sloble@crowleyfleck.com

maybe I don't understand correctly, but I don't think we get a free ride on top heavy because we have discretionary profit sharing contributions and reul 2004-13 makes it pretty clear we have to test for top heavy. All of our contributions are 100% vested, so we don't have to worry there. Does my previous post jive with your understanding of who might fall through the cracks in relying on our shnec to satisfy the top heavy contrib? THANKS VERY MUCH!

ohhh! I think I see your point. Under the plan, only compensation earned while the employee is a participant is considered for purposes of the 3%SHNEC--and the employee becomes a participant after a YOS. Please consider the example below to make sure I follow you. EXAMPLE: Non-key Employee commences employment on April 15, 2003. He gets one year of service by April 15, 2004 and becomes a participant on the July 1 2004 entry date. He then gets a 3%SHNEC for the compensation he earned from July 1 to December 31 2004. If the plan were top-heavy in 2003, then that Employee should get an additional contribution equal to 3% of his compensation earned from Jan 1 to June 30 2004. Does this cover the only "gap" you can think of with respect to using the SHNEC to cover the top heavy minimum contribution? Are there any documentation requirements that you know of that we should be doing with respect to treating the SHNEC as the top heavy contribution, or when we bump up a new participant's contribution to meet the top heavy minimum? Thanks!!

Even if its unfunded?? I thought DOL Technical Release Memo (92-01; 57 Fed. Reg. 23272) was still goo dlaw. This essentially provides that the DOL will not enforce the trust/financial reporting requirements on a health FSA if: (1) participant contributions come through a cafeteria plan; (2) benefits are paid from the general assets of the employer (e.g., not from a trust or account in plan's name); and (3) there is no other basis upon which plan assets might exist (e.g., there is no separate account or fund suggesting that the plan "owns" the assets).

THANK YOU--Ok now I have a little more information-- any additional thoughts greatly appreciated. I realize that we have to test for top heavy because we have discretionary profit sharing contributions every year (rev rul 2004-13 clarified this) The 3%SHNEC is made to all employees and partners. I think we can just rely on the 3%SHNEC to satisfy the top heavy minimum contribution requirement in all cases. ARCHMAGE/anyone else: Tell me what you think: I don't think we have to worry about making a top heavy minimum contribution for new hires because under our plan, to be a "participant" for purposes of elective deferrals and SHNEC, you need one year of service. (for the profit sharing contribution its 2 years) Thus, there is no one who is eligible to participate who is not also eligible for the SHNEC. So I think this works. Final question: Asuming that the SHNEC works to satisfy the top heavy minimum contribution, do we even need to test or document that we tested and remedied in any way? I mean if we are meeting the remedy every year, I don't see what we really need to do.

We have a design-based safe harbor with a 3% employer contribution to all employees. We have no matching contributions. OUr profit-sharing contribution is 100% vested. We are a partnership. If our plan is top-heavy, will we automatically meet the remedy (of a 3% employer contribution to non-key employees) due to the 3% safe harbor contribution? This contribution appears to go only to non-keys because the partners do not get a 3% contribution and I think only partners could be considered keys. I assume we will not meet the remedy due to the profit-sharing contribution because that goes to everyone (including partners). THANKS!

Two corporations in the same controlled group want to merge their two separate cafeteria plans into one plan. The two plans are similar in many respects but I haven't seem them yet. I know we should consider discrimination issues. Any thoughts on discrimination issues or any other issues you can think of?

Employer A has a "program" by which it pays the employee's spouses portion of the premium for family coverage health insurance sponsored by the employee's spouses employer. (employee is covered under the family coverage) Employer B has a "program" by which it reimburses $400 of a $1000 deductible once the employee has had to pay that $1000 deductible. Are either or both of these ERISA plans? (plan fund or program established or maintained... that does not meet the voluntary employee payall excepetion because there is an employer contribution?) THANKS!

Thank you--I don't think I gave enough info. Please consider the following: The sole Employee (Joe) is employed by XYZ corp. Joe is not an owner. Joe's spouse is employed by ABC Corp. ABC Corp. maintains the applicable health plan. Joe is covered under the same health insurance policy as spouse. ABC Corp does not have a cafeteria plan. ABC Corp pays $200 of the $500 family premium, so $300 is left for Joe and spouse. XYZ wants to set up a POP so that Joe can pay the $300 pre-tax. XYZ would not be paying any of the premium. THANKS FOR YOUR HELP!

Employer wants to set up a Premium Payment Plan so that is sole employee can pay the $300 monthly premium pre-tax--the caveat is that the premium is for the employee's SPOUSE's health insurance. Spouse employer has no cafe plan. Can this be done and if so what are the risks? THANKS!

Employer pays the employees' co-pay and does not give them a choice to receive cash instead. Can they do this without a cafeteria plan?

Thank you! This is all what I suspected.

Can an employer have an arrangement whereby employees pay for their co-pay (not premiums) on a pre-tax salary reduction basis without a cafeteria plan (health FSA) or HRA or MSA? I heard of someone doing this this and I can't find the authority for it.

Thanks very much. Are there other tests that apply to a safe harbor plan like ours--I 've been told that we are exempt from the ADP/ACP testing and so the Top Heavy test is all that's left.

We have a design-based safe harbor 401(k) Profit Sharing. It requires a 3% safe harbor employer contributions and permits an annual discretionary profit sharing contribution. WHat tests do we need to perform? I believe we need to test for Top Heavy status because of the discretionary contribution. What does this entail and is there anything else we need to do? I'm getting conflicting answers--thanks for the help.

THANKS FOR YOUR VERY HELPFUL RESPONSE!!

Does paying premiums for life insurance or disability insurance on a pre-tax basis through a cafe plan make the benefits taxable to the employee where they would otherwise not be taxable?

There is a HIPAA/ERISA exemption for on-site medical clinics, but I can't find a definition of what an "on-site medical clinic" is. The clinic I'm analyzing is physically located away from the employer's offices, but nurse clinicians perform MOST of the services on the employers premises. Some services are performed at the clinic. (e.g., if an employee misses his on-site flu shot or annual physical, then he can go to the nurse's clinic off-site and get the shot/physical, etc.)

There is a HIPAA/ERISA exemption for on-site medical clinics, but I can't find a definition of what an "on-site medical clinic" is. The clinic I'm analyzing is physically located away from the employer's offices, but nurse clinicians perform MOST of the services on the employers premises. Some services are performed at the clinic. (e.g., if an employee misses his on-site flu shot or annual physical, then he can go to the nurse's clinic off-site and get the shot/physical, etc.)

THANKS--helpful Kowan: There are no salary reductions. Employees pay at reduced rates at the clinic--NOTHING passes through the employer--no money, no health info, no enrollment figures. The employer simply writes a premium check annually and the clinic handles the rest. BUT the employer does maintain the program in the sense that it pays the premiums, and it does endorse the program in the sense that it does not provide employees with other options to choose from. Does this change you answer? THANKS jbentz: that provision is helpful--it seems odd that on-site clinics would be exempt but not off-site clinics. Thank you for your view.

So you don't think the plan is a covered entity? (I know the employer isnt) Health plans are covered entities under HIPAA unless excepted. ANYONE ELSE--I'm also wondering whether this type of plan could be subject to ERISA--e.g., established or mainatined by the employer to provide welfare/medical benefits?? I know there is an analysis that you must go through... I just can't recall it. THANKS

Employer has a "nurse service program" where the employer pays an annual premium for employees to visit nurses --usually at a clinic off-site --for reduced rates. This program also enables a nurse to come to the office of the employer and administer flu shots. The employer has no involvement except to renew its annual contract to pay premiums and to distribute a brochure created by the clinic to employees. Employees are responsible for calling the clinic and no information about participants (health or otherwise) passes through the employer. I am concerned about ERISA, HIPAA, etc.

thanks--thats what I suspected!

A health FSA has 47 participants and the employer is the named plan administrator. Employer processes the payroll and the salary reductions, but the reimbursements are made by submitting the reimbursement form to an outside company who cuts the reimbursement checks. (This outside company is in the business of selling insurance and performing limited benefit services such as this.) I know that the HIPPA privacy rules exempt health FSAs with less than 50 if they are self-administered. I hope this plan qualifies for the exemption--any thoughts???