sloble@crowleyfleck.com

In years past TPA has been filing schedule A for a self-insured medical plan for which the employer has a stop-loss policy. This year, the schedule A reports 17,000 in commissions to the TPA (which I assume are not paid from the plan) and 170,000 in premiums. I didn't think a Schedule A was needed for a self-insured plan because the insurance contract is whith the employer, not the plan. Agree/disagree?

That is interesting. I misunderstood the question upon first reading, but I just read the regs and it does look like the employee has to be covered at the time of the second event, although the wording of Reg 54.4080B-3 Q/A 2(b) could be better. This is probably overlooked a lot because many election forms do not contain this qualification.

This sort of extra involvement with the HSA could reflect employer endorsement and maintenance of the HSA which could cause the HSA program to be subject to ERISA.

Why not? It sounds like a GHP bc its a fund/program maintained by the employer for the payment of medical/health/sickness expenses. See ERISA 733a Sick-pay plans are listed in ERISA 3(1). But it might meet the payroll practice exemption if its unfunded or possibly the voluntary employee group insurance exemption if the employer doesnt endorse it, etc. (but somebody has to manage the bank). Obviosly if this is a government employer then no COBRA/ERISA.

I think your correct--otherwise you would never have second qualifying events after employment termination.

is the program under 50 participants and self-adminsitered? Then it is exempt from HIPAA privacy/security. You also want to check ERISA and COBRA issues.

If claims are paid from general assets of the employer and there is no separate account in the plan's name and the employer has control over the account and has merely given the TPA check-writing authority then it sounds like you meet the Form 5500 filing exception for small unfunded welfare plans.

I am ok with "if" but I want to make sure I understand the application of these rules. I have formulated the following conclusion--please let me know if you think there are flaws: Even if a plan reduces the mandatory cash-out to $1,000 or less and defines "nonforfeitable accrued benefit" to exclude rollovers, this plan will still be stuck having to establish an IRA and comply with the mandatory rollover rules if and only if both of the following are true: -The nonforfeitable accrued benefit is less than $1,000 AND -The rollover account brings the total account balances to over $1,000 THANKS

Kirk: I am aware of this cite. I am just confused as to why some are advising that you MUST count rollover contributions for purposes of cash-out when the language you quote uses the word "if" and 411aD indicates a plan can be drafted otherwise.

Thanks--I think that clears it up. So the former participants get a top-heavy "contribution" (to a plan account), and if they elect a "distribution" (which they probably will), then it can be rolled over just like any other distribution.

A few of the affected participants--who were entitled to a 3% contribution but did not get it-- are now cashed out.

Client has elected to comply with the EGTRRA autorollover rules by reducing the mandatory cash-out limit from $5,000 to $1,000 or less. What is the rule for counting rollover accounts for purposes of determining whether the $1,000 threshold is met? I know you don't count them for purposes of the $5,000 autorollover. Some advisors are saying that you must count rollover contributions for purposes of cash-out, but I think Code Section 411(a)(11) (referenced in 401(a)(31)(B)(ii)) indicates that a plan can be drafted to exclude rollover contributions from the definition of "nonforfeitable accrued benefit" and thereby exclude rollovers from the determination of whether the cash-out threshhold is reached. Furthermore, Q/A 14 of Notice uses the word "if" which suggests to me that a plan can be drafted differently. If I am right, what are some reasons to include rollovers in the nonforfeitable accrued benefit? (There is no vesting in this plan--all contributions are vested.)

I recall seeing somewhere that corrective distributions (ie to comply with nondiscrimination rules) are not eligible for rollover, but as inelligble rollover distributions, they are not subject to the 20% penalty and the 10% early distribution penalty can be avoided. Is this at all correct? The next part to my question is how this applies to top-heavy corrective distributions. A plan failed to make top heavy contributions in certain years, some former participants have distributions coming in excess of $1,000 and they may want to roll them into the same IRA or plan into which they rolled their initial distribution.

Thanks--my initial post was written in haste and not worded well but you have confirmed my initial thoughts

I see that Code Sec. 79 applies a $50,000 cap on the amount of life insurance that can be received by an EMPLOYEE under a group term life insurance plan. I presume this means that self-employed individuals (partners) who receive group term life insurance through the firm's plan are not subject to this limit. Who has a cite that describes the life insurance tax rules that apply to the self-employed?

Thanks. That's kind of what I was thinking too, but I'm still struggling with the logistics-- For example, what plan number do I assign for the DFVCP if I want to wrap it into the health plan (#502) going forward? Do I just use 502 and attach a cover letter explaining? Do I have to refile the whole health plan for all of the years the client failed to file the EAP or can I just do the EAP component (and explain that the remaining components of the plan have already been filed under 502 and that going forward they will all be part of one filing)? Any thoughts, disagreement or confirmation of my approach appreciated. THANKS

Kirk: That's encouraging. How about this one: Client is up to date on its self insured health plan filing (plan has major medical and discount benefits--client is a hospital)--however, it has not ever filed for its separate EAP which provides counseling services and has been around for 10 years or so. I want to wrap it into the existing health plan this year but what to do about past filings? Under the rationale you and I have used, it seems reasonable to "not look back" (ie due to present intent and plan number problems) ... any thoughts? THANKS

I have been dealing with some similar issues for a client. We are going to go ahead and prepare a wrap for the unfiled plans effective this year, but we are going to do DFVC for all the plans as if they are one, all the way to the beginning (1990s). The cover letter will state that we are filing the plans under one plan number because we want to treat them as one plan and they are (as of 1/1/05) part of one plan document. My rationalle is that it would not make sense to separately do DFVC for each plan individually because we would have to assign different plan numbers and then we would have to change the plan numbers to go forward with the furture filing for the wrap plan. I figure with this come clean approach we are not hiding anything and the worst that could happen is the DOL will want more $. Then we'll have to decide whether to argue whether they were one plan back to the beginning. I think you need to have some kind of documentation tying them together somehow to make this argument.

GBurns/Kirk, etc. Thanks for your thoughtful responses. I was out of town most of last week. The EAP is not part of the health plan, and GBurns it is interesting to consider looking at at it as a safety/liability OSHA/WC type protection as opposed to a health plan. It IS totally stand-alone. In fact, the insured health plan has some of its own mental health coverage separate from the EAP. I am going to research this a little and I will definitely let you know if it goes anywhere. THANKS again.

I am aware of the DOL rulings that say if an EAP provides any counselling it is an ERISA plan. I am also aware that many employers do not treat their EAPs as ERISA plans. Does anyone have any other straight-face arguments for not treating an EAP as an ERISA plan (e.g., not maintained by employer, not providing ERISA benefits). Unfortunately this one provides some counselling and is 100% employer paid by insurance through APS healthcare.

Thanks for the helpful replies. We have a GUST favorable letter, and I'm thinking its insignificant so SCP is the way to go. Our definition of compensation (barely) passed 414s. I have to check on the 1,000 rule and I'm a little unclear on the 30% nondiscrimination test. Tom: Would you mind clarifying: "assuming the number of bodies that are top heavy only people and have more than 1 year of service is less than 30%, then nondiscrim shouldn't be a problem." THANKS very much.

GBurns: I generally appreciate your comments, but I wonder if you are reading my full question?? In the (second) scenario I describe, THERE IS NO MORE PLAN at the time the company shuts down and there is NO SUCCESSOR EMPLOYER. The plan and all plans will go way then the company will go away. The reason I am posting and looking for help is I have very limited COBRA resources but I would not think there would be a successor plan under THAT scenario. THANKS

Client has "satisfied" top-heavy contribution for past 3 years via 3% nonelective safe harbor contrib. However, it has been using a definition of compensation that excludes OT and bonuses (not a 415 definition). What is the appropriate correction? Plan also has a discretionary profit sharing contribution after 2 YOS--can we look to that to make up the "deficiency"? (then we would only have folks with less than 2 YOS with an improper calculation)

Client has "satisfied" top-heavy contribution for past 3 years via 3% nonelective safe harbor contrib. However, it has been using a definition of compensation that excludes OT and bonuses (not a 415 definition). What is the appropriate correction? Plan also has a discretionary profit sharing contribution after 2 YOS--can we look to that to make up the "deficiency"? (then we would only have folks with less than 2 YOS with an improper calculation)

Nothing has happened yet, no notices, no termination YET. The co is in serious decline and unwinding rapidly and may end up terminating the health plan altogether with NO subsequent health plan several weeks before the lay-off. I understand that the co will have lots of issues--termination issues, participant communication issues, etc., but in this scenario there is no successor plan, right? So no COBRA obligation? I realize this may be the least of their worries. THANKS