KIP KRAUS

Donna: We give our employees $150 per month as regular taxable income if they opt out of our medical plans. At the time we calculated this amount it represented about 35% of what the Company would pay for family coverage per month. We require evidence that the employee is enrolled in some other group medical plan before we will pay the opt out money. Typically, only married employees opt out, because the only place they can get group coverage is through their spouses employer's plan. That's not to say they couldn't be getting it from a part-time employer, but if they are we will let them opt out. They could be getting it as a retired military person also, but not in our area.

Kevin: Have you run this by any insurance Companies? Even if the plan does comply with ADEA, insurers may not even write the kind of schedule you are looking for depending on the number of total employees to be insured. In addition, they may not be willing to write a flat $500,000 on the partners unless this amount is reasonably close to 1,2, or 3 times their normal earnings.

Have you checked with your payroll department to see if they may know? They have to be sending withheld taxes into the state.

Your best bet is to contact an independent insurance broker who deals in employee benefits and property & casualty insurance and ask them. Most of them would be happy to meet with you for free, because if they place any of your insurance they will get commissions from the insurers. You will find that your employee benefits options with 15 employees will be more limited than when you have 50 employees. Talk to a broker.

Most employers I’ve been involved with do not have maternity specific leave policies. The most typical situation I’ve seen is a disability policy that applies to all disabilities including maternity. The most common formula I’ve seen is 100% of pay for a specific number of weeks based on years of employment; i.e. 1 week of 100% pay for each year of service based on the employee’s anniversary date of hire. Thereafter the employee received only the STD benefit from the insurer or from a self-insured plan. You of course can be as creative as you would like to be as to how much the employer is going to pay.

We make distributions to alternate payees under QDROs. In order to do this we amended the plans on the advice of council.

Nsoroma: I don't know of any litigator, but I assume you never returned from work following your STD, which is typical. It sounds to me like the LTD insurer is paying correctly. I've never seen a Group LTD policy that would increase a person's LTD based on that person getting a raise while disabled. LTD replaces lost earnings, not loss of future earnings. Sorry, but it sounds like they rightfully base benefits on your earnings just prior to your date of total disability.

I have read the new proposed rules related to Mergers and Acquisitions, but not knowing the details of the sale puts me at a disadvantage. There could have been a qualifying event related to the M&A QBs. However, it looks as though you have researched this thoroughly. That being said, I agree with your observation that Sec 106 applies in many cases with regard to retirees and layoffs. It often times is applied in cases of involuntary downsizings as well. However, I still would argue that in such cases, in order for Sec 106 benefits to be qualified they would have had to been previously accounted for in a plan document. Where are you CPAs out there that always have the tax answers? Feel free to step up any time.

It wasn't obvious to me. However, I guess my question would be why would an employer who provides code section 106 medical benefits to non-employees be able to take a tax deduction for providing medical benefits to non-employees? I'm not a tax specialist, but the code does specifically reference benefits provided to employees. Unless the plan document provides for such payments in the event of a sale of a portion of the business, I'd say the employer is not eligible for a tax deduction. As to the tax effects to the former employees, I have no guess, because there is no employer employee relationship that seems to be a personal income tax question. By the way, I'm not sure that there is no COBRA event. If I'm not mistaken a seller retains the liability for COBRA, even if the purchasing company hires the seller's employees. By the way, there may be a COBRA event. Why not contact your accounting firm. I'm sure they can clear this up.

Why do it as a taxable bonus. Why not create a self-insured dental welfare plan and have the benefits be tax free to the employees and deductible to the employer. I believe the applicable IRC sections under which the plan should comply are 105 and 106. A standard dental plan would have an annual maximum benefit per participant of around $1,500. As a self-insured plan you can design it any way you wish as long as it precludes individual selection and complies with ERISA. You need a plan document, and an SPD to set the plan up. In my opinion, not a major undertaking. Dental plans are the easiest plans to self-insure.

LDH1: Let me see if I have this right. Company A was sold to Company B. Company A employees are now working for company B? If Company A was sold, how can they maintain a group health contract? I can only assume that they did not sell the entire company. Has Company A considered that there may be a COBRA event? If there is, they can offer COBRA on whatever premium contribution they wish to charge the former employees within the limits of COBRA, i.e. require the normal in-service contributions to the former employees. I can’t imagine that any group insurer will allow non-employees to be covered under a group contract unless it is under COPBRA.

Rw: I agree with Larry. You may want to contact any HMOs in your area as well. Also check out this web site. There is a they have some helpful information here and some may be specific to your state. http://www.insure.com/health/

It is not uncommon for an employer (say employer"A")to require spouses of its employees to enroll in their employers health plan before even allowing the spouse to participate in employer "A's" plan. In fact, I believe it was J.C. Penny's who tested this requirement several years ago in court and won. If the the employer wants to reduce benefits for those spouses that do not follow the plan rules, I don't know of any regulations that would prohibit that from happening as long as the provisions are administered equitably to male spouses and female spouses, which is what I think the J.C. Penny's case was related to.

Kimberly: What kind of document are you talking about?

I don't know that there are any government regulations that determine medical plan eligibility for part-time employees. If the employer is large enough, or self-insured the employer can determine who is covered. Usually eligibility is determined on the bases of how many hours the part-time employees is scheduled to work during a normal work week, i.e. 20,30, etc... If you have an insurance company telling you who you can have as eligible employees, then they can limit part-time employees on the basis of hours worked based on their underwriting standards. That's why I say if you are large enough, or self-insured you can eligibility on your terms. I'm not sure what you are asking with regard to participation rates. If the only issue is coverage for part-time employees, if you offer it on an equitable basis there shouldn't be any participation problems. If you are asking in regard to pre-tax premiums via a Section 125 plan, what you need to be concerned with is not having the plan be descriminatory in favor of highly compensated employees.

You are absolutely right Kirk. In fact I believe 54.4980B-7 Q&A 1 © specifically would exclude the grandchild, because the grandchild is not a qualified beneficiary just by virtue that he/she was born to a qualified beneficiary. Thanks for clearing this up, and God bless the politicians for making COBRA and FMLA so easy to figure out.

Kimberly: The design of the new employer's indemnity plan will depend on how good it is. I would ask the employer for a copy of the Summary Plan Description, which will detail medical benefits that are coverdd and ones that are not covered. You could also have annual deductibles before any benefits are paid, even at the 80% level. Until you see a full description of the plan, you can't really make a comparision. You are correct in that most indemnity plans do not cover well child care visits, but that doesn't mean that an employer could elect to cover them under an indemnity plan. I suggest getting more details about the plan and then coming back to this site if you have any questions.

It is my understanding that a child born to a COBRA eligible person is also a COBRA eligible person and therefore has the option to independently elect COBRA coverage on his/her behalf. I the case of the grand child, the mother should be allowed to make the election for the child. I believe Q&A 6 in Section 54.4980B-6 addresses this cituation.

Most voluntary supplemental group life policies I've seen will allow an employee to cancel coverage at any time. What does the group policy state?

Try this site. http://assembly.state.ny.us/cgi-bin/claws?...?law=132&art=12

WOW!!!!!!!!! I can’t believe I am going to agree with PJK, but I think you are right on PJK. The average 401(k), 403(B), or any other plan participant will never be able to figure out how best to invest their pension funds. Regardless of all of the available invest advice, the majority of employee funds are still invested in the least riskiest investments offered under their plans. This by the way, in my opinion is why putting any of the responsibility of investing Social Security in the hands of the citizenry would be only beneficial to the stock brokers. If the government or anyone else thinks that they can make investors out of the general population, maybe they should test their theories out on politicians first.

Christine; Is the Insurer an HMO or PPO, or is the insurer writing an indemnity plan? Some HMOs and PPOs have out-of-area riders to cover benefits recieved out of the HMO or PPO service areas. However, the coverage is typically more in the way of an indeminity type of coverage, i.e., deductibles and co-insurances. In the case of a plan other than an HMO or PPO, it would seem that out-of-state benefits shouldn't be a problem. I don't think an insurer necessarily has to be admitted in the state of a person's residence in order to cover a person in his state of residence. They may not be able to situs the contract in Illinios, but they should be able to cover a person living in Illinois. Having said that, it may be that the insurer doesn't want to be subject to any extrataritorial Illinois state mandated coverages. If there are enough COBRA participants (4 or 5 or more say) living in a common HMO area in Illinois the employer may look into purchasing a small local group contract to cover them. I'm not sure though if they would take only COBRA participants. I guess I would want to know why the insurer is saying it can't cover a person living in Illinios. Do they cover persons in other states? In any event, even though I'm not an attorney,I wouldn't want to be the one to try and justify a change in insurers when I knew all along that there were COBRA participants that may not be eligible for coverage.

I agree with you that a court order cannot make you cover a person who is not otherwise an eligible person under the plan. That being said, it appears that the employee was other than truthful when he enrolled his ex spouse, and the ex spouse is an innocent party in this matter. However, in my opinion she should not be eligible for COBRA. I don’t see how a person who was enrolled in a plan illegally could be eligible for COBRA, but stranger things have happened. I would write the ex spouse and inform her that the plan has just discovered that she had been enrolled under the plan as the spouse of the employee when in fact it now appears that she was an ex spouse at that time and not eligible to participate in the plan. Therefor her coverage is being canceled immediately, and no claims incurred on or after the cancellation date will be honored by the plan. This is only what I would do. You should contact your legal council for their opinion. I suspect that the ex may want to take some kind of legal action against someone, probably both the plan and the employee if coverage is canceled without a COBRA option. As for the employee, I would inform him that it is his responsibility to contact his lawyer, unless you are willing to copy the lawyer in on the cancellation letter to the ex spouse. The employee is the one who deceived the plan and his ex spouse, not the plan. By the way, has anyone considered disciplinary action against the employee? I would also check to see if he had named someone other than his ex spouse as beneficiary under any qualified pension or 401(k) plans without his ex spouses’ notarized signature.

jlcowden: Let me see if I can grasp this concept. I've never heard of it, so I'm curiouos. The advantage to the employee is they don't have to pay taxes on their benefit payments, if and when they ever recieve them. On the other hand, the employee must pay federal, and maybe state income taxes on the premiums paid by the employer. Who is gaining by this? The employer must have to pay fica on this W-2 income? Don't see the advantage to them. The employee pays taxes on premiums in lue of taxes when benefits are recieved. I just don't see the advantage to them, especialy if they are most likely in a higher tax bracket while working as apposed to when they are disabled? Again. I must be missing something.

DICK BOEVER: If an employer is paying the full cost of a group disability plan, why would the premium be showing up as taxable income on an employee's W-2? It has always been my understanding that group disability benefits paid for by the employer were fully taxable to the employee when he/she receives benfit payments. In addition, the benfit payments are only taxable on the portion paid for by the employer, i.e. if the employer pays 50% of the premium, 50% of the benfit is taxable. I also was of the opinion that the % of cost paid by the employer is calculated on a three average and calculated each year. Did I miss something?