Larry M

Hawaii does mandate medical benefits for employees.

If the out of network group is not highly compensated, why not establish a medical reimbursement plan for that group which would be limited to the deductible or higher co payments?

until such time as the old documents are found, consider drafting a plan amendment which states how the allocations (assuming this is a defined contribution plan) are to be made in accordance with the current wishes of client or the presumed method used in the past.

Have you considered contacting an ERISA attorney, describing the situation and asking whether the attorney will draft letter for you or help you draft a letter (with cc to atty)? Although you may not intend to pursue litigation, the plan administrator does not know this and should respond appropriately with the infromation you need. Sometimes, you have to hit the mule on the head in order to get its attention.

The answer to the question is determined by the language of the amendment. It may say the changes apply only to those who were not employed, or participants as of its effective date. [This is common and avoids the headache of some participants having two vesting schedules for portions of their benefits.] if the amendment applies to all employees, you have an administrative nightmare and, most likely, some unhappy employees who were about to become eligible (with 100% vesting).

When discussing reinsurance with clients, I use the analogy of a line of credit. That is, the client (employer) has designed a plan which will pay for specified medical expenses incurred by his employees. Over the long run, these claims will be at a certain level. No matter what the size of the employer, claims in a given period will be higher or lower than the expected. For self funded plans, the lower than expected periods are easy to fund. When the claims spike upwards, the client needs a source of extra cash. We use the reinsurer as the "bank" to lend us the money to pay for the excess claims. For this loan, the reinsurer charges a fee, which adds to the cost of the basic plan. In the negotiation of the reinsurance contract, the client decides which level of risks it is willing to take in any period and the level above which it needs to borrow the money to pay claims. The reinsurance premium is the reinsurer's charge for the expected claims above the risk level plus its fees for providing the loan "on demand". The addition of reinsurance does not affect the employees' claims. The addition of reinsurance adds a cost to the employer's cost of maintaining the program - in return for which the emplyer receives the comfort of knowing its cash flow risk is limited.

Okay, we have our clients primed to take advantage of the new limits (for 2002) under EGTRRA. Hmmm, what do we do about those who reside in non-conforming states such as Massachusetts, Hawaii or California?

COBRA allows certain individuals to continue (by paying the required premium) to receive the same benefits as those of the active employees of the employer. If there is no plan for the active employees, then the COBRA beneficiaries are in the same position; that is, they, too, have no plan. An exception might be the ability to convert to an individual plan provided by the former carrier.

Christine, from your comments I understand the plan provides two types of benefits for the employees and their covered dependents. For those medical care services which can be provided "in-house" by your provider(s), there was no specific bill rendered. Rather, services were provided. For those services which could not or were not provided in house, the providers were reimbursed according to some reasonable and customary fee basis. As a result, the determination of the "benefit costs" of the plan for employees was made using an assumed cost (based upon what would have been paid if Medicare rates had been billed) for the in house services and the actual benefit payments for out house seervices. Using those numbers, and with sound actuarial techniques, the insurance company developed a rate per employee. So far, this seems to be an acceptable/defensible (to me, at least) method of determinng the basic costs to use for developing COBRA rates. The part which is troubling is your comment "..they did not have claims data for dependents." Why not? Surely, whoever provided the service (in or out house) knew the identity of the patient and the relationship to the employee. Is this because the number of employees with family members is not known? [An assumption can be made for the purposes of developing the COBRA rates.] Is this a situation where it was too much trouble to separate claims between employee and dependent and all family members were given the same identity because the IBM card had only 80 spaces? Or is this a situation where an individual, whether an employee or dependent is given a unique identity as a "member" and all costs are identified on a "per member per month" basis? Again, a reasonable assumption can be made as to the split between employee and dependent costs to develop COBRA rates. Or have i missed the boat completely?

This seems to be getting "worser and worser". Let's see,a company is large enough to be able to self-fund its employees' medical care benefits. So it gives some one a checkbook (including access to the bank account) and tells that person to pay the bills. However, it does not have the ability (or desire) to determine whether the bills are being paid correctly, nor does it have the ability to know how much has been paid and how much is owed and, by the way, since it has an unfunded medical plan, it is subject to audit - but don't worry because the auditor either is accepting the "I don't know"s from the person administering the claims...or else it tells the auditor to not bother because it doesn't even know how many persons are covered and may not be subject to audit. If we didn't know better, we would believe the company falls into one of the following categories: savings and loan bank hospital medical group trust company medical management group governmental agency And, after all, how much could a medical plan cost? On average it may be only 10 to 15% of payroll - unless, of course, there are some major claims - but those are covered by reinsurance - which is "free". I wonder if someone could refer those companies to me. To save both the client and me lots of time and money and headache, I would agree to a. not provide any service; but b. bill them for twenty hours a month at a heavily discounted rate. The client could pay me at irregular intervals and not worry about having to reconcile the work done with the bills submitted. Think of all the time it's accounting department saves...and all the time it frees for me to provide services for other companies.

I agree with Kip's comments (as usual), but am concerned about the implication a self funded plan does not know its own costs, or doesn't want to know.

[i am not an attorney - the following is my lay opinion.] Generally, the answer is "no". Most of these qualified plans are available to you regardless of the form of the company. There are some distinctions due to the form of the company which do appear. These involve such items as the ability to make loans, and the definition of compensation (if you have no "earned income", any contribution based upon earned income would be zero). Decisions such as type of entity are probably best addressed in discussions with your accountant and tax attorney...and there are many aspects (administrative, state laws, local business fees and taxes, liability, etc) other than qualified retirement plans which come into play.

[i am not an attorney.] It is my understanding your qualified plans are not covered by the creditor protection portions of ERISA - although they are subject to other ERISA provisions. You may have creditor protection as a result of your state's laws concerning qualified plans.

[i am not an attorney.] This appears to be a question best determined by an attorney (and, ultimately, the courts) after reviewing all the aspects of plan. I believe the answer to your question depends upon the circumstances of the situation. Various courts, in differing jurisdictions, have made decisions in such cases which range all over the place. I am not sure how effective a poll would be in hlping you get the company to change its current position.

RIA (checkpoint - pensions and benefits), and I'm quite pleased with it. My practice encompasses both areas. An associate, who is strictly in qualified plans, uses TAG and he is pleased with it.

'tis a worrisome thread. Oakley, when you say your ex is "entitled to 1/3 of my 401k", is that 1/3 the value as of a certain date? Or is it 1/3rd the value at whatever time you take a distribution? or is he entitled to 1/3rd the value as of a certain date with adjustments for the investment yield up to the date he receives a distribution? or .... well, as you can see, there many possible interpretations and, unless you are very careful in the way you draft the qdro, your ex may receive a distribution which was not the one you thought he was going to get. It may be worth the cost to get a qualified attorney (one familiar with qdro's) to help you draft this document.

I have mixed feelings about generalizations in statutes and specifics in regulations. My preference is to allow the sponsor to have leeway and permit common sense approaches to interpretations of the law. Too often, the regulations become so specific as to prevent a. an employer from complying with a reasonable interpretation of the law, b. the actuary from using common sense in funding for plan benefits, c. the employer from providing a needed and prudent benefit (the list goes on and on) The only advantage to specific regulations is that they allow us to follow a cook book literally and provide the employer with a relatively risk free approach to qualified plans. (although we still get people arguing about whether "60%" means "59.87%" or "60.00"). The problem with the specific interpretative regulation approach (in additon to their length and complexity) is that it is similar to requiring everyone to wear ready made suits without allowing us to make alterations to fit the idiosyncracies of our unique bodies. Let the ambiguities remain - keep the regulations simple - let us use our best judgment - that is my preference.

pax, I wonder if you would be willing to be the replacement for the online research service I am currently using?

Eric, with respect to the ERISA coverage, a qualified plan covering only the sole proprietor or proprietor and spouse is not an ERISA plan and does not carry the same creditor protection elements (although many state laws do extend protection to such plans). However, it is relatively easy and inexpensive to include a non-owner in such a plan if you wish. The non-related individual can be a part timer earning minimal wages and for whom a nominal contribution is made. As long as there is another participant, no matter how small his/her benefit, and even if not fully vested, the entire plan becomes an ERISA plan. So, you, as a sole proprietor can have a tax qualified plan which is ERISA protected (and governed) for a relatively small additional cost - the extra administrative cost may be more than the contribution to the part time employee.

[just some additional comments:] Some plan documents state two separate uses for actuarial equivalence. One is the classic definition for benefit purposes and, after the Manhart and Norris decisions, these should provide the same benefits for male and female particpants. The other definition, which I believe is a misuse, states the assumptions which are to be used for funding purposes. [in my opinion, the plan document can not dictate the assumptions to be used by the plan's actuary for funding.] With respect to Gary's question, it is possible the drafter/scribe tried to define it as the 1971 Group Annuity Mortality table for Females, set back 5 years. In any event we seem to have unanimous consensus the same AE must be used to determine benfits for all participants.

I just received a new professional liability policy from a carrier which is replacing Lloyds. The policy is headed "Professional Liability Policy for Specified Professions" The declarations page lists the occupation as "actuary" Then, in the body of the policy we have "Exclusions ...This policy does not apply to any 'claim' ...arising out of .... Services as an attorney, accountant, actuary..." I guess it could be worse. They could have added a surcharge to the premium.:confused:

With respect to Guam, prior to the change in the 5500, we submitted all requests for determination and all 5500s to Revenue & Tax in Guam for Guam based sponsors. Now, we, probably, will continue to submit to Rev & Tax for determination, but are sending 5500s to U.S. DOL.

the problem with the 13 facts listed by pax is that we don't see any humor in them. After all, truth is not, by itself, humorous.

Jeanine, Why are you so upset? Just because an employer did not pay your company for a health plan which would cover every conceivable medical service, does this mean your hmo should not provide all services, even those not purchased? After all, if my employer buys a limited plan from you, why should I get less benefits than my neighbor whose employer bought a fatter plan? ...as an aside, whether your hmo is non profit or for profit should not be the basis for determining whether you are "good" or "bad". Just as whether the plan is self-funded or insured or pre-paid (old timers hmo term) is not, by itself a determining factor. The administration of claims according to a plan document should be the determining factor. Unfotunately, Congress will pass, and the President will sign, some law which will have a good sounding name ("patients' bill of rights" - or some such) and which will have the effect of reducing the number of persons covered by health plans. Eventually, the uninsured, whose medical care is provided by local government agencies, will become so large in number, we will have, de facto, government provided medical coverage for 90+% of our population....and the "socialized medicine" we all decry will be upon us.

It seems to me whether the charge is per participant, or per eligible, or per employee, or per account, or as a percentage of assets, or by the phases of the moon, the payor should be concerned with the total charges - not just with how they were determined.