Nathan

Gburns - thanks, I'll have to dig into this a little deeper with the client with regards to your points.

GBurns - I don't believe the amount being paid is being reported as income to the EE, there is not an EE portion running through the cafeteria plan as the entire premium is being paid by the Employer. Chaz - The Key Employee is participating in the Cafeteria Plan, but with regard to the HSA benefit as they are currently contributing money to their HSA account on a pre-tax basis through the cafeteria plan. Would it be recommended that this individual fund their HSA with after tax dollars and just claim the deduction for the HSA contribution on their tax return when they file their taxes? Then they would not be a participant with in the Cafeteria Plan at this point. Thank you - Nathan

We have a small employer with less than 15 employees, they offer a group health plan to employees with ER paying 25% of premium and EE's paying remaining 75% of premium. ER also pays 100% of 1 Key EE's insurance outside of the Cafeteria Plan as a general business expense. When running the necessary non-discrimination tests for the Cafeteria Plan we are including both the ER Paid and the EE Paid premiums for the Health insurance. (1) Is it proper or is ER permitted to exclude the Key EE premiums paid as these were paid outside of the Cafeteria Plan as a general business expense? or does this ER paid premium amount need to be factored in for our Non-Discrimination testing? (2) If the above is not permitted, can we elect to run our Non-Discrimination testing only looking at the EE's portion of the Health Insurance premiums being paid? Thus the ER paid premiums would not be included in the Non-Discrimination testing. Problem is that with the Key EE's ER paid insurance premiums factored in the Cafeteria Plan fails the 25% concentration test. Thank you for any assistance with this question - Nathan

What are the requirements for Insurance complanies having to supply Schedule A information? I am working on a large welfare benefit plan that has individual AFLAC policies for those employees who have elected for such coverage in addition to their Life and AD&D policies. I have Schedule A informaiton for the Life and AD&D policies but not for the AFLAC policies. Is this because the AFLAC policies are all individual policies and not a group policy? Should I expect any schedule A information for the AFLAC benefits? Thank you.

If a 125 plan were to be amended to remove OTC items from the eligilbe list of reimbursable items to make administration easier would OTC items that participants have received a prescription for be reimbursable as a "prescription" or would these items always be considered "OTC items" regardless of any prescription they may have received, thus making the item ineligible for reimbursement? I have read several articles that imply that many Employers are electing to remove OTCs all together to limit any potential problems with the determination of what are "drugs" and what are "Medicines" under the new regulations. Are a lot of Employers or TPAs removing OTC items all together?

masteff, Thanks, I understand were you are going with the discussion of ER paid Health Insurance premiums and whether they should be included in the 25% Concentration Test. You have hit upon the main question I had which was if the ER is only tracking the expense as a liabiltiy and not actually funding the plan then it should not be part of the 25% Concentration Test. It makes sense that it would not be included in the 25% Concentration Test, I just have not seen this liability being tracked before when the premiums are not funded. Thanks for info. Nathan

George, The client's payroll report has three sections for each EE: Earnings, Deductions & Liabilities. The EE's Health Insurance premium deductions show up under the Earnings section. The question I am having is under the Liabilities section the ER is tracking the ER cost of the Health Insurance premium for the various groups, (EE, EE+1, EE+2, EE+Family), but these amounts are not actually being set aside by the ER into the Self Funded Health Insurance pot, they are simply being allocated or linked to each employee on the payroll report. In this situation the ER is not actually paying any portion of the EE's Health Insurance Premium, thus my thought is that these amounts should be excluded when we are running the 25% Concentration Test as the ER is not contributing or funding any of the Health Insurance Premiums. Not sure why they are tracking things this way, they just are. Thanks, Nathan

Does anyone know how to treat ER paid Health Insurance premiums for a self funded plan who allocates a liability on their payroll records for the ER portion of the Health Isurance premiums, but does not actually contribute this allocated amount to the self funded plan? They are just tracking the ER cost as a liability on the payroll reports. The question at hand is whether or not these allocated ER premiums should get taken into account when running the Key Employee Concentration Test when they are NOT actually paid; or should the EE portion of the premiums be the only item included in the Key Employee Concentration Test? My understanding is the ER is just tracking these costs on their payroll. The only amounts being funded into the Self Funded Health Insurance plan are the various EE premiums being paid. Thanks - Nathan

Does anyone know how to treat ER paid Health Insurance premiums for a self funded plan who allocates a liability on their payroll records for the ER portion of the Health Isurance premiums, but does not actually contribute this allocated amount to the self funded plan? They are just tracking the ER cost as a liability on the payroll reports. The question at hand is whether or not these allocated ER premiums should get taken into account when running the Key Employee Concentration Test when they are NOT actually paid; or should the EE portion of the premiums be the only item included in the Key Employee Concentration Test? My understanding is the ER is just tracking these costs on their payroll. The only amounts being funded into the Self Funded Health Insurance plan are the various EE premiums being paid. Thanks - Nathan

We have a plan document that states In-Service distirbitions of ER Profit Sharing dollars are permitted once an employee has reached age 59 1/2. Some how the Employer allowed an In-Service distribution for a participant earlier this year (2009) when they were only age 58. What is the easiest way to correct for this operational failure? I believe they can qualify to use SCP for significant operational failures and correct by plan amendment. Appendix B Section 2.07 of Rev. Proc. 2008-50 has a similar example using Hardship Distribution Failures. The only part I am having trouble with is under Section 9 (Self Correction of Significant Operational Failures) .03 states "Correctionby Plan Amendment. In order to complete the correction by plan amendment (as permitted under section 4.05), the appropriate determination letter application must be submitted before the end of the plan's applicable remedial amendment period described in Rev. Proc. 2007-44. If we are using a Prototype document is a Determination letter necessary or can we rely on the option letter received with the Prototype document?

Jackmo - In our case we have an ER who has an old cafeteria plan year of Aug. 1 - July 31 which the 5500 has been filed for the Welfare Benefit Plans (Health, Life & Dental). The welfare benefit plans have a plan year of Nov. 1 - Oct. 31. For the cafeteria plan year that ended 7/31/09 it would have reported the welfare benefits for the period 11/1/08 - 10/31/09. -- Can we not file a short cafeteria plan year for the period 8/1/09 - 12/31/09 with NO welfare benefit plan info on this return as the welfare benefit information for the next welfare benenfit plan year (11/1/09 - 10/31/10) would be reported on the new cafeteria plan year 1/1/09 to 12/31/09? The FSA is not going to start or be effective until 1/1/10 so there currently is not a separate FSA filing. We are checking with the insruance carrier to see if they can switch to a calendar year insurance program or provide us with Schedule A info on a calendar year, but from what I have gathered from above is that it is not a big deal if the welfare benefits have a different plan year from the FSA and cafeteria plan as long as we are reporting all of the necessary periods for all plans. We are trying to create a wrap plan situation where we only have one 5500 for both the FSA and the Welfare Benefits. -- Does the plan document for the caferia plan just need to mention that it is intended to be a wrap plan document and then list or reference the various welfare benefits? -- Lastly, the current cafeteria plan document lists some AFLAC benefits that the employees are able to elect into, the eligbibility for these AFLAC benefits is same as it is for their group health, Life and Dental (90 days) but the effective date of participation is 1/1 and 7/1 rather than effective as of the entry date under the Employer's group health plan? Does this cause any concerns with a wrap plan? Thanks for all your help - Nathan

Sieve, is it your understanding too that anyone (in this case the employer) can pay the COBRA premium for the one employee that has not elected to join the companies group health plan? Do you know if the EE can pay these premiums with pre-tax dollars through a premium conversion plan that allows individule policies? Thanks, again.

Chaos - thanks for your input on this issue. I will advise the client to review their current plan to see if it would cut short or stop the COBRA policy. Good point on the taxation issue, I will do some further reserch on this as well. Any other comments from anyone are always welcome. Nathan

The following question was posed to our firm, but we do not work with COBA plans very often. I have a question for you about providing health insurance for my employees. We have been following the letter/intent of the law in providing health insurance for those employees who wish to be on our companies plan. Within the last few years I have hired an employee whom has maintained her COBRA plan but is considering joining our health plan. According to the employee, she is eligible to stay with her COBRA plan. She is also a likely candidate for knee replacement surgery in the near future. This, of course, would cause a significant increase in our premiums. Is it possible for our firm to pay her COBRA health insurance premiums and keep her off our group plan? She is eager to do this as she does not want to provide a burden to our group plan. If we can do this, what is the best legal way to accomplish it? Any input would be great on this topic as we normally do not deal with COBRA issues. Can an ER pay COBRA premiums on behalf of an employee? If an employee is eligible for an ER's group plan are they then ineligible for COBRA? Thank you, Nathan

Thanks GMK, In our case I believe it makes scence to to stick with a calendar year cafeteria plan as we are setting up a Health FSA for a trucking company. I think it would be difficult to to try and explain to the EE's that their Health FSA election amount would be for a period other than a calendar year period. I tend to think that most emplyees thing of a calendar year for elections as it is the same period for taxes, w-2s ect. If you match up the Cafeteria Plan year to the welfare plan years 11/1 to 10/31 you always run the risk of it changing when the ER switches carriers.