GBurns

If he remains a sole prop, she has to be a bona fide employee. If he incorporates as an S Corp or LLC etc ther would still be issues. There have been a number of cases where the IRS prevailed because the employee relationship etc was not valid. Here is something that you should look at for starters: IRS_FSA_19991111_re_105_Plans_for_SE.doc

This personal analogy might help explain my logic. Years ago I worked as a Sales Rep for a company. When I toook my annual 2 weeks vacation in October/November I went and worked with a competitor who had been trying to recruit me. My work there was just to see what their Field Training and Product Training was like. I was not going to actively market, provide leads or even any competitive information. There was no conflict, in fact I learned more than I gave and was free to tell any and everything to my employer. I left on Tuesday of the second week. But on the Friday a customer had come into the showroom and a Technician and the Receptionist were trying to help him, but since they were doing a terrible job I intervened. It turns out that he came back with his check and bought what I had suggested. Also 1 of the Sales Reps credited me with having closed a sale for him. I was not informed and never asked. The next year I got a 1099 from that company. I pointed out that I never received any money and was told that a check had been issued. It turned out that the Branch Manager had forgotten to tell anyone and the check was still in his desk drawer. Since it was now stale dated the company issued a new check of course in this new year. Eventually that tax year was audited by the IRS. The sole reason was that I had not reported that amount on that year's return. I had made a note, provided a copy of my request for a corrected 1099 etc and had reported the amount in the subsequent year since that was when I had constructive receipt of the money. The IRS view was that the 1099 was correct, the distribution was not. So the correction must be to the distribution not the 1099. I have seen a few similar cases since and all were treated the same, Tax Court included. This case seems to be factually no different. Appleby's case does not seem to have had a 1099 issued for an amount that differs from the actual amount distributed.

Good question. I usually see this addressed in either a CBA or Employee Handbook, but that is because I only see this happening with large employers. IMHO, it depends on how this employee will either cash out or get compensated. If cash out, then date of cash out should be date of separation. If the employee gets the time off and then collects pay for the time off, then the date of that paycheck should be the date of separation. Of course, the cash out has to be a buy out of the days and not an advance payment. My reasoning is that in the first cash out scenario, that employee would have started the days count for UC and also if they were injured after the date of the cash out they would not be covered for a WC claim. This is because there is no employee status. In the second scenario, that employee would not yet be eligible for UC and would still be eligible to file a WC claim until the date of the payout because there is employee status.

What complicates the segment that is in bold is that in some other countries there are either service providers who will provide services under the US policy and accept an assignment to the US insurance company or insurance companies that have an established relationship with either the US insurer or act as an affiliate of a US service provider. That way coverage under the policy is available in that foreign country. A number of US BCBS already have established relationships with the BCBS in many foreign countries or a local insurer. The same is true of many of the other large insurers especially for Europe, Japan and South and Central America. BCBS even has a BlueCard Worldwide Service Center to handle the volume of such instances. And this is for non-emergency services. There have also been reports that there are US BCBS who currently already send some participants to other countries for certain treatment, e.g BCBS of California and BCBS New Mexico (I think Anthem) send people for treatment to Mexico. BCBS and Life of Jamaica accept many US BCBS and insurers even outside the BlueCard program. There are also the reciprocal arrangements that are made by the service providers with service providers in other countries as far away as India. So it is no longer a given that coverage or service will not be available in another country or region. I cannot give a link to the programs from Aetna, UHC or some of the large hospitals that have these "International" programs such as Mayo, Cleveland, Miami Heart, Cedars (Miami) etc but here is a link to the BlueCard Worldwide program: http://www.bcbs.com/bluecardworldwide/

Now that's a good signature.

I see it. I stand corrected. But will that cover what you need? For example, they devote about 4 hours to pensions in the EU, which would not give time for much useable detail as to what is actually available and permitted in Germany and/or the UK in particular. Think how much time and detail you would need to learn enough about Pensions in the US if the session was instead devoted to North America. Health and other benefits have the same deficiency. Will this be adequate for a "point person"? Will the countries that you need to know about be covered in sufficient detail? It is nice that they cover Asia even if only barely. They cover India but things are different just south in Sri Lanka. What about Singapore, Indonesia and Malaysia. PRC (China) but not Hong Kong, Taiwan etc. What they cover for China, India and Japan might have no applicability in the countries that you might need.

HRAs are not set up under 105(h). What benefit do you see that they would get using employee salary reductions, which would be the main source of funds for an FSA, or employer contributions to an HRA? This is a sole proprietorship, why is anything other than a standard 105 MERP needed? Are there other employees who would have to be given the benefit also?

Yes. They are US employees of a US employer with a US benefits plan. Where they go on assignment should not matter.

Unfortunately the "International" is usually limited to Canada. But look and see.

Who is questioning? The US Congress, some state legislatures and even the IRS. It has had extensive news media coverage. http://www.irs.gov/newsroom/article/0,,id=151368,00.html http://www.irs.gov/newsroom/article/0,,id=151372,00.html Other items related to claims etc can be found through a Google search. http://markey.house.gov/index.php?option=c...d=881&Itemid=85 Note the links at the end. http://www.privacyrights.org/ar/outsourcing-privacy.htm http://www.informationweek.com/story/showA...icleID=18400011 http://www.usnews.com/usnews/opinion/artic...517/17dobbs.htm

mjb Why can an audit not take place that covers 1.125-4 related issues? Are you saying that an issue that is in the IRC, but for which no final Treas Regs have been issued, cannot be audited?

Nothing uniques requires that it be done domestically. But nothing stops a client from refusing to do business with a firm that out sources to a foreign country or a particular country. The reason could be as simple as "Buy American". Who knows? But that is not the issue. The issue is whether or not there are pros and cons. 1 of the cons is client and investment provider reaction. Who knows what that will, so Why not find out first? The same applies to competitors. As for tax returns, claims etc being outsourced. Those are currently being questioned, even by the Legislature, aren't they? Questions of privacy, release of private information including PHI etc are concerns that are being now raised. The fact that a number of companies have done it, does not make it right, proper or prudent.

If an auditor come across an issue that he/she is not conversant with, do you not think that they have enough sense and that the IRS has enough staff and reserves to bring in additional auditors who have training and expertise in the required area?

While this might be a good idea from some points of view it might not be overall. What has been their track record as far as accuracy and response to problems? Have you considered what the reaction from Plan Sponsors, Investment providers and your clients in general will be? Can your competition use this against you, in any way, whether for current business or in the future?

What makes that any different from what is done in any Accounts Receivable system? You send an Invoice either for each item or you send an invoice with each item as a separate line. You send a monthly statement thatis updated each month with the new invoices. You post any payments as received. You can send duplicate invoices or statements as you see necessary. If you want you can treat each item as you would an Inventory item and get useage etc figures. Anything you want. All you seem to need is a very simple Accounts Receivable system with Invoicing and Statements.

Why doubt it? People can be very helpful if asked politely. Many of the people in Global Benefits present at seminars and Forums and are quite accustomed to being asked for advice and help. Over the years I have made many such cold calls and have received extensive information including having them mail me their employee handbook and giving me trial subscriptions to publications etc that were unknown to me then. In fact that is how I was introduced to the BNA Payroll Administration Guide and many other things. 320 only deals with Pensions and Retirement, so that still leaves a lot of the benefits areas not covered.

Aside from the annual tests, Plan Documents (Agreement, Adoption etc), salary reduction agreements, change of status/qualifying event issues, there are the actual benefits (I recently ran across a plan with pre-paid legal still in it and I have seen postings about STDs with untaxed benefits), FSA operation (including reimbursement issues) and coverage and effective date issues to mention some other things.

The response given by any state DoI is dependent on what information is given, How it is explained and most of all by the level that the responder is at. Speaking to a telephone customer service rep. will usually get no meaningfull response. I do not know to whom your Friend spoke nor do I know what was said. All that I can tell you is that I have been a licensed insurance agent for 20 years and have sold mainly group plans including group STD. I am licensed in Florida and a few other states. I have enrolled thousands into STD programs and I have replaced the coverage of many groups and had my coverage replaced by others. As a result I have had and seen many complaints against me and others. Your Friend's situation is not uncommon in the world of supplemental STD. What I told you was not speculation. It is what has solved many cases. That they did not follow ERISA is what can be used against them, NOT what you should accept. That they did not follow state rules is what can be used against them, NOT what you should accept. It was not suggested that your Friend make a stink to the insurance company or the employer or the plan. It was suggested that your friend make a stink to those who enforce the laws. It is a simple procedure to find out what the law requires the agent to do in replacing your Friend's coverage and to report any violations of law. It is entirely up to you and your Friend to either bark at the moon or to use the regulators to sole a simple problem. Good luck.

Have you looked at QuickBooks Accounts Receivable module? What sort of versatility and in depth could you need for what seems like a simple task?

Disability Insurance IS a health plan (actually an accident or health plan) just like major mediacal is. While DI might be exempted from HIPAA it might not be exempted under your state version. Your DI policy most likely is state Dept of Insurance regulated and has to meet state law requirements including those regarding pre-existing conditions. That is where you find what is required for pre-existing conditions. Also as I pointed out before there are state law required procedures that are required to be followed for cancellation, termination and replacement of coverage, that most likely are applicable in this situation. Making assumptions about what state insurance law requires serves you no purpose, find out what both the law and the actual contract state. The Certificate of Coverage is not enough. You said that this DI was provided through your employer. Why then would it not be subject to ERISA and required to have an SPD? How would an employer have a plan to provide a benefit and have no Plan Document? It is not the DI Policy that has the SPD and the Plan Document it is the employer's plan that has them. It does not matter what everyone figures nor whether it is insured or not, it matters what the law actually requires.

I have never heard of anything and I doubt that there is anything. The benefits allowed and the service providers are too country specific. Some service providers in some countries will accept payment from US insurers but that is only possible if their government allows that. Some service providers and even some services that are standard in some countries are not accepted by US insurers etc. You might consider giving a call to the Benefits Dept at a company like IBM or 3M and ask them for some assistance. You might be able to put together what you need to know from a collection of what they have had to develop for their employees. They and others including NCR, GE, Microsoft etc have exactly the scenario that you describe.

Why would medical expense reimbursements through a cafeteria plan (or even otherwise) be under 105(h)?

Yes, a 12 year old can get a W-2, but employees get W-2s, so the child first has to be an employee. See IRS Publications 15 (Section 3 page 8) and 15-A for further info. See also your state labor and payroll laws. If they were employees they would have had to be paid periodically. Each pay period would have had tax treatment, possibly also for the state and municipality, and subject to periodic reporting such as 940, UC etc. Even if W-2s are now created, there is no way to recreate what should have taken place during the year and which requires reporting that balances with the W-2s. W-2s do not stand alone, they are the end result of what happened during the year. Without proof of payroll payment there is no proof of compensation. No compensation means no deferral. Payment to employees cannot just magically appear at or after the end of the year without consequences. How does the plan define compensation and eligibility?

As suggested file an appeal using the procedure etc in the old SPD. Make written request (Return Receipt Requested) for the new SPD. File an appeal against the denial under the new policy. The claims denial should have contained the Appeal procedure to be followed. If not, make a written request (RRR) for the appeal procedure. Also request a look at the Plan Document (not the STD Master policy). In the meantime check your state law regarding continuation of coverage (state version of HIPAA) and pre-ex in group health plans. I think that if you were issued new coverage under new terms, pre-ex should have been waived, or might be required to be waived under state law. This is almost certain if this is group coverage but is also applicable under individual coverage. There is also the question of the Certificate of Creditable Coverage which should have been issued if the old policy was terminated. There could also be questions regarding state requirements for Replacement of Insurance Coverage and Notice of Termination of Coverage. As far as I remember, but I have not looked it up, HIPAA also requires that the pre-ex be waived. I would also contact the agent, it seems that he/she might have to intervene to protect themself, if you eventually file reports with the state Dept of Insurance and DoL.

Do you mean benefits for employees of US companies who are assigned to locations in other countries and who are US nationals, or do you mean benefits for employees of US companies operating in other countries and who are not US nationals, or do you mean to find out what benefits are in common useage in other countries?