GBurns

Why would it matter? Unless they are hoping to get a lower rate by changing their health insurance coverage, which is very very unlikely, I cannot see a reason to want to change anything. It seems too much trouble for no gain.

I am not an expert in retirement plans, but mbozek's post reminds me that health insurance was treated the same way "back in the day". This is no longer done, not because of ACA , because ACA is not applicable to such small employers, but because the courts agreed with the IRS that there had to be a bona fide employee relationship. Many of these cases involved BIzPlan and AgriPLan which are now run by tasconline.com. The Shellito and Speltz cases come to mind: http://www.forbes.com/sites/robertwood/2011/10/05/farmer-hires-wife-grows-tax-benefits-treats-irs-like-weeds/ http://www.tomcopelandblog.com/peter-and-maureen-speltz-vs-irs-commissioner.html TASC now breaks down their offerings into 2 categories : 1. Microbusiness 2. Group The Microbusiness offerings of BizPlanNow and AgriPlanNow are aimed primarily at self-employed or entities which have no non-family employees and are the sort of businesses which would use what mbozek described. In fact, his wording is very similar to their wording. However, for their Group offering they use very cautious wording: "The most important concept surrounding a Section 105 Plan is legitimate employment between spouses or any other named employee. This issue is closely scrutinized by the IRS, and it is absolutely vital that the relationship be in existence. Fabricated relationships are absolutely discouraged. Therefore, the following items must be in place to ensure the plan operates smoothly and the tax advantages are maximized: A written employment agreement A log of hours worked by the employee An established cash (salary) compensation payment amount and schedule" (My highlights in red .) While not said, it stands to reason that if there was an employee contribution, a salary reduction/deferral agreement would also be needed as shown in Speltz above. Although retirement plans are different from health plans, both are employee benefits plans and I just cannot see that the treatment could be that different so that any person, probably with no documentation of any sort, could be entitled to benefits, without having met either the eligibility to participate or the vesting requirements.

Just in case you miss this: https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-Benefits-and-Recovery-Overview/Medicare-Secondary-Payer/Downloads/MSP-Working-Aged.pdf Note that the Small Employer Exception must be applied for.

But could they show that they enrolled, elected deferrals etc ? I would think that they would have to show eligibility and participation before they can claim benefits. Otherwise anyone could turn up at a TPA and claim benefits from any Plan. Let us see how this turns out.

Take note of the "Note" at the end of your extract. The employer would have to have "more than one type of healthcare arrangement" partly because the part you highlighted in red states "and (4) the employer payment plan is limited to reimbursement of Medicare Part B or Part D premiums and excepted benefits, including Medigap premiums" (however the "and excepted benefits" does create confusion) and partly because each arrangement must meet "the applicable integration or other rules set forth in this notice or in related guidance." This means that Notice 2015-17 is not the only applicable guidance. Regarding Medicare: https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-Benefits-and-Recovery-Overview/Medicare-Secondary-Payer/Medicare-Secondary-Payer.html Edit: Make sure you scroll to the end and see the section and downloads regarding Employer responsibility. In your case, it seems that the age 65+ employees would have Medicare and no GHP.

Medicare Part C is also known as Medicare Advantage Plan. Medicare premiums are not reimbursable because Medicare is not a group health plan and if integrated with another employer group health plan raises the " Medicare secondary payer" problem which is noted in Notice 2015-17 Answer 3. Also while "Medicare secondary payer" might only apply to employers with less than 20 employees, Notice 2013-54 and the EPP prohibition applies to employers with more than 2 employees, and state laws might also be applicable.

mbozek Are you saying that if there is no conviction, the Plan can knowingly have participants who never met the eligibility criteria and that such participants have vesting rights although they were not eligible participants, initially nor subsequently? I do not see where conviction matters, the Plan and the TPA have to operate the Plan in accordance with its documents and applicable law, regardless of a conviction. Regarding ERISA 530. I think that in order to make an eligible claim for benefits, they would have to first be eligible plan participants. As david rigby points out, "Perhaps the TPA will get advice from its own legal counsel."

I think that you need much more information. Whether their pay was properly taxed on the payroll and properly reported otherwise, should not be a concern of the plan. Tax fraud by the company owner and/or the relatives should also not be a concern. The only issues of concern that i see are: 1. Eligibility. 2. Possible failure to operate the plan as per the Plan Documents. The issue of eligibility is, in this case, different from a case in which an actual employee uses either a fake or someone else's SS#. In this case, the participant never was an employee and therefore could not have met any hours or time requirement. Failure to operate as per the documents. hinges on the same principle, the plan has eligibility requirements which could not and were not met. These participants also should not be able to meet the vesting requirements, which means they would not be entitled to some of the account balance. I do not have a solution. but I do think that you need more information in order to proceed. As mbozek pointed out, the relatives might have to forfeit any claims in order to settle with the Justice Dept. and IRS. This is some of the information that you need.

Please do pass this information to your friend. Whether it is FSA or HSA, does not matter, as explained above. There is simply no way to reimburse individual health insurance premiums on a tax free basis. There also could be an insurance fraud issue. Almost every Application for Individual health insurance has a section which asks the applicant to certify that they will not be reimbursed, in any way whatsoever, directly or indirectly. The Application becomes part of the policy. These employees would have knowingly made a false statement and collected insurance benefits as a result. This provision is mirrored in most state health insurance laws. The penalties could be very severe for these employees. There could also be penalties to the employer in addition to the $100 per day per employee excise taxes mentioned by Brigid Anderson above. Let me say again, the penalties are HUGE.

The change of eligibility to exclude a class of employees requires a change in the eligibility provisions of the plan which, in turn, requires the adoption of the amendment/change by the Board of the Plan Sponsor. Nothing needs to be filed with the IRS etc.

The world was certainly different in 1961. Section 105 was enacted in 1954 but the Treas Regs took some time. Section 106 was different. Section 125 was not enacted until 1978 and we are still waiting on the Treas Regs. So the tax law was very different in 1961. The state insurance laws and the insurance contract prohibitions have been in place for years and has nothing to do with ACA. You do not need to know if I am right or wrong, all that you need to do is to look at the Individual Application for the major insurers. You can access the Forms Library of Aetna, Anthem and any of the larger BCBS entities by going to their website and scrolling to the index at the end of the page and look or yourself. Why do they do it? The state insurance law prohibits reimbursement in any manner in keeping with the IRC. I think that the bulk of people affected, were recent and as a result of a few who saw an opportunity to mislead. Older providers such as TASC learned to restrict the eligibility as a result of IRS action in cases such as Shelito and other BizPlan cases. Most others closed shop, but, a few served time. So since the providers are recent, it would not be millions affected.

jpod. Almost every major insurer has wording that asks the applicant to certify that they will not be reimbursed by the employer, for the premium, in any way. The Application becomes part of the insurance policy. So signing that they will not be reimbursed, when they know that they will be, would be insurance fraud and since it was a condition for coverage, would violate the terms of the contract/policy.

Thank you. People make assurances that things are factually correct etc, all the time, but that does mean that they are correct. People make mistakes all the time. There are many reasons why this happens, To err is human, I am sorry that you think that questioning you about a Form that does not appear in the IBC Forms listing and which information, IBC says that it does not use, is rude. But, bear in mind that you said that Aetna was also using such a Questionnaire. While this is true, this is explained on the Aetna Application, showing the purpose of their medical questions, I was faced with your word against what is published by IBC and you apparently not seeing the Aetna explanation. It would have been foolish of me to not ask you questions, When I posted that I had not seen or heard of such a Questionnaire, then told you that i had looked and suggested that you check the date of the forms, most people would have provided a copy or a link. I did not think that I needed to ask. I also do not think that asking you about the forms means that I think that you are lying. You are fairly new to these forums, but you have been on enough threads to know that I have in no way hijacked. Some posts get little or no response.. ,

See the early post by Bill Presson. Also see IRS Notice 2015-17 http://www.irs.gov/pub/irs-drop/n-15-17.pdf From the Notice: "Code § 9831(a)(2) provides that the market reforms do not apply to a group health plan that has fewer than two participants who are current employees on the first day of the plan year. Accordingly, an arrangement covering only a single employee (whether or not that employee is a 2-percent shareholder-employee) generally is not subject to the market reforms whether or not such a reimbursement arrangement otherwise constitutes a group health plan." Also note the wording used by TASC for their section 105 plan which is used to reimburse individual health policy premiums. This has been in place for years BEFORE ACA and has not yet been updated. Note their restrictions on eligibility: https://www.tasconline.com/products/agriplan/section-105-plan-2/ So, yes , a "one person" 61-146 arrangement can be exempt from ACA market reforms and be tax-free, BUT, it would violate the individual health insurance policy which prohibits reimbursement by the employer, in any form. As I have repeatedly tried to point out, the issue involves more than the iRC.

The criticism of @zbenefits' analysis is not related to cases with "only a single current employee" since most laws, including ACA, ERISA, HIPAA, and sections 125 would not be applicable.

@zbenefits You are grossly misreading the USC. IRC Section 105: Section 105 allows tax-free reimbursements from a self-insured medical reimbursement plan if the reimbursements are for expenses incurred for “medical care” as defined in Section 213(d).Section 105(b) Amounts expended for medical care, states that "gross income does not include amounts referred to in subsection (a) if such amounts are paid .... to reimburse ... ... for expenses ... for the medical care (as defined in section 213(d). It does not mention reimbursements, tax free or otherwise, from a self-insured medical reimbursement plan. Subsection (a) states that, "Except as otherwise provided in this section, amounts received by an employee through accident or health insurance .....shall be included in gross income to the extent such amounts (1) are attributable to contributions by the employer which were not includible in the gross income of the employee, or (2) are paid by the employer. IRC Section 213: Section 213(d) defines “medical care” for personal deduction and Section 105 distributions, which includes amounts paid for insurance. Section 213(d) has no bearing or relation to section 105. Section 213 is under "Deductions from income", a Form 1040 item whereas section 105 is under "Items specifically excluded from income". There is no exclusion (pre -taxing) under section 213. IRC Section 106: Section 106 allows the value of the self-insured medical reimbursement plan to be tax-free to employees. Section 106 is titled "Contributions by employer to accident and health plans". It states that " ...gross income of an employee does not include employer-provided coverage under an accident or health plan." It says nothing about self-insured medical reimbursement plans. It relates to "coverage"., so that we are not taxed on the value of the benefits received, such as a heart transplant and the employer payment of premiums, which are contributions. That is why employee salary reductions under a section 125 cafeteria plan are "treated as employer contributions' by section 125. IRC Section 162: Section 162 allows reimbursements to be tax-deductible to the employer as a business expense. Only if allowed by other sections. An item is only deductible if ordinary, reasonable and customary and not otherwise prohibited by another section. There is no specific section of the IRC that allows tax free reimbursement to an employee for individual health insurance premiums. Such reimbursement was and is only made possible by the Treasury Regulations (CFR) and supplemental Written Determinations. Regulations and Written Determinations are subject to change at the discretion of the Treasury Dept. Revenue Ruling 61-146 allowed tax free reimbursement along with a part of the Proposed Treasury Regulations for section 125. At their discretion, as allowed by law, and in keeping with ACA, these have been withdrawn. Treasury gave it now Treasury stops it. It is solely at the discretion of the agency. All of your citing of PHS 2711 and 2713 etc is gobbledygook. If most, if not all, of the relevant Preventive Services are provided under the Health Insurance coverage, there is nothing that the patient will pay and therefore nothing that you could reimburse. If you were to provide these medical services your Premium Reimbursement arrangement (or whatever you choose to call it) would no longer be an excepted benefit and would have to comply with the same requirements of other health insurance plans.

Why not just post the Questionnaire? The question that you originally posed in this thread, can only be answered by seeing the Questionnaire. If I looked and did not see such a form, it is only logical that i ask you questions. Are you above being questioned?

Considering the cost of getting a PLR, it does not seem worthwhile to take a chance. I doubt that there is a viable reason not to make the change in a timely manner.

I think that you should check the dates of those forms for currency. I did not see any such form for IBC, Keystone or QCC. The IBC Guides state that "* IBC has not used pre-existing conditions as a rating factor in small group before, however now it is a federal law that carriers can no longer deny coverage because of a pre-existing condition or charge a higher rate.". The Guides then go on to state: "Beginning January 1, 2014, rating restrictions limit insurance companies to only four factors for adjusting premiums:". So aside from the Tobacco usage question, it does not seem logical that they would have a Health Questionnaire, which answers they say they did not use and which now under ACA, they cannot use. I do not see such questions on the Aetna Enrollment Form for Medium or Large Groups, but I do see on the 2014 Small Group (2-50) Enrollment Form a Section G. Case Management (OPTIONAL - This information will be used to help coordinate your care. It will not impact your premium rate or eligibility for coverage........" http://www.aetna.com/employer-plans/document-library/forms/pa-ee-2-50.pdf http://www.aetna.com/employer-plans/document-library/enrollment-forms/ppo/68000-20.pdf

Note that the Interpretive Bulletin etc are from 1969 (amended 1967 and later) are before ADEA, HIPAA, ACA and other changes an therefore probably are not applicable. Remember that, under ACA, for applicable employers, there is the 9.56% affordability requirement; http://www.irs.gov/pub/irs-drop/rp-14-37.pdf Then there are the section 125 and/or section 105 (if self insured) non-discrimination rules and testing. Then there is the possible effect on those over 40 and the ADEA and any related state law: http://assets.aarp.org/www.aarp.org_/articles/money/employers/age_discrimination.pdf http://www.shrm.org/templatestools/hrqa/pages/offeringdifferentbenefitsfordifferentemployees.aspx And of course, the EEOC position: http://www.eeoc.gov/eeoc/foia/letters/2001/adea_benefits.html http://www.eeoc.gov/policy/docs/benefits.html#I.%20Introduction%20%28T7%29

See Revenue Proc. 2014-37: http://www.irs.gov/pub/irs-drop/rp-14-37.pdf Also be careful of ADEA and any related state laws regarding the effect on older (40+) employees: http://assets.aarp.org/www.aarp.org_/articles/money/employers/age_discrimination.pdf http://www.shrm.org/templatestools/hrqa/pages/offeringdifferentbenefitsfordifferentemployees.aspx And of course be aware of the EEOC position: http://www.eeoc.gov/eeoc/foia/letters/2001/adea_benefits.html http://www.eeoc.gov/policy/docs/benefits.html#I.%20Introduction%20%28T7%29

The provider of the FIHDP would most likely be the best choice for administering the MERP. They should also be to point you to a few TPAs who are set up for this.

I have not seen or heard of this Questionnaire and do not see it on any of the 2014 or 2015 Applications that I have seen. Is this a separate form? What insurers and in which states are you seeing this?

I really felt that I was not understanding you. Thanks leevena.

@zbenefits An HRP is the name given to a product being marketed by some entity. It has no legal standing in tax law. The term HRP does not appear anywhere in any IRS Publication. An IRS Notice does not codify law, it is simply an advertisement of their stand on an issue. IRS Notice 2002-45 clarified what the service saw as compliant with the law. IRS Notice 2013-54 addresses what the IRS sees as being non-compliant with the law. Neither of these Notices codify or change section 105, because no change is needed. The provision that allowed tax free reimbursement of individual health premiums which were previously allowed by Revenue Ruling 61-146, has been withdrawn by the IRS as allowed by law. You still have not been able to cite the tax code/law provision that allows tax free reimbursement of individual health premiums. While there might be hundreds of CPA and law firms using some type of reimbursement arrangement, it is not structured as you think and I suggest that you check with a few. Consider that most CPA and law firms are Partnerships or LLCs which means that the Partners are not employees and therefore have different laws applicable. You seem to have fallen for the pitch of some promoter and do not quite understand the issues. This is obvious from your use of the term HRP and your lack of understanding IRS Notices, codifying or even what IRS Publications are relevant to the issue.