CaliBen

I'm trying to get an idea of how pricing may change if the TPA passes the rebates through to us instead of keeping the rebates. Trying to gauge whether it is worth it to conduct and RFP.

Any insight on whether sponsors of self-funded health plans are sharing in rebates paid to the TPA when specialty drugs are run through the medical benefit instead the pharmacy program? We are capturing the rebates paid to the PBM when run through pharmacy benefit.

Someone is pitching to our CEO a 162 bonus with restrictive endorsement. CEO is all excited about this. But details presented by broker are somewhat lacking so I have some concerns. I understand the endorsement limits access to policy values etc. But: 1. Broker indicated that we can include a vesting schedule, and made it sound like we can still take a current tax deduction. Is that correct? With a vesting schedule, does the employee have current taxable income, or only when vested? What about payroll tax? 2. It seems clean enough if the employee stays until restrictive endorsement is lifted, but what if they don't and have to repay the company? Do we (the company) have taxable income for amount of repayment? If the employee paid tax all along, are they just SOL or can they deduct the amount repaid? If so, I assume the are out the payroll taxes, if those were paid all along? What about company - are we also out the payroll taxes? 3. This seems to be moving pretty fast in our C-Suite and I also have concerns about administration. Broker is a small 3 or 4 employee company. Our CEO is considering this plan for 100-150 employees. What kind of administrative support will we need from the broker? This seems like a long term plan and putting it in the hands of a small mom/pop company concerns me. Thank you

The only advantages I can think of are: 1. No or minimal basic life is offered so buying voluntary life through cafeteria plan lets you take full advantage of the $50,000 non-taxable coverage; or 2. The voluntary life rates are higher than the imputed income rates so tax on imputed income is less than the tax paid when buying voluntary life with post-tax dollars. Am I missing something?

For a new endorsement split dollar plan, to be effective in 2016 how does one determine if the economic benefit may be valued by the insurance carrier’s one-year term rates? I see that the rates must be (1) generally known to persons who apply for term coverage; and (2) regularly sold by the insurer. The illustrations from the insurance carriers (Pacific Life, John Hancock) all show economic benefit based on their lower term rates, but then in the footnotes say that “we don’t give tax/legal advice etc.” Are plan sponsors using these lower economic benefit amounts? What kind of due diligence can be done?

For a new endorsement split dollar plan, to be effective in 2016 how does one determine if the economic benefit may be valued by the insurance carrier’s one-year term rates? I see that the rates must be (1) generally known to persons who apply for term coverage; and (2) regularly sold by the insurer. The illustrations from the insurance carriers (Pacific Life, John Hancock) all show economic benefit based on their lower term rates, but then in the footnotes state that “we don’t give tax/legal advice etc.” Are plan sponsors using these lower economic benefit amounts? What kind of due diligence can be done?

Is this a breach of fiduciary duty under ERISA? Company sponsors a group term life plan. Company provides a basic life benefit at no cost to employees. Employees may purchase supplemental life. Basic and Voluntary life are with the same insurer. The basic life loss ratio runs pretty consistently around 150-200% per year. Voluntary life loss ratio runs a pretty consistent loss ratio of about 30%. It is clear that the voluntary life is subsidizing basic life, is this a breach of fiduciary duty? Thanks

Following up on the FICA issue - if instead of giving the employees a choice, the employer imputes the value of the premium (similar to group term life imputed income), does FICA still apply? I am thinking yes, that imputed income is considered wages for FICA tax purposes.

Company long-term disability plan has two components: 1) company provided 50% of pay 2) voluntary employee buy up to 60% There is no insurance, plan is self funded. There is no cost to the employee for the 50% base benefit (and no income is imputed) so any benefits received are subject to income tax. Employees pay for the buy up with after-tax payroll deductions so the incremental 10% benefits are received tax free. The question is: can the employer impute income for the cost of the 50% base benefit so that all disability benefits received would be tax free? If so, since there is no insurance, and the plan is self funded, how would the company determine the amount to impute? Could they engage an actuary to set "rates" for the base plan? Would a composite rate suffice, or would they need to develop age based rates and impute accordingly?

Flyboyjohn - I always assumed the same, until I came across this: www.kpcom.com/newsletters/documents/2008.11.20%20Section%2079.pdf

I need help deciding if the plan below is a straddle plan/carried by the employer, and therefore company should be imputing income and withholding payroll taxes. Facts: Assume there is no company paid basic life benefit. Company offers voluntary life insurance to all F/T employees. Employees pay the same rate per $1,000 of coverage, regardless of age. The company rate is $.25 / 1,000. When compare to Table 1 rates I see that the company rate is less than Table 1 rate for employees ages 55+. Based on these facts, may I conclude that for employees ages 55+ with more than $50,000 of coverage, the company should be imputing income and withholding FICA? And the imputed income/fica would be on only coverage in excess of $50,000 and calculated as the difference between what the cost would have been under Table one and the actual employee contributions? Thanks

Why do you say that? Would same sex spouses now be eligible? What if the employee & spouse are married in a state that recognizes same sex marriage, but live/work in a state that does not? What about children of the same sex spouse who now presumably are stepchildren of the employee - are they now eligible to participate in the various benefit plans?

What impact, if any will this decision have on employer sponsored life insurance plans that offer employee spouses life insurance on a voluntary basis?

Our company has a VEBA for a legacy retiree life insurance plan and is considering a buyout/transfer of this liability to an insurer. This is beyond my area of expertise. What potential pitfalls do we need to look out for? For example I have heard that retirees who retired due to disability may not be covered. If that is the case are there any solutions for them? Or do we have to maintain the VEBA for that small group? Any other things to look out for? Thanks in advance.

What 409A issues, if any, may arise if a loan regime split dollar plan is terminated? - policies will be surrendered with proceeds paid to particpants - loans will be forgiven giving rise to tax on forgiveness of debt for each participant? - does waiving loan and interest trigger the exception that pulls loan regime into 409A? If so do the penalties and interest provisions apply? - plan sponsor will then establish a 457f plan with initial contributions equal to the difference between the loan balance and cash surrender value to "make participants whole". and will also make ongoing annual contributions to the new 457 plan Thanks

If a professional athlete - golfer or baseball player - receives pension benefits from the PGA or from MLB, are those benefits subject to United States income tax? If so, would only a portion of the benefits be taxable - the portion attributable to work performed in the United States? So for example if a MLB player from Japan plays for the Yankees, who travel to Toronto several times a year, is that portion exempt from U.S. taxation? Or a golfer from South Africa who plays tournaments all over the world - does he pay U.S. tax on his pension? Just on the portion attributable to service in the United States, or no U.S. tax at all? Thanks

If a professional athlete - golfer or baseball player - receives pension benefits from the PGA or from MLB, are those benefits subject to United States income tax? If so, would only a portion of the benefits be taxable - the portion attributable to work performed in the United States? So for example if a MLB player from Japan plays for the Yankees, who travel to Toronto several times a year, is that portion exempt from U.S. taxation? Or a golfer from South Africa who plays tournaments all over the world - does he pay U.S. tax on his pension? Just on the portion attributable to service in the Unitted States, or no U.S. tax at all? Thanks

If an executive has a $1.5 million base salary and defers $500,000, does that mean the company can deduct 1,000,000 of base salary this year, and then, assuming the executive has left the company at payout, deduct the $500,000 plus earnings at that time. The current bonus is structured to allow full deduction for cash bonus. Thanks

Thanks for the info guys. Ex-employee forwarded me the plan docs and SPD last night. States in part: If you leave the Company for any reason... Balance in Your Dependent Care Spending Account: You may use the remaining balance in your Dependent Care Spending Account for expenses you incur through the remainder of the calendar year. Ex-employee is going to go back to claims department and try again.

I can see the risk that you don't use the money within the calendar year, but the risk of forfeiture due to job loss seems extreme and I imagine most people participating in this type of plan are not aware of that risk. I think they had to make the decision within 30 days of the child being born, but daycare did not start until after 3 month maternity leave.

Thanks for the info. It seems to me that it is a bit unfair for people to forfeit their money if they are involuntarily terminated. This is a perverse result that the government should fix.

Employee had money taken out for dependent daycare from Jan - Mar 09. Child did not start attending daycare until May 09. Employer is denying reimbursement because service was not provided during time employed. Says money is forfeited and goes back to employer. Is this correct? Seems like a way to steal money from employees - terminate before they use their balance.

Client being advised to roll or terminate? existing DC SERP balances into new split dollar using loan regime. Can you convert an unvested DC balance into some type of split dollar? What would the accounting look like? How would move to split dollar work? Is this even possible, regardless ofbeing a good idea? Thank You