KIP KRAUS

JWK, Our HMOs have a premium rate bsais of single and family. If an employee is married and enrolled in a family contract esentially any newly aquired dependent is coverd at birth or adoption. Adding a new dependent does not in this situation change the employee's contribution. If an employee fails to add a new dependent it merely delays coverage, because we have no pre-existing condition limitations. We will allow them to add the dependent beyond the 30 days. If you have a medical plan that has pre-existing medical limitations and HIPPA does not come into play, you may have a problem with allowing late entrants. Of course, there are always employer errors, which could justify enrolling a dependent retroactivley, if you know what I mean. I have work for several employers and this has always been an issue on occasion. Just how leanient the employer and insurer wants to be determines what happens. However, as you know, once an acception is made it can be construed as the norm.

PJK, I agree that all of your points have merit. I also agree that the DOL’s opinion letter was verbose, which one might expect from a government organization regardless of how they arrive at their conclusions. And I still contend that the DOL doesn’t understand the nature of a true group term life plan, and even if they did they would be remiss if they didn’t point out each area in which the employee organization did not meet the exceptions of the Regs. Yes we are beating this to death, and it is clear that you I still agree on this issue. However, I still contend that by the mere nature of GTL an organization who purchases such a contract cannot meet the exceptions of Reg. Sec. 2510.3-1(j). I will agree that while the term “sponsor” in and of itself has no definition in ERISA the term “plan sponsor” does in Section 3,16 (B). So when I refer to sponsor I mean this is what I am referring to.

I didn’t get the impression from jrjatno’s original post that he was talking about a separate supplemental GTL contract. It appeared to me that he was talking about an ad-on to the original GTL contract. Feel free to jump in any time jrjatno with any more details/clarification. PJK, I still say that a GTL contract is a GTL contract, whether for supplemental or basic coverage, and is always issued to the group and therefore sponsored by the group. My contention is that the employer cannot satisfy the 3rd and 4th subparagraphs of paragraph (j) if in fact they have entered into a true group term life arrangement with an insurer. Maybe I am missing something, but if an employer wishes to have an attractive Supp. GTL plan, they will say who is eligible,and negotiate the plan provisions and benefits, which does not limit their involvement by statute. Just by the very nature of GTL, the employer is involved as other than a premium conduit. On the other hand, if an insurer comes in and says they will allow employees to purchase “Group Universal Life”(not a true GTL plan) and the employer need only allow them access to employees and be the conduit for sending in payroll deducted premiums, I’d say it would be relatively easy for the employer to satisfy paragraph (j). I personally do not have faith that the DOL knows the difference between true group and quasi group insurance, but given all of the information pertaining to true group insurance, I feel sure they would have no choice but to find it an ERISA plan, and not exempt under par. (j). In the case of Section 79 and imputed income I have always been under the impression that if an employer purchased basic GTL on behalf of the employee and the employee elected to pay for supp GTL that the total of basic and Spp. Life were added together and then run through the imputed income calculation, where employee premiums were taken into consideration in offsetting imputed income. Payroll services have been calculating it this way for years. Maybe someone has been doing it wrong, but if so, plenty of employers are in trouble.

I haven’t ignored the scope of any provisions of DOL Reg. Sec. 2510.3-(j). Because in my experience, when someone tells me they have a GTL contract, I assume they have a GTL contract, and by definition, a true GTL contract can only be issued to an employer, employer group or similar sponsoring “group”. That being the case, the employer or other group would be the sponsor. I would suggest checking the definition of GTL under the state where the contract is being issued to determine the status of the contract. Of the GTL contracts I have seen, they all have similar characteristics, the contracts were issued to a “group”(employers, in most cases), the group determined eligibility, the group signed the application for coverage, the group was responsible for submitting premiums to the insurer (whether contributory or non-contributory), the group issued certificates of insurance to participants, and otherwise met all of the requisite characteristics of group insurance set out in state regulations. There are, of course, other life insurance programs marketed as group insurance that may or may not qualify as GTL plans by various state laws such as group universal life, group variable life, group variable universal life, group permanent life, group paid-up life and credit insurance and others where the policies are actually issued to employees and may stay with the employees when their employment terminates. These type of programs typically require the employer to remit premiums payroll deducted from employees, and in the absence of the employer not meeting all of the exceptions of paragraph (j) I would not consider these plans employer sponsor as a general rule. If an employer wishes to pay the premiums for these types of programs, even though it’s not required, I would call them a sponsor and assume the plan is subject to ERISA. In fact paragraph (j), (3), in my judgement, applies more to these kinds of non-GTL plans. I have no idea what the DOL means with regard in (j), (4) when they talk about the employer or employer organization receiving no consideration in the form of cash or otherwise. In most states this would be illegal anyway in the form of kickbacks. I can’t imagine the DOL reviewing a true GTL plan and not finding that it is sponsored by the group that purchased it as was part of their determination in the Opinion letter 94-22A sited by KJohnson. PJK, I don’t think IRC Section 79 is a stretch since it does apply to GTL. My job is not client based with regard to dispensing advice, so I don’t need malpractice insurance. However, if it were I wouldn’t advise a client who had a GTL plan that it wasn’t subject to ERISA.

I'm not sure what the exact point pkj is trying to make , but I would consider a Supplemental GTL plan as a plan subject to ERISA if the Supplemental GTL policy is issued to the employer, which in most true Supplemantal GTL plans thay are. In addition, if the employee's contributions to the suplemental GTL together with company paid GTL premiums are applied to calculate any imputed income under IRS Section 79 I would consider it an ERISA plan. I agree with KJohnson that if the employer is merely a conduit for remitting premiums to an insurer, and the policies are issued directly to the employees, the plan would most likely not be subject to ERISA.

I contacted my insurers for their NIAC codes. They had no qualms about providing it to me. I would also think that they will be required to providing this information when they provide the Schedule A information as required by ERISA.

If you are looking to limt your aggregate costs why not have a fully insured plan? If you have credible claims experience (850 employees is 100% credible in most cases), and steady employment, as Greg points out, you should be able budget for your maximum liablity within a margin of 3 to 5%. Stop-loss premiums, whether in a fully insured plan or as an excess risk in a self-insured plan, is typically money that you will never see again regardless of claims paid against it. By the way, has anyone ever seen a stop-loss premium be reduced at renewal, I haven't. In most cases the insurer pleads bad claims experience in their pool, and want a 15 to 25% increase, even though they are not able to (or wont)prove their bad experience. The last time I got a quote for specific and aggregate on mature claims the carries quoted higher premiums for aggregate than specific. I don't know what Larry M is referring to regarding premiums of 1 to 3 times costs, but I've never seen premiums for specific over 5% of Expected claims(EC). Most consultants and insurance underwriters Ive dealt with say if you have the choice of individual or aggregrate, got individual. Maybe there's something different in Cal.

I'm no sure that we would allow an employee to stop having payroll deductions made on a plan loan. This would be the only way the loan could ultimately be in default under our plan. I would check with legal council before doing anything to adversely affect the tax status of the plan.

jfgc: EAPs and disease management programs are good programs to have, but I'm not sure you will see a reduction in medical claims directly related to these programs. By the way, have you considered dropping aggregate stop-loss? Sometimes the cost of this coverage can outway the risk of going with individual stop-loss only. What has your exposure been on the aggregate over the past three years? If it has been less than premiums, you may be better off going without it. In addition, I still recommend looking at increasing the individual stop-loss to at least $100,000. In some cases, stop-loss carriers will reduce premiums in direct proportion to the increase in stop-loss coverage. A case your size should be able to support a higher individual stop-loss.

jfgc: Variuos underwriters have varying incremental costs associated with the types of plan changes you are proposing. I assume that you have recieved a number of quotes from vendors other than United Health Care? If not, I would recommend you do. You should be receieving mature expected claims projections from those who are quoting, if not you should be asking for them. Each underwriter should be able to provide their projected incremintal costs associated with the changes. By the way, $50,000 individual stop-loss seems low for a group your size. Have you looked at increasing this limit and the effects on your stop-loss premiums? Ask UHC to give you this information based on their experience in the areas where your employees are.

I don't see this as an issue of defining Non-duplication of benefits. We know how that works, and with Non-dup the participant in most cases will not recieve 100% reimburesment between the two plans. It seems to me Ruth's issue is that the secondary plan is not going to pay even though they have a non-duplicaiotn of benefits COB provision. As I understand the original post, the secondary plan will not apply their COB if the primary plan pays higher benefits. Lets take Ruth's example. On a $100 expense the primary plan pays $85, and the secondary plan is paying zero. If the secondary plan applies its non-dup COB to this claim they would end up paying 80% of the $15, or $12, thus the participant recieves $97 in reimbursement between both plans, not 100% reimbursement. Of course under the standard COB provisions the participant would end up with 100% reimbursement. This is the reason employers opt for non-dup, and have been for years. Now as to the apparent creativeness of this employer Ruth is talking about, unless they have a major number of employees in an area where other employers have dental plans that consitently pay higher co-pays, the savings they are experiencing in using this method may not out way the ill will they are creating among their employees. Creative? Perhaps.

I didn't think COB was mandated by state insurance. However, an insurer more than likely has to file their COB provisions with the state. That is an iteresting approach that the secondary plan is taking. They pay nothing when the primary plan has a higher benefit, but will in fact pay more when the primary plan has a lessor benefit. I understnad that non-dupilcation of benefits is intended to save money over the standard COB provisions, but to apply it this way seems a little cheesey at best, but I guess if it works for them that's great, but they had better explain this to their participants.

If you go to http://www.smartbiz.com/ and do a search for "due diligence" and I think you will find some help.

Phil: I guess I'm confused about how this plan is set up. Is the employer paying something for this benefit? If so, it sounds like more than a discount plan. You say employees are paying a premium??? Sounds more like a vision plan that could be subject to ERISA.

Kirk: You are absolutly correct. Cal. requires employee contributions. NY allows employee contributions up to a maximum amount, but it is not mandatory. The employer can pay the full cost. In addition, in order to avoid any confussion in NY, if an employer is going to provide enhanced benefits for STD (called DBL in NY)the employer would be wise to have one carrier and not two, or to self-insure the benfits for both. In Cal. an employer is required to use the state fund unless it can get the employees to agree to a commercial insurer plan. Both NY and Cal. disability plans are mandatory under the Workers' Comp. laws in each state. Coordinating benfits between NY DBL and another STD plan is relatively easy because the maximum weekly benefit under NY is 50% of last eight weeks average earnings up to $170 and most full-time employees will qualify for the maxumum. Cal. on the other hand is a little diferent. Employees could get varying weekly benfit maximums depending on their earnings and where they fall in the Cal. schedule. We always had to contact Cal. to find out what an employee was entitled to before we could off set their enhanced benefits.

I agree with Tamre on the self billing. However, that will not necessarily eleviate the problem of non-employees showing up as covered and insure that covered employees are put into the system correctly. I would ask to audit how they put covered employees into the system to see what their checks and balances are.

I have run plans of this nature for years and never have attached an auditors report. It's not required. However, if assets were being set aside in a trust to pay benefits it's my understanding that an auditor's report would be required. The only financial data we file on our self-insured medical plan is a Schedule A for the stop loss premiums paid. Paying benefits from general assets, even if there are employee contributions, does not, in my opinion require a trust, especially when claims typically will exceed total employee contributions on a weekly basis.

Scott: I don't know what IRS office the plan has been filing with, but our Melville, NY IRS filling office picks up every minute detailed error. If a number is one digit off, they senned us a notice. I find it hard to believe that a plan could file with the same auditor reports and the IRS office review would not pick up such a glaring error. Maybe you can put some of the blame on them and lessen the penalty hit.

Phil: My theory has always been, if the IRS instructions are vague, or incomplete, I do what I think makes since. It appears that an honest mistake was made, and the correct plan must make the distribution. I would argue that the admistrative error has to be rectified and would transfer the assets to do it. An admistrative error does not appear to be a reason to file a 5310-A.

Go to the following web site and look at the "tools" section. You may find some worth while examples. http://www.401kafe.com/library/articles_401k.html

Diana: Some employers, us included, give employees who opt out of medical coverage an additional amount of taxable income per month based on the amount of money the employer saves by having the employee opt out. Typically the opt out bonus is a percentage of the amount the company saves. However, if an employee wishes to opt out of coverage, he/she must prove to us that he/she has "group" medical coverage eslewhere, tipically with the spouse's employer. Evidence can be a letter from the other employer, the other insurer, or the employee's ID card. Other coverage must be group coverage, not individual coverage, or coverage through the military.

Sheila: Without knowing to what degree you are self-insured and what the financial arrangement is with your current insurer it's difficult to make any solid suggestions. However,I would suggest that if you are heavely self-insured you may want to look at using a TPA and purchasing stop loss on your own. As for the insurer, it sounds like you must be dealing "Six Gun of Texas", don't get mad Texans,it's just a joke. Some insurers don't ever get it right. I've seen it happen far too often, and once it get started it seems to snowball. Try getting together with the insurer and matching data runs of active employees to see what the errors are, and what controls they have to insure the right people are enrolled in your plan. Maybe if you can let us know more about your financial arrangement we can better help you. If you don't want to put it here, feel free to e-mail me and I will be glad to share my thoughts.

me: I don't want to sound flippant, but how does a person not know how much monies is in his account? Didn't you and the others you mentioned recieve periodic statements? $10k is a lot of money to be overlooked. Was this perhaps the company's profit sharing portion of you account balance? Regardless, what ever amount of money that was initially left in the plan should have been in some sort of vehicle that was earning additional monies, and from that perspective you should be entitled to any earning, or is the $10k inclusive of earnings? Good luck.

Amy: My understanding is that as long as qualified money has been rolled into the IRA and no non-qualified money has been comingled with it, the money can be rolled back into a qualified plan. If both roll overs into the IRA came from qualified plans, and qualified under the same IRS regs., in my opinion the employee can roll the whole amount back into to employer 1's plan. Unless the CPA can provide a siting for his position, I'd argue that the money is qualified money.

If employees are only given a discount by a certain vender, and the employer does not have to sign any kind of agreement with the provider, I wouldn't consider that as an ERISA plan. In addition, if there is no requirement other than the requirement that an employee be an employee of the company recieving the discount, I wouldn't consider it an ERISA plan. No enrollment requirement, no plan.