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I'm not an attorney, but in CA benefits for a long time. I think the section is pretty clear - it's granting dissolution (divorce) but reserving jurisdiction on other issues pending resolution. Unless your plan has a provision allowing for coverage of ANY person as required by a court order, the dissolution would result in loss of eligibility and invoke a COBRA offer for the ex-spouse. Any kids would stay covered. If the employee still has financial responsibility for the ex-spouse medical they should check out the state insurance exchange, Covered California, for comparable coverage as required under 2337©(2), which may be cheaper than COBRA.

Could use some advice regarding disposition of excess plan assets. I have encountered remaining funds from 2 plans that are now terminated. We're embarking on a wellness effort and this money could provide several years of start-up funding. But I'm not sure it's an appropriate use of the funds. After some research I discovered the following: Life Insurance Plan - Fully insured life insurance Plan was terminated in the mid-90s and the employer subsequently received a payout from the demutualization of the former insurance carrier. Funds have just been sitting since 2000. The plan was funded by both employer contributions (basic life benefit) and employee contributions (optional purchchase). Disabiltiy Plan - Self-funded disability plan was terminated in 2013. All claims are paid. All premiums were 100% paid by employee contributions from a limited, definable subset of the employer (about 20% of the workforce). Excess assets accummulated over a 20+ year period. While "finding" these funds is a good thing (?), their disposition may pose some issues. Although the plans are not subject to ERISA (governmental), its provides a reasonable guidepost. Researching a similar issue years ago, I recall an ERISA provision (but can't find the cite now) permitting an employer to recoup its own premiums first, and then providing that anything above that (if any) could be used for the benefit of employees generally, or distributed to current or former participants. That might solve the Life Plan excess issue. But the Disabiltiy Plan excess (all from employee contributions) is another matter. What are acceptable uses of this money? I'd appreciate any leads, cites or suggestions you might offer regarding acceptable use of these funds. Many thanks in advance.

Publication 503 specifically addresses "Camp" as a possible source of reimbursable day care. It reads: 　 Camp. The cost of sending your child to an overnight camp is not considered a work-related expense. The cost of sending your child to a day camp may be a work-related expense, even if the camp specializes in a particular activity, such as computers or soccer. You might take this to the Plan Administrator and request consideration. Good luck

Back in benefits after an 8 year hiatus. My organization currently has no budget for communicating benefits to employees. We mail various notices to employees as required by law, and (still) send out paper open enrollment packets to all employees which are printed in-house as needed, and the cost just absorbed in administrative overhead. I have no way to track what has been sent or spent over the past 5 years. I'd like to change this. As a general rule of thumb, what do you expect to spend on a per employee, per year basis to communicate benefits to your employees? No staff costs, just the hard costs of printing and mailing (including the cost of any professional services used for design, production, etc.), and electronic communication costs if you track it separately. If possible to split out cost between paper and electronic media, that would be great. But even a composite figure would be most helpful. I'm just trying to get an idea of what a basic, professional communication plan should cost so I can start moving my organization in that direction. Currently we do all of our own printing on big printers, no color, stapled in the corner, and have no professionally produced materials of any kind. Unfortunately, I think this low budget low tech approach sets the tone for the value that employees perceive from our benefit program. I think we can do better. Thanks in advance for your insights.

At my prior organizaiton, the waiver payment was treated like a benefit but paid like salary. If on an unpaid LOA, employees didn't get it. However, if they were in any type of payroll status (eg. partial hours worked, S/L or vacation pay, etc...) then the waiver payment triggered. There was no make-up payment upon return to work from an unpaid LOA.

A little different scenario. Mom lives in California, dad lives in Phillipines. Minor child (now 2 y.o.) spends 6 months with mom and 6 months with dad each year. Do we have QEs here that allow us to add and delete the child from coverage as the child changes country of residence? Have yet another family where dad and the kids went home to the middle east from Sept.to January. Is a 5 month absence from the plan service area more compelling than the 2 month trip in the original post? I just don't have enough imagination to make this stuff up! I wonder what's next?

The qualifying event would be the move out of the service area of the plan, which in our case, is a move out of the service area of EVERY plan we offer. While the law says the child is still eligible for the parent's plan, does the law contemplate requiring the parent to maintain coverage when the ONLY coverage available is in an emergency room? Similarly, if moving out of the plan service area is not a qualifying event, how does a large national company justify allowing its employee to drop a local HMO and pick up new coverage when the company transfers the employee from, say, California to New Jersey? It would be a similar situation for a spouse, which comes up from time to time, where the spouse's job requires a relocation out of the area and you now have a commuter marriage. While this might involve the spouse acquiring group coverage through the new employer, which is by itself a QE, I have had also them move and pick up individual coverage in their new locale, which is not a stand-alone QE. Should I require the spouse to stay enrolled in our local plan that cannot be used?

Technically they are not "ineligible" to be covered, they are just out of the plans' service areas. Plans are all managed care, so no routine services are available when out of the country, but that would also apply to a vacation to another state, or even another part of our state. However, emergency services can be reimbursed based on a bona fide emergency. If a dependent moved (permanently) out of the plan service area, we would consider it to be a qualifying event. It is the temporary, albeit long(ish) term, nature of the extended out of country travel that is causing the conundrum.

Employee's wife and children travel back to the home country each year for 2 months. During their absence, the employee wishes to delete them from all health plans and then add them back on when they return. Would you consider an extended vacation out of the country by family members, and then the return, to be qualifying events that would allow cafeteria plan election changes? Thanks!

My first time with Fiscal Year rather than Calendar year plans... We have a fiscal year based plan (July to June). Employee starts work in August 2012 and elects $5000 for dependent care account, which is pro-rated across the balance of the plan year. For new Plan Year starting 7/1/13, employee again elects $5000 which is pro-rated across the whole year. Net result is that calendar year 2013 W-2 shows a dependent care deduction in excess of $5000. However, $5000 maximum deduction for each plan year has been properly limited. Anybody have experience with how the IRS might regard this? Thanks!

It sounds like my "easy" fix is to stop the practice of offering previously waived PT employees with continuing eligibility the opportunity to enroll at the mid-year eligibility review window. Someone first gaining eligibility could make an election; someone losing eligibility could have their election revoked; but someone currently waived with continuing eligibility could make an election change ONLY based on a QE, but not just because it's our mid-year eligibility review and they are still eligible.

Still working through some questions and issues on a plan I took over several months ago. Finding some design issues that are unfamiliar to me and which make me nervous regarding our legal compliance. But just because I haven't seen them before (10+ yrs of plan admin experience) doesn't mean they're a problem. But they might be ... which is where I hope to draw on your collective experience for some insight. Your thoughts and comments on the following situation would be greatly appreciated! Health plan provides employee-only coverage for part-time workers who average more than 25 hours per week over the previous 12 months, following 3150 hours of continuous service. Eligibility is determined in June and December each year looking back at the previous 12 months, with coverage effective in January and July. Plan covers approximately 160 of 350 total PT workers, with approximately 20-30 rolling onto or off of coverage at every review. PTs losing coverage are offered COBRA. PTs becoming eligible are offered employee only coverage (ee pays 20% of premium cost, pre-tax) or are allowed to waive coverage. No response by employee defaults to enrollment in the plan. At each review, waiver employees who have continuing eligibility are also offered the opportunity to enroll. Waivers who do not respond are continued in waiver status. At other times during the year, standard Qualifying Event rules are observed to permit eligible PT employees to drop their coverage or enroll from waiver status. Plan year starts July 1. This plan is different from, and more limited in scope and provider selection than the plans offered to regular full-time employees. Due to the ACA, this plan requires some design changes (eliminate service requirement, add availability for minor dependent coverage) this coming July 1. The issue at concern is offering a 2nd plan enrollment opportunity and pre-tax salary reduction election to employees with continuing eligibility who have previously waived coverage. This only applies to the January enrollment window as it does not coincide with the start of the plan year. I suppose we could look at this as a "special enrollment" opportunity, but it's really just a normal part of the plan design. Does anybody have a concern regarding the mid-year pre-tax election changes, either for continuing waivers who now want coverage, or for continuing enrolled ee's who want to drop mid-year? Thanks in advance!

GMK, thanks for the reply. The insurers will not be the problem. My concern is the 125 election change. Because the employee is not covered by the plan at the time of the event, is notification required at that time, or is notification at the time that coverage gets reinstated going to be sufficient, from an IRS perspective? On one hand, I don't have a big problem considering the reinstatement of coverage to be its own QE, which then allows 60 days to make changes. On the other hand, however, upon return from LOA coverage is automatically reinstated at the pre-LOA level, and once the first paycheck runs, the "election" is in force. Once in force, can the election be changed? This is a bit akin to brief termination of employment and loss of coverage. If the former employee is rehired, their pre-termination 125 elections should be reinstated. Now suppose they had a baby, or acquired a new spouse during the break in employment. Can you change the 125 election?

Employee is on unpaid LOA, declined continuation coverage so there is a break in coverage. Normally upon return to active payroll status, benefits and 125 elections pick up where they left off. During LOA, employee gets married. Wants to add spouse to coverage. Plan allows 60 days to make election changes, but employee does not return to active payroll and benefits status until 100 days after marriage. Do you allow the employee to add spouse upon return from LOA even though it is 100 days after the qualifying marriage event? Or, do you REQUIRE the employee to notify you of the marriage within the normal 60 day window in order to be able to add spouse upon return?

Carol, I just took on a new position with a local government which has historically filed form 990 (prepared by our TPA for a fee, of course). We, too, are a governmental VEBA with a 501©(9) determination letter. While I'd love to discontinue an unnecessary filing, I'd rather not run afoul of the IRS. Were you able to resolve your issue with the IRS in a way that would give me hope that I might find quick resolution if the IRS looks askance at my current and future failure to file a fruitless form?

Maybe an old issue but I couldn't find an answer to my specific query. I'm back in the benefits world after a 5 year hiatus and am still shaking out the cobwebs and catching up on changes to the law. There's been a few... Could really use your collective assistance in straightening out some things as I plow through becoming acquainted with my employer's benefit plans. Employer maintains a125 Cafeteria Plan which contains the following provisions: "3.3 Benefit Component Elections -- Each Participant shall elect among Benefit Components and shal designate the amount of Salary reduction and/or Employer Credits (or portion of the total) to be applied during the Plan Year for each of the Benefit Componenets, and the amounts so disignated shall be credited to the appropriate Benefit Component subaccount." "3.4 Cash Benefits -- A Participant may elect to receive in taxable cash compensation any amount contributed by the employer as Employer Credits." Internal Revenue Notice 2012-40 contains the following: "As noted, the $2,500 limit applies only to salary reduction contributions and not to employer non-elective contributions, sometimes called flex credits. Generally, an employer may make flex credits available to an employee who is eligible to participate in the cafeteria plan, to be used (at the employee’s election) only for one or more qualified benefits. For further information on flex credits, see Prop. Treas. Reg. § 1.125-5(b). For example, if an employer contributes a $500 flex credit to each employee’s health FSA for the 2013 plan year, each employee may still elect to make salary reduction contributions of $2,500 (as indexed for inflation) to a health FSA for that plan year. However, if an employer provides flex credits that employees may elect to receive as cash or as a taxable benefit, those flex credits are treated as salary reduction contributions for purposes of § 125(i)." (emphasis added) Not all employees get Employer Credits (depends on your union and date of hire). Employer's credits vary in amount (based on union negotiations), but can be up to $1,200 per month which easily exceeds the $2,500 annual limit. My question - should the employer's flex credits be treated as salary reduction contributions, thus violating Section125 limits? Your expert guidance and opinions (whether humble or not) would be most welcome!

GB - granted, a termination of employment is a change of status event under 125. I apologize for my over simplification. Your quote cites a great section, which includes lots of other conditions as well, not all of which apply to every potentially affected person listed in the section. To make a change under a cafeteria plan, termination of employment would apply to the status of another eligible dependent rather than an employee, and then only if consistency conditions are met. A dependent's termination is not a qualifying event if it does not result in a loss of coverage or one of the other criteria that satisfy the consistency standard. Relative to an employee, termination of employment ends participation in the cafeteria plan. The person is not electing benefits under the cafeteria plan, they are exercising their COBRA rights which provide for continuation of coverage that was in effect at the time of the event. If the employer desires, and the carriers agree, I suppose the employee can probably permit anything they want under their continuation program. It will never fall under the cafeteria plan so there are no IRS prohibitions or implications. Don't know why an employer would want to do this, but I suppose they could, again, only if the carriers agreed. (I'd want that in writing.)

Be careful not to confuse "qualifying event" for COBRA, versus "qualified status change event" under a Section 125 cafeteria plan. COBRA events allow you to continue the coverage you have in force at the time of the loss of coverage due to an "event" (termination, loss of dependent status, etc.). Section 125 events allow you to make mid-year election changes, eg. plan-to-plan change. Under 125, "loss of (other group) coverage" is a 125 event that lets you make a 125 election change. On the other hand, "termination" is not an event ... it kicks you out of the 125 plan and (generally) triggers your COBRA right, which is the right to continue the plan you had in force under basically the same terms and conditions as when you were active.

The QB can continue whatever they had in force at the time of the loss of coverage. You must then treat them like you would any regular employee, so if you would let your employee make a "free will" change mid-year, you should do the same for the QB. Even if you don't offer mid-year free choice elections, if the QB experiences a status change event of the type that would permit a regular employee to change plans mid-year (eg. move out of a plan's service area), you should permit the QB to do the same. And if you have an annual enrollment period allowing unrestricted change, don't forget to include your COBRA participants in all mailing and offerings.

GBurns - I'm afraid we're just going to have to disagree on this. I'm not sure I would rely so heavily on someone's 2 year-old comments to an initial exposure draft for formulating my position on this issue. As have you, I too have seen, and heard, many similar opinions expressed over the past couple of years. But that's not where credible sources are hanging their hats these days. The seminars, consultant newsletters, and other recent meetings we've attended all recognize the implicit rate subsidy as a real issue, at least in relation to GASB and governmental reporting of OPEB liability. But, it still waits to be seen how the auditing firms will actually treat this component of OPEB when their first opinions come due in a couple of years. If an entity with blended rates reports no funding or liability, and the audit firm issues an unqualified audit, then I'll cross over to your side. However, I suspect we'll be seeing liability reported or appropriate notes written by auditors. That said, recognition of OPEB in the private sector may be different. I took a quick look at FAS 106 and couldn't really find mention of the implicit rate subsidy or anything like it, so maybe it doesn't exist in that world. In such case, you're right, it's not an issue.

GBurns - read up on "implicit rate subsidy" to find the employer liability. If you are blending your active rates with retiree rates, you have it and it needs to be actuarially determined, and in most cases you need to fund it. I agree that an individual 35 year old "early retiree" is not necessarily a bigger risk than a 35 year old employee who is still working for you. Depending on your business, the former employee may actually be at lower risk. However, as a group, early retirees will pose a larger risk. There are no 20-30 year olds joining the retiree pool to knock down the age factor. If your plan is large enough to be credible, you will have an age difference with the early retiree group being older. If your plan is not credible on it's own, you'll be pooled into some type of community rate type arrangement, and you'll get the age factors of the pool, which will be credible, and the early retirees will still be older. If the retirees pay the same rate as an active employee, you have implicit rate subsidy. Larry's 40% figure is, I think, pretty reasonable, if not conservative. I've seen data on a large credible group where the experience difference was 60%. Active:Retiree ratio was about 4:1. The blended rate was about $400 for a single - the unblended rates were about $360 and $580 for an active and early retiree, respectively.

I agree that the implicit rate subsidy generated by blending rates with actives could be considerable, depending on the size of your active and retired workforce. This will become a funding or liability reporting issue (FAS 106?), but if your employer is willing to pony up or disclose, more power to 'em. Just make sure you advise them to have an actuary evaluate their exposure, just to cover your bases.

Back to Sheila's original concerns. 1) set a "normal" retirement age for the plan (tied to your retirement plan eligibility?), can't participate until begining to receive pension benefits. This eliminates the 38 year old former employee. 2) require that the person must retire from active service, that is, go directly from active employment into drawing benefits from the pension plan. This eliminates that same 38 year old coming back 20 years later to sign up for your health plan. 3) have separate retiree rates, not blended with your actives. Expensive for the retirees, but it makes the plan stand on its own. 4) provide some sort of mechanism for active employees to set aside money for future retirement medical expenses. This will give more of your retirees a chance to afford coverage, thus participate in the plan, thus minimize the adverse selection potential. Good luck.

Good point by GBurns. The savings rate will only be 1.45% on ANY contribution made by an employee who exceeds the limit at the end of the year. In terms of savings, however, be sure to include an offset for amounts paid under your medical FSA that will never be recovered through payroll deduction. Or, you might include discussion of plan forfeitures (which could already include the extra medical FSA payouts) which generally turn out to be a plan revenue item that offsets internal administration costs.

Reckon I'm with leevana on this one. While there certainly is fraud against whoever is accepting the risk and paying claims, there is payment by the employer for the dependent coverage which is clearly being misappropriated by the false (fraudulent?) representations of the employee. But is it fraud, or confusion, or poor communication, or ???? Now, whether or not it will rise to the level of a firing offense or not in your company is a subject for YOUR attorney in the context of YOUR policies and YOUR past practices. In my organization, it might be a discipline issue, but if we fired you for it we'd probably be reinstating you a couple of years later with full pay after your union got done with all of the appeals. It would be a high risk, low reward scenario with little or no deterrent value. However, if we could identify a clear body of on-point case law from our own Circuit, it would be worth the risk. Whether or not the insurance company could (or would) come after you is another story altogether that would likely hinge on the dollar value of their loss. I might encourage them to do so, but that will be up to THEIR attorney, etc...