Benefits 101

Although interesting, this theorizing to make "reimbursement of individual premiums" as a viable strategy, is quite frankly, malpractice. The IRS & DOL have clearly come out and flatly said that an employer cannot reimburse individual insurance premiums. I'd up your E&O policy zbenefits. Just my 2 cents. I mean geez... how much more plainly can every regulatory agency put it! http://www.dol.gov/ebsa/faqs/faq-aca22.html

No, this would pass non-discrimination testing. But good point if this was done for a really small employer. With large employers, I don't think its really an issue. Although that is somewhat of a grey area issue... does non-discrimination testing apply to taxable benefits... like an opt out? I'd say no... because the general idea of testing is to make sure high wage earners pay taxes. Here, non taxable benefits (i.e. premium payments) are being converted into taxable wages... sooooo the IRS is getting paid. Don't see why they'd be unhappy with that.

There are absolutely excellent reasons to do this... which I won't get into here. Thanks for the response, but I was asking for possible compliance / legal issues with such a design. I do not see one, but I was thinking someone here could help confirm or deny that thought. Anyone see any potential legal issues here?

Can an employer (fully insured) offer a greater cash opt out benefit based on years of service? For example: 1st year = employee can take health insurance, or receive $50 per month 2nd year = employee can take health insurance, or receive $100 per month 3rd year = employee can take health insurance or receive $200 per month.

Group

Wanted to run this by people: Can an employer who normally pays 75% of an employee's premium offer to pay 100% as part of a hiring incentive for certain positions they want to fill? Lets just say they need one key employee (the CFO or COO or some C suite person) and this is one way to incentivize the candidate to take the position.

Supposing for a moment that it was a valid plan design, this particular element is a deal breaker to me. It's glossed over in other articles on that website ("simply limit plan participation to people w/ proof of insurance which means preventive care will be covered by that plan instead"), but here's your all too realistic scenario: EE takes cheapest insurance, Insurance has a limited network and restricts (legally) preventive care to network providers only, EE prefers his own provider so EE gets out of network preventive care, Plan and Company are now on the hook for entire cost of preventive care which could quickly outweigh the Company's savings on payroll taxes. No point in beating up that website. That website is just flat out wrong. I mean, completely wrong...not even hitting any part of the target. Whoever, interpreted the law for them that way needs a timeout. That's gross negligence or outright incompetence. It makes us all look bad. The IRS goes out of its way to say premiums are "after tax". IRS Notice 2013-54: B. Employer Payment Plans Revenue Ruling 61-146 holds that if an employer reimburses an employee’s substantiated premiums for non-employer sponsored hospital and medical insurance, the payments are excluded from the employee’s gross income under Code § 106. This exclusion also applies if the employer pays the premiums directly to the insurance company. An employer payment plan, as the term is used in this notice, does not include an employer-sponsored arrangement under which an employee may choose either cash or an after-tax amount to be applied toward health coverage. Individual employers may establish payroll practices of forwarding post-tax employee wages to a health insurance issuer at the direction of an employee without establishing a group health plan, if the standards of the DOL’s regulation at 29 C.F.R. §2510.3-1(j) are met.

Umm, that website is just flat out incorrect. Wrong info.

Under a MEWA (or what this forum is calling a "Coalition"?), each member employer can establish their own set of eligibility criteria.. right? For example: Employer A says a full time employee is eligible for benefits after 1 month and a full time employee is defined as an employee working at least 25 hours a week Employer B says a full time employee is eligible for benefits after 2 months and a full time employee is defined as an employee working at least 30 hours a week This can occur in a MEWA, correct?

Under a MEWA, each member employer can estabilsh their own set of eligibility criteria.. right? For example: Employer A says a full time employee is eligible for benefits after 1 month and a full time employee is defined as an employee working at least 25 hours a week Employer B says a full time employee is eligible for benefits after 2 months and a full time employee is defined as an employee working at least 30 hours a week This can occur in a MEWA, correct?

Thanks for the thoughts. It is one of the things I really dislike about the ACA. Usually the extra "marginal dollar" effects high wage earners, but this spins it so that low wage earners suffer. Anyway, ethics aside, as for my statement that families pay a lot for coverage, I suppose I work with lower wage / benefits companies then. I commonly see: "the employer pays most of single rate, but nothing for dependents" in my area of the country. I mostly work with for-profit industries as well, not benefit rich non-profits. If I had to estimate, the payroll deduction for family coverage is about $700-$800 per month in my neck of the woods (just a very rough & general estimate). Anyway, in 2014, why not.... no penalty right! Give these poor folks a break! In 2015, that non-tax deductible 4980H penalty is steep. But for smaller employers... why not? How is this kind of "Robin Hood" discrimination wrong? P.S. Peter, I think the IRS has said "we are looking for companies working in co-hoots by making workers part time at both companies" (to paraphrase)... so it might be tough for that lower wage employee to pull that off. And just think about it, this poor guy or gal has to take a part time job, then what... a temp job? Where is the hope, the upward mobility, the American spirit.... ughhh, the polarization of wealth continues! From a practical sense, I think its difficult for low wage workers to pull of 2 part time jobs that would provide any kind of upward mobility (just my gut opinion).

Ok, guess I didn't read your post closely enough. Thanks. I ran across this a situation with a client. We dissolved the group plan a few years ago, but this year, there was an employee who was not subsidy eligible. Their accountant told them that the company could still pay for the premiums on a pre-tax basis and send the premium check directly to the insurance company. I disagreed with him since IRS notice 2013-54 defined "employer payment plan" as a group health plan. The accountant never got back to me. when I brought this up. Anyway, it does raise the question: how does the IRS know what is employer money & what is employee money? The pre-tax treatment under 125 is still alive from what I understand. If the employer "raises wages" *wink wink*... then the employee uses those increased wages towards health insurance on a pre-tax basis via 125... how do you police that?! Which is what I suppose the accountant is thinking, or he'd just a bad accountant.

I was conversing with an attorney and lamenting how the affordable care act really hurts lower wage working families. Consider the average family premium costs $14K per year, and most companies require a very large payroll deduction for family coverage. A family of 4 making 55K per year with a payroll deduction of $11K per year, is harmed by the ACA because if they were allowed to get subsidies, they would pay far less on the Federal Exchange (about 4.1K per year for a silver plan). So she said, why not just change the plan document to alter eligibility. And she of course qualified it as just a thought and an off the cuff one at that. So, how about if we change the plan document to be: "If one is a full time employee and has a household income of less than 200% of FPL and has a household size of 3 or more, they are ineligible for the group health plan". The point of this is to make that employee eligible for the subsidies via the public exchanges. Most employees would be left in a better situation as a result of this.... except single mothers with free CHIP in many instances. So how about: "If an employee would enroll into Company ABC's health plan as a family, and has a household income of less than 300% of FPL, they are ineligible fore the group health plan." Since there is no 105(h) non-discrimination testing for fully insured plans right now, that isn't a factor. The group would have only a few people effected by it, so they still meet the insurance company's participation criteria. Thoughts? This is discrimination in favor of lower income earners IMO.

I think PHSA 2711 effectively says "no more pre-tax treatment of individual premiums". But you could still pay for individual premiums post tax by saying "all FT employees will get a $200 raise & we are dissolving the health plan". That is not a group health plan anymore. And how would the IRS / DOL determine what is employer money & what is not employer money? KJohnson, why do you think that DOL's HIPAA non-discrimination is a factor? The premiums are not based on health status in any way.

You can combine the HRA with a "skinny plan" (aka "bare bones plan)... new kind of idea. For small employers, it should fly. Edited to add: Since the post pertained to small employers, How do you propose getting around the state small group/employer restrictions on use of section 106 and 162 etc or against reimbursement of premium by the employer and the insurance carriers guidelines, in the many states that have such restrictions?

Bump... this is an interesting topic now with the ACA. IRS notice 2013-54 clearly says employer payments for individual policies must be post tax. But how about ERISA now?

So an employer wants to create their health plan so that employees remain on the health insurance like so: Employee is terminated at the end of the month following 31 days from the date of termination. So if an employee is terminated on October 3, they are removed from the insurance on November 30. They do not have a Plan Document. I am going to prepare one for them. However, this request seems odd, and possibly at odds with the insurance company's eligibility rules. Any comments, insights?

But there is quite a bit of law about this such as IRC 414(n) dealing with benefits & leased employees. George. the employee is usually ALWAYS eligible for the PEO plan, per the guidelines of that section and its extensions. So that is clear, the employee is eligible for the PEO plan. What is not clear is IF they will ALSO be eligible for the common law employer's plan. Because if so, then the ACA stipulation concerning plan eligibility & the various rules around that becomes interesting since they are eligible for both plans. What I am still looking for is case law / other laws concerning dual plan eligibility.

I'm thinking of a client, they have a staffing agency / PEO. Part of their new marketing will be "we take on ACA liability". However, I'm curious as to the situation where an employee waives the coverage from the staffing agency / PEO...then takes the common law employer's coverage (i.e. the place the employee is actually stationed). Or what if they waive one plan, then try to get a subsidy because the other plan is unaffordable, etc...This scenario obviously does not alleviate ACA liability IF this is the case. This could be avoided because we can carve out eligibility with: "you are not eligible if you are eligible for benefits through another entity".

Ahhh, thank you. But without employer contributions, it seems to be meaningless, right?

So in 403b plan documents, why do we have to enter a "normal retirement age" between 62-65? Employees can take plan assets at 59.5 So it is somewhat of a meaningless requirement, no? Does it have any significance?

Well waiving the coverage means that the employee would have been eligible for the coverage... which is what we want to avoid. We would prove it because the employee is in a co-employment situation (i.e. Staffing company, Union, PEO, etc...) and we know that the employee has a plan available elsewhere. I was really looking for the legal answer... case law, etc...

When writing our Plan Document / setting eligibility criteria, can we make the following stipulation: If you are eligible for and enroll for medical benefits through any other entity, then you will be ineligible for benefits under this medical benefits Plan. Can we do that?

It all depends. With the right consultant (i.e me), staffing agencies will be able to thrive vs the competition. The one's I work with are low wage, and as of now, the ACA shouldn't hurt them too much. The penalty is not an option for most staffing agencies IMO.

I have a client that forgot to collect COBRA premiums for an employee for months, just realized it, then termed them as far back as they could go. The employer is in the hole around 5K now in non-paid COBRA premiums. Can they send this to a collections agency? Is there any case law on this?