

Isn't there a NASD or RIA rule that prohibits this ?

My experience is that HR and Benefits usually ad lib and provide answers that are not consistent with the actual plan document. So my advice is to look at the actual Plan Docuement to see if it allows more or allows less options than the Treasury Regulations do. You might want to read www.changeofstatus.com which should be less confusing and also where you can read the Treas Regs that JSimmons cited. Your original post raises some questions for me: Did you knowingly enroll in this new plan? If so, then you were fully aware that there was an increased cost and you elected and accepted. The law is not in favor of buyer's remorse, so HR might be right. Your employer's section 125 plan is probably not set up to reimburse you if you get outside coverage.

I am no lawyer, but if I were you, I would be seeking the advice of a competent employment/labor lawyer. asap.

Don It is the contribution that is deductible. It is the accumulation of earnings that could be UBTI. The "set aside" is the contribution. It is different from interest and accumulated earnings etc. Where did anyone say that all or a portion of a set aside was subject to UBIT ?

I guess he could cut salary to $0 then revert when the cash flow permits, however that would mean that he "gave up" or "lost" that money and the C Corp loses the deductibility. If he reverts to the previous amount plus an amount that would over a period make up the "lost" amount, he might face IRS characterization of the amounts as being unreasonable when audited some time in the future, especially if he gets further salary increases. I am also not sure that any of the announced salary reductions referred to by mjb will stand up to IRS or SEC scrutiny. In fact, I do not recall any opinions being given regarding the legality etc of reducing or forgoing salary in that manner especially if also a stockholder etc.

Isn't the requirement for continued employer funding a facts and circumstances issue? What happens if retiree medical is either vested or provided under a non changeable contract etc?

In my experience, the Claims Adminstrator provides a HIPAA compliant Business Associate Agreement. It is a standard form.

How are the insurance premiums going to be paid? If the employer is still going to be liable for future insurance premiums What is the advantage? If the employer is going to fund the trust with an amount which is calculated to be enough, Is the employer giving any sort of guarantee that the funding is adequate and will the employer be on the hook for shortfalls, if any? Is there any difference in the FAS 106 treatment if the TOHI is used rather otherwise?

david, Not a bonus, just a delay in getting agreed salary. ************ I am not sure that an individual can be accrual basis, but it deserves a look. ********** Lori What is the 2 1/2 month rule? ****************** Thanks to you all for the input.

Small C Corp is having financial problems, really cash flow problems and the CEO (sole shareholder) wants to help by not taking salary. He does not want to give away the benefit, he wants to delay being paid until cash flow improves in about 8 months when payments on job contracts start to come in. The company will accrue the salary liability on the books until paid. Is this a deferred compensation arrangement/plan subject to 409A? Is it subject to anything else? When is FICA etc due ? If you have seen anything like this and can point me to wording for such an agreement, I would greatly appreciate it.

Since the PEO will most likely not be the common law employer, How will the PEO be able to offer employee benefits? Or will the PEO offer the Client the opportunity to jon a MEWA? If so, Has the state or DoL "approved" this MEWA? I think that the IRS explained this issue in a Revenue Ruling issued in 2002. You might want to search these Forums for prior discussions and also search the "Who's the Employer?" Q&A Column.

Do you charge for the stand alone POP?

jala What is/are the corporate structures involved? S Corp, C Corp etc ?

IMHO, it certainly seems to fit the "mission statement" quoted. I think that each can choose whether to share or not to share. wsln, I usually see free POPs but usually it is from an insurance product provider. Employer size does not seem to matter.

Don't you mean house rather than home? What is the business/investment rationale behind the purchase?

GM did not "spin off" a VEBA nor did it then give control to the participants. A new VEBA was/will be created under the control of the UAW from day one. There is no "spin off" etc of the VEBA. A CBA is not relevant unless the covered participants are covered by an applicable CBA. However, retirement benefits promises or obligations are not the exclusive territory of CBAs, contractual liability can be created otherwise. I do not recall that either Caterpillar or Goodyear etc had CBA's but they did have court challenges etc, the outcomes of which I did not follow. As I recall none of these employers are fully off the hook in case of underfunding and failure in the future. So it is possible that an employer might not be able to easily walk away even because of a sale of the original employer. One point to keep in mind is that the VEBA and the employer who has the retiree health obligation are two separate entities and contractual obligations might not be transferable absolutely or partially. I also do not recall that any of the VEBAs set up for retiree health obligations are sponsored by the VEBA itself. In fact, I wonder if a VEBA can sponsor itself as you are sugesting and I hope to see what vebaguru or vebaplan think. This is not to say that they are infallible experts, but they do see more gotchas and twists in a short time, than most will see in a lifetime.

Nowhere does the OP mention control by the participants. It says "spin off". What does "spin off" mean? Who does the Trustee answer to after the "spin off"? Certainly not the employer who is no longer involved. Who is the Plan Sponsor after the "spin off"?

John Thank you for your responses. I did not feel like flogging a dead horse again. Don A circuit or any court ruling can be disregarded if either not applicable, can be distinguished or just not similar enough. Something can be similar yet different. It is a facts and circumstances decision.

I thought that Federal courts handle federal issues, whereas state courts handle state issues. What does state law and a state's determination of insurance mandates etc have to do with federal courts? How is an ERISA determination relevant ? ERISA is only one of the many laws that have to be complied with by health and benefita plans. The fact that you can find no federal court that adjudicated as you state is irrelevant.

Spin off the VEBA to the participants? Are you sure? I can see spinning off to a union or association or some created eligible entity (although I cannot think of what), but to the participants, I cannot see how. Who will be the Trustees and Who appoints them etc? I am also curious as to where this actuary has seen this and seen this enough times to merit being regarded as gaining in popularity.

Don Why is a court case relevant? Also, in many states, the reimbursement of the premium might, by itself, create a group health plan under the state's Small Group and other rules.

Green92 What did you eventually find out from the audit etc?