KIP KRAUS

jeanine: Last I knew, premium tax savings for a small self-insured group are minor. Somewhwere around 1 to 2% depending on your state and whether or not an insurer is a domestic (state based)or foreign (non-state based,but admitted) insurer.

I guess I’m a little more liberal than Do in that I would look at the intent of the company. If the company executed a board resolution prior to 1/1 stating that they were going to institute a 401(k) plan effective 1/1/00 I don’t think that the date they actually signed the plan document would matter, especially if the plan document clearly states that the plan effective date is 1/1/00. On the other hand, I agree that applications to defer to the plan cannot be made retroactive to 1/1. That’s my opinion and not based on any reg. Sites, but I think it makes since. Maybe there are some sited opinions that someone out there can provide.

Tara: You are making us do some assuming here. 1. Can we assume that the $108,000 is stop-loss premium? 2. Can we assume that by saying the plan recieved reimbursement from a secondary insurer it is a coordination of benefits issue, or is it reimbursement from the stop-loss insurance? If it's from the stop-loss insurer, I would assume that the plan is being reimbursed because it paid claims above the stop-loss limit. In which case the money would go back into general assets, again assuming that claims are paid from general assets. Maybe you could clarify the situation more.

Did any other former employee fail to get notification? Doesn't sound like standard procedure for a plan not to notify former employees of this important change.

I filed for a determination on a plan that we were terminating on July 15,2000 and recieved the determination dated November 12, 2000. Don't know if filing for an new or amended plan would take the same time.

AMP: That’s an interesting concept. I’ve managed self-funded STD plans before with no employee buy ups or contributions and agree that if benefits are paid from general assets the plan is not an ERISA plan. I don’t know the answer to your question regarding the treatment of buy-up premiums, but I am curious as to how the buy-up premiums are determined. Also, how are the buy-up premiums booked from an accounting perspective? At some point, if claims experience is good, does the employer give a refund of the buy-up premiums? Just curious!!!

Marry C: There is no site for what I have seen as the norm. It just happens to be an underwriting option. If your plan is as large as you say it is then you know you can pretty much design it the way you want and if it allows new spouses to be covered on the date of marriege that's fine. I guess I shouldn't have really said that what I've seen is always the norm, because I have seen it done your plan's way.

If you are referring to group insurance plans or self-insured group plans I have never seen these plans enroll new spouses in the plans on a retroactive basis. It is true that most of these plans require a new dependent to enroll within 30-31 days of becoming eligible, but coverage only starts on the date of enrollment subject to any other plan restrictions. However, I have seen medical and dental plans that cover a new born at birth provided the employee has family coverage.

Christine: My understanding of the carry over provision is that any money carried over must be allocated to all plan participants, or to pay plan expenses.

It's my undestanding that if this is a group insurance plan sponsored by the employer that FICA taxes apply for the first 6 months of payments. In addition the benefit payments are taxable income to the extent that premiums are not paid by the partner. If this is an individual insurance policy, I don't know the tax consequence.

Most distribution forms I've seen have an area for the dollar amount or alternatively a percentage amount. If a plan is valued daily the person requesting the distribution wouldn't know the dollar amount by the time the paperwork was processed and the distribution is made. On the other hand, If a particial distribution is being requested then of course a dollar amount could be indicated.

Camann: I’m not an attorney so I can’t give you legal advice, only friendly advice. However, there are attorneys out there that may be willing to give you legal advice. COBRA, in general provides that you have 60 days from the date of the notice you received informing you of your COBRA rights to make your election. You then have 45 days from your election date to make your first premium payment. Whether or not your employer is willing to change the date that your coverage terminated is going to be an issue that you or an attorney may have to resolve. In the meantime, If I was you I wouldn’t let my 60-day election period expire and would elect COBRA coverage if I needed it for my spouse. I assume your spouse is eligible? Get a copy of the medical plan Summary Plan Description (SPD) and see what the termination provisions are. The SPD will describe when coverage terminates. If you have a problem getting a SPD you may want to try contacting the Insurer to find out what the termination of coverage provisions are and see if they will assist you. Employer can make mistakes and sometimes the insurer can intervene on your behalf.

Wow!! I can’t believe I agree with Kirk on this one. I don’t see how a person can use up all of his original salary deferral in the first half of the plan year and then increase his deferral in the middle of the year and have claims prior to the new deferral be eligible for reimbursement. I would argue that the new deferral based on the birth of a child has no relationship to the original deferral. I addition, as Kirk says, wanting to include claims prior to the new deferral election would be retroactively making an election change. You may even be able to think of it in this way. Suppose an employer elected to add vision care coverage to its medical plan in mid-year. Claims for vision care would only be covered as incurred from that date forward. Any vision care expenses incurred prior to that date would not be retroactively covered unless the insurer or employer didn’t follow reasonable underwriting procedures.

I didn't think one needed an authority to state an opinion, which is what was intended. Maybe my opinion sounded like a statement of fact but it wasn't intended to. Lest we all be naive don't think for one minute that an HCE in a small company can't get what he wants for his personal reasons. In addition, even though such a change effects all participants it doesn't mean that my opinion couldn't be possible. As to the number of times an employer can change a plan year for whatever reason,that was a question based on the fact that the IRS looks with disfavor on an employer making numerous changes to its accounting procedure (i.e, inventory methods) and taxable years. Any CPA out their should be able verify that. I'm just posing the question in caes someone out there knows the authority.

I would agree with Kirk that a state could invalidate an ex-spose beneficiary designation after divorce. However if the ex-spouse was designated as beneficiary after the divorce (stranger things have happened, maybe a guilty feeling)I'd say it is valid and I would argue that in that case a state court could not invalidate it.

If an employee leaves a company and forfiets company matching contributions and takes a distribution then the employee is only going to recieve that portion of the Company match in which he is vested and tax would apply to that portion only. I don't see how a person can be taxed on a forfieted benefit. I don't think there's a construtive reciept question either since the benefit is forfieted.

Kirk: What legitimate reason would there be for changing the plan year and thereby allowing someone to revoke an election? Seems to me that the only reason would be to allow someone to get in some additional monies for medical expenses that one didn't expect. Think it might be a HCE? By the way. How many times can one change its plan year to accomodate a person, or what ever the creative reason is? Seems to me there's a limit to changing plan years???

To my knowledge, brokerage firms have no controle over an employer's qualified plans, and their acceptance of qualified rollover money,assuming it is qualified. Get the rollover paperwork from your employer and request a distribution from ML in accordance with the paperwork. One thing you may want to consider is that there may be an early withdrawal penalty imposed by ML, which may change your mind.

Laural: I’m no attorney, but I wouldn’t touch this scenario with a ten-foot pole. In my opinion you would be hard pressed to justify any contribution based on age or gender. Who is to say that one sex is more risky than the other therefore warranting a different contribution. Are you going to charge child age women more than males of the same age, because they can get pregnant, what about Title VII of the Civil Rights Act? The same thing applies to age, is a 50 year old more likely to have an illness, accident than a 25-year old? Sounds like law suit city to me.

Dave: Ask the beneficiary if He/she would like to assign me as beneficiary. I'll take it.

I just can't resist it.

What benefits are provided by a PCA and are they tax exempt.

nader12 has explained as accurate as it can be explained. Keep in mind that full-insured group medical and HMO plans are all governed by state/commonwealth insurance laws. This is one of the reasons some employers opt to self-insure so they can avoid madated levels of coverage. Trying to avoid compliance with ERISA based on the fact that group indureance is controlled by the state seems odd at the least. I also would be surprised if any group insurance sales person would advise an employer that this is an out for complying with ERISA. Group insurers, ever since ERISA was inacted have been providing employer with ERISA compliance information related to sale of their products.

I agree with PAX the plan is required to be in compliance with ERISA no matter how you fund it. By the way jeanine, most group insurance policies are issued to the employer, not the employee. Even in the case of some HMOs that say their contract is with the individual participant, an agreement is made with the employer to sponsor and remit premiums to the HMO on behalf of the participant. Maybe I'm wrong, but I think this makes the employer a sponsor. If there is some loop hole in ERISA that says these types of arrangements are not subject to ERISA I would like to know.

Moe Howard What does having a fully insured medical plan have to do with an SPD being required? Section 101(a) of ERISA requires SPDs.