Joe Priselac

There is no requirement in Section 125 that the enrollment process must be done in a paper format. Many companies use internet or telephonic systems to enroll their flex plans. Theonly problem we have encountered is with certain insurance companies inability to accept electronic enrollment.

A government is not subject to ERISA regulations. Even if it were, it is a permitted disparity to give a larger credit to family eligible employees than to single eligible employees. Look at it from this point of view. If an employer paid 100% of the cost of health insurance coverage for its employees, it would pay more in premiums for the family coverage than for the single coverage. The employer would not be required to pay the difference in premiums to the single employees.

Jennifer, Why don't you do your withholdings over eleven paychecks? That way you will do your last withholding on the December 1st paycheck. This will enable you to properly report the withholdings on the W-2. We administer several plans that do withholdings over a lesser number of pay periods than are in the calendar year. For this year, notify all participants that you will be adjusting their withholdings so that the entire year's withholding will be completed by the December 1st paycheck. If you want to discuss your options in more detail, feel free to contact me.

There is a requirement to file a 5500 since a POP plan is a statuatory fringe benefit. Section 6039d of the Code is where you will find the reporting requirement. There is no audit requirement since there is no trust involved. Size is not a factor for POP plan reporting. You may be thinking of the welfare plan threshhold for reporting which is 100.

Sam, I have been involved with many situations where the employer wishes to begin employee contributions. I'm no labor lawyer, but absent a collective bargaining agreement, the employer is free to change the company contribution after notifying the employees. This is one of the main reasons employers adopt a Section 125 plan. Obviously, the way you go about this has a huge impact on employee morale. Properly planned out, there are ways to "sugarcoat" the transition to employee contributions.

Iris, There is no state law mandating the offer of health or dental insurance. I assume you are referring to a fully insured plan given your size. Since IRC section 89 was repealed there are no Federal nondiscrimination rules governing health and dental plans. The short answer is that you can offer medical and dental on a "discriminatory" basis. Typically I have seen the company contribution vary, but I was involved with a medical group where the doctors purchased dental coverage on themselves and not the rank and file employees. The biggest hurdle you will face is the insurance company underwriting guidelines.

That's a pretty general statement. Can you be more specific?

The employees would be responsible for the taxes on the excess contributions. The employer is responsible for any FICA taxes that may be due.

You hit the nail on the head. You make everyone eligible to participate in the POP plan immediately.

I have been involved with many union negotiations in this very area and the possible solutions are extremely varied and depend on your particular situation. I would want to ask a lot of questions before I would offer suggestions. I think your best bet is to find an expert in the field to assist you. One suggestion might be to split the cost of the consulting fees with management. I have been engaged that way and it made both sides feel more comfortable. Neither side thought I was being "partisan" in my recommendations.

Yes. It sounds like you have a Section 125 plan because of the employee contributions which I asume are on a pre-tax basis. Your municipality could have a 105(h) plan without having to comply with any ERISA requirements. Since a Section 125 plan is considered a statuatory fringe benefit plan you are not exempt from filing a 5500 form. I would for simplicity operate one plan,a Section 125 plan that would allow for both employer and employee contributions.

I work in Buffalo, New York the alleged capital of questionable weather. Our policy is that if the office is closed because of a travel ban then we don't dock employees. If the office, which is located in downtown Buffalo, is open for business and the employee doesn't come to work, we give the employee several options. Western New York often gets hit with narrow bands of lake effect snow showers. Downtown Buffalo could be basking in sunshine with no snow while 10 miles south in the suburbs they could be experiencing blizzard conditions. Those employees affected can make up the lost time, use up a vacation day, use up a personal day or have their pay docked for the day. Being from Buffalo I don't comprehend rain as reason not to go to work.

In the latest version of Publication 15-B the IRS stated that the limit for parking reimbursement is $180 per month.

I assume that you are referring to payroll deductions for the employee share of employer provided health insurance. If that is the case, then the answer is yes. The plan, if it is so written, may allow for changes due to premium increases or decreases that occur off of the plan anniversary. The rule is covered in Prop. Treas. Reg. 1.125-4(f)(2)(i)(2000)

If there is no Section 125 plan in place,the only rules would be those of the insurance company or employer if it is self-insured. Practically speaking there would probably be little difference. Most companies allow changes for family status changes like marriage, divorce, birth, death, etc. similar to the status changes allowed under Section 125. If a company offers multiple medical plans, there is a once per year open enrollment window to switch insurance options.

Becky, Insurance premiums of any kind not just COBRA premiums are not an eligible expense for reimbursement in a health flexible spending account. This rule can be found under the proposed Treasury Regulations Section 1.125, Q/A-7(B)(4).

It depends. They are not eligible for reimbursement under a health FSA which is strictly for out of pocket medical, dental and vision expenses. If your plan document is written so that it creates a separate premium reimbursement account, then you could run COBRA premiums through this account for reimbursement. For example, if an employee left an employer with a dental plan and went to work for a new company that did not have a dental plan, that employee could COBRA the dental coverage and be reimbursed from the new employer's flex plan for the premiums. I hope I am not too confusing; it's Friday.

It is not only legitimate, but required under COBRA. A health FSA is treated like any other health plan. When a participant in a health FSA leaves empoyement, a proper COBRA notice should be sent notifying that participant of their rights. Those rights include the ability to continue participation in the FSA. I am assuming that the employer is large enough to be covered under the COBRA rules.

GBurns, IRC Section 105 is where I would look to for the reasoning that certain benefits could be taxable. Reg 1.105-2 covers amounts that are excludable from taxable income. It refers you to Section 213 to determine what kinds of medical expenses are eligible. Regulation 1.105-2 states that "However, the exclusion does not apply to amounts which are attributable to (and not in excess of) deductions allowed under section 213..." Since a taxpayer can not attempt to deduct more than the actual medical expenses incurred, it would seem logical to assume that if the taxpayer were reimbursed for an amount greater than the actual medical expenses incurred they would have to include the excess amounts in their taxable income. Perhaps some of the tax attorneys out there could shed some light, or should I say, poke some holes into my reasoning.

Yes, these premiums can be deducted pre-tax. However, the employees should be made aware of the fact that the benefits from the disability policies will become taxable income and any benefits from the cancer plans that exceed actual medical expenses are also taxable income.Many people after hearing that the benefits become taxable opt to have the premiums deducted after-tax especially if the premiums are relatively low.

Steve, I don't have survey results, but since we have made the account part of our administrative package about 70 our employer groups have added the benefit. Not many employees in each company use the account,but the ones that do really benefit from the tax savings. IRC Section 137 allows up $5,000($6,000, in the case of a child with special needs) per adoption. In operation it works like any other spending account. The difference from an employer's point of view is that the reductions are still subject to FICA tax and in that sense it has a tax impact similar to a 401(k) plan. The rules become somewhat convoluted for foreign adoptions. We have also found that several people who wanted to use the account were prevented from doing so because of the income limitations in the Code. The benefit begins to phase out if your adjusted gross income is above $75,000 per year. Also any direct employer contributions toward adoption expenses reduce the amount that an employee can put into his spending account.I hope this brief description helps. I almost forgot.This program expires December 31, 2001 unless Congress extends it.

Are you refering to a spending account for the reimbursement of adoption expenses or are you asking about the adoption of a flexible spending account plan?

Mary C is correct assuming that a proper initial COBRA notice was done when the employee first became eligible for benefits.Without proper notification, the employee or the dependent could argue they had no knowledge of the requirements.

In your scenario the limit is $5,000. The combined limit for a working couple is never more than $5,000, but it can be less depending on the circumstances.

Linda is correct regarding the way most Cafeteria Plans are written. There is a way to write the Cafeteria plan document requiring employees to participate for the entire plan year. If termination of employment occurs, the employer can deduct the remaining unpaid contributions from the employee's last paycheck. This must be done for ALL employees regardless of their account balances. Also, many states have labor regulations about garnishing employee paychecks. A separate authorization may be necessary to satisfy state requirements. The employee continues as a fully active participant even after termination of employment for the balance of the plan year. Many employers shun this method because of the administrative hassles inherent in chasing ex employees for unpaid balances that exceed the value of the last paycheck.