GBurns

Have you tried a Google search? If you know the names of any large companies who have such plan features looking at their websites should get you a copy.

LRDG Google was recommended along with the law library sources. Remember the need here is for the basic introductory level explanations not detailed treatises which pre-suppose some in depth knowlegde. Thanks for bringing up the DCAP vs DC credit issue. It is very important and often forgotten until the tax loss hits. Maybe 2 or 3 years ago we had an indepth discussion on the issue and someone posted a comparison and worksheet. It should be worthwhile for summit2282 to search the Board for it. Or someone might be kind enough to give the link. The DC tax credit, the "use it or lose it" and the 1 year election commitment are probably the only disadvantages to a cafeteria plan.

Read Treas Regs 1.125-1, 1.125-2 and 1.125-4 then do a Google search on "section 125 cafeteria plan". That way you should get the basic knowledge that you need and should have had before starting the project etc. A section 125 cafeteria plan is a method for avoiding the constructive receipt of the money that is being "re-directed" to pay for the eligible qualified benefits. The qualified benefits are provided under IRC sections such as 105, 106, 129 etc. The list is in IRC section 125 and the Treas Regs. The only thing that a section 125 cafeteria plan is, is a means of pre-taxing the amounts. A section 125 cafeteria plan provides no other benefits. Any other benefits are derived from the applicable IRC sections not from 125. There are basically 2 forms of cafeteria plans, a Premium Only Plan (POP) and a full Flex Plan. The full Flex Plan is the 1 that can have the FSA and DCAP features. There are vastly more POPs than full flex. That is another reason why I do not understand what you mean. A cafeteria plan is not the same as an FSA nor an HSA. You should not see any disability insurance being pre-taxed, so that should not be an issue. It is just no longer sold that way. You also would not see any life insurance except the group term life (up to $50,000). There is usually no effect on the employee's Social Security benefits because not only are the amounts not usually enough to have an effect, but also because of the way that the benefit is calculated. You can run a simulation through the Calculator available on the SSA website. Use the latest Earnings & Benefits Statement that an actual person has received from SSA and plug in the income with and then without the cafeteria plan amounts and you will see whether there is any effect at all.

What do you mean "..a Cafe plan, both health and daycare"? I have no idea what you mean. You do not submit claim forms for reimbursement in a Cafeteria Plan, although you must submit claims for reimbursement from an FSA or DCAP, which could be in the Cafeteria Plan. A cafeteria Plan does not have to have an FSA or DCAP.

mjb Are you saying or implying that the IRS never made mistakes, had inconsistencies and never " thought that retirement benefits were a tax shelter for the wealthy" except when "under the control of Clinton appointees "? Are you saying that the IRS is currently perfect??? Even if we regard the IRS as being started (in its present form) in 1952, that would mean that you are saying that in over 50 years, the IRS was exemplary except for 1993 to 2001 (the 7 Clinton years). In any case what does this have to do with the issue?

mfocke, "The account in question was a Health Care Reimbursement Account " really means nothing. FSA, HRA, HSA, MERP, section 105 MERP etc are all Health Care Reimbursement Accounts, but each has different rules. Since you have not clarified the issue, the replies have been rather generic rather than specific. So far, you seem to have been reimbursed for expenses incurred before, up to and including January 31st and are now ahead of the game. Barring COBRA extension (if applicable) I would not expect any more reimbursement, unless this is an HSA, and unless there are more January 31st amounts still outstanding.

Don, ERISA is not an issue. Almost every employer provided group health plan (except very small groups) is an ERISA plan. Regarding "However, that does not mean that unequal employer reimbursements for premiums is not discriminatory", there is no "employer reimbursement" mentioned in the OP. The issue is payment (or amount) of employer contribution to the employee benefits program. **************** The use of a Benefits Credit is quite normal, the issue is whether it can be a % of compensation or whether it has to be a flat amount. In my experience a flat amount is what I usually see, but even then the flat amount varies by the employee classification. I do not think that a % of compensation in a health plan is any more discriminatory than the employer matching % in a 401(k) etc.

The end result is that these employees most likely cannot now contribute to an HSA. Primarily because they would not have an HDHP since it is very unlikely that the current medical coverage would qualify as an HDHP. Also they would not be able to stop contributing to the FSA ( no qualifying event) and contributing to both would serve no purpose.

There have been a few discussions on Boards such as this that might be of interest, for example: http://benefitslink.com/boards/index.php?s...opic=30424&st=0 Read any links given. You might want to do a Google search and also visit a good law library, where you might be able to access Lexis, Tax Analyst and BNA for cases or comments on the issue.

The first thing that comes to mind is that insurance and insurance companies are regulated by each state and not by the Federal government. The second thing is that some insurance companies are regional and only operate within 1 state. The third thing is that not every state has to accept every federal law and doing so would need to be formally done by the state anyhow, which means passing legislation acknowledging the acceptance etc. The fourth thing is that many times the Federal law is a minimum standard, leaving the state to do better. That is why there many states have their own Minimum Wage law, Labor law, Privacy law etc. Notice that section 125 tax treatment although a Federal law, was not, and probably still is not, treated the same way by every state. Same for HSAs. Same for Voting Rights. Same for some National holidays. Etc.

Doesn't it depend on the nature of the rounding, to determine discrimination? If the HCE's are rounded up for anything over .50 (cents) and the NHCE's are not for the same anything over .50 (cents), that is discriminatory regardless of prior years and precedent. I have had auditors from the IRS, DoL and various state agencies who will spend from 8:30 AM to 3:00 PM for $8 in additional taxable income. They knew that it would most likely be small, definitely under $100 max, but they just had to try. By the way, the $8 was for sales & use tax for a company with gross sales in excess of $5,000,000. But still the worse has been DoL W&H doing certified Davis Bacon payrolls, line by line ad nauseum looking just in case they do find something. Some audits are really examinations of accuracy and investigations into propriety and procedure. As a result they have to nit pick, after all if the books are out $1 it means that they do not balance and that some error exists somewhere.

I do not think that the employer would be reimbursing the deductible, per se. The employer would probably be reimbursing any deductible that is incurred. In that case there is no need for a rollover since the reimbursement would have been made to reimburse an actual expense and the employee would be getting the money in hand. There would be nothing left anywhere to rollover. Also since only incurred expenses would be reimbursed there is no need for pre-funding and no need for any sort of holding account. It would be reimbursement for eligible expenses incurred. A simple MERP.

mjb You quite often make statements similar to this one, "From audit perspective IRS agents will not object if ..." and it makes me wonder if you have actually been involved in many audits. Have you?

Why would "termination" not be an event? Treas Regs 1.125-4©2)(iii) Employment status, starts off with "Any of the following events that change the employment status of the employee, the employee's spouse, or the employee's dependent: a termination or commencement of employment; .."

It seems like simple section 105 Medical Expense Reimbursement Plan which have been around for decades before HRAs were conceived. It has no rollover feature etc and so does not need to be an HRA, which is also a section 105 MERP but with a rollover and no employee contributions etc. Treas Regs 1.105-11(b)(i) requires a separate written plan.

What bothers me is the wording used. The plan starting date does not seem to be differentiated from the plan's effective date and it seems uncertain if the distinction is made between the start of payroll deductions and both the plan starting date and the plan's efective date. I now wonder if there was an adoption date?

But when was the FSA effective etc?

I have said nothing about the "active" either being there 20 years or paying premium. All I addressed was the "retirees". The OP said "ADD them to our benefits menu". It did not say add them to our existing health plan. To me that means a new plan for the "retirees". You expand eligiblity or coverage in an existing plan, but to "ADD" to a benefits menu means a new item.

I have seen what you are loking for but I do not remember where. I would suggest that you look to the larger insurance companies and Mutual funds that provide 401(k) and other plans etc. I think that I saw it in use as an Advanced Markets financial planning tool.

If a new plan, make sure that it starts before the payroll deduction. Other than that papogi said as much as can be said.

I thought that this was a terminated plan that had "ZERO" assets and no participants. How then does the issue of " Plan cannot refuse to make distributions to employees who have incurred a distribution event before DL is issued .." arise ? In my rather limited experience the term "interested parties" applied to eligibles, participants, beneficiaries, providers, fiduciaries, in fact anyone who has, had or should have any sort of involvement with the plan. After all, there could very well be a beneficiary (or estate) that thinks that there was money due etc, an eligible who had not been allowed to participate but who now thinks that they should get some of the money being "given out", Or, as I have seen, an investment provider with an "overlooked" account balance. There might be some difficulty in unilaterally deciding that there are no "interested parties". If you "just check yes to the box to the Q that all IP have been notified." when none have been notified, How do you defend that action if something happens?

K man You might want to check to see if an estate has to "opened". I thought it existed by default as of death of a natural person.

"There is no requirement that a terminated plan payout all benefits immediately." Was someone's post deleted? How did "immediately" get into this issue?

This is worse than comparing apples and oranges. Larry M The employer is paying nothing. It is entirely employee paid. This was stated in the OP. There is no employer contribution, So the employer has no ability to pay a varying contribution by class or otherwise. If there are 2 separate plans, as was proposed in the OP, there would be only 1 "class", the retirees. jsb I did as you suggested. I did a Google search on "implicit rate subsidy". I do not see where this is applicable or even valid. I took note of many comments such as this which was excerpted from: http://www.nacubo.org/x3844.xml " Especially compelling to us is the notion spelled out in paragraph 197,if the ED is adopted as is, “the financial statements will . . . reflect what the impact would be if health insurance companies charged a different premium for retirees than for active employees . . . this information is neither relevant nor valid because financial statements should not reflect ‘what-if’ situations.” A question we might ask – akin to what we ask when calculating and recording contingent liabilities – is, “is the event probable and measurable?” It is our view that an OPEB implicit rate subsidy – while it may be measurable - will likely never be a probable obligation of the institution. The level of precision demanded by the ED in calculating the benefit expense and related liability causes us to wonder why estimates remain acceptable in other financial statement categories, for example, depreciation." (emphasis mine). There were many other articles all following the same thought and showing that it is not applicable to this case.

This might help you. See Q 22 et seq: http://www.irs.gov/irb/2004-33_IRB/ar08.html#d0e1696