PhilB

Yes, employee-paid group-term life insurance that is supplemental to employer provided group-term life. My understanding is that the amount over $50,000 would have imputed income tax applied. I've inherited this benefit program and am not terribly familiar with the ramifications involved in making a change of this type.

My company recently implemented a new Supplemental life benefit on a pre-tax basis. However, we have an old Supp Life plan that a few active employees are grandfathered under that still deducts premiums on a after-tax basis - Are there any compliance/regulation issues if we switch these people to pre-tax?

Can an employee make after-tax contributions to a FSA in a situation other than COBRA - for example, during a leave of absence?

Apparently not all states are mandated to capture hospital charges, though I would expect all do for Medicaid & Medicare purposes, if for no other reason. The agent was referring to an office in their own state, but I've found that the name differs from state to state. I've looked at the HEDIS data on the HCFA site.

I'm not sure actually. The administrative procedure has been in place for some time, and I've not been here that long. In reading another thread related to executive physicals, someone made the statement that the cost of the physicals are includible in the income of executives under Code Sec. 105(h)(1). I haven't investigated the taxability issue on this benefit. My current understanding is that this would be considered an ERISA plan, but is not statutorily excluded from tax under IRC.

In a recent call with an insurance representative, reference was made to the Office of Health Care Information (OHCI), which apparently operates at the federal and state level. Although I am aware that not every state has mandated public reporting, I am hoping to get OHCI data (a hopefully unbiased source) regarding some hospitals in North Carolina and other states pertaining to average charges reported. Some of these hospitals allegedly charge much higher rates for similar services than other area hospitals. I've tried searching the Government sites but so far have come up empty handed. Any suggestions where I might find this type of information? Any cautions/understandings we should have when looking at this type of data? Any help appreciated!

My company currently has an Executive Physical Program in place for U.S. executives and we are evaluating how to make this a global program. This is a taxable benefit. Payments are made directly to the providers and payroll/tax is notified in order to apply taxes on the payment amount. We are trying to determine how we could offer this to our international associates. Is anyone currently administering this type of benefit on an international level, either themselves or through outsourcing? I am also curious whether there are any ERISA regulations with which we would have to be concerned, even though this benefit would also apply to non-U.S. Citizens.

I found the same sentiment in the EBIA COBRA manual after I posted. Specifically, it says: "The regulatory definition of "open enrollment period" also clearly allows QB to switch to other group health plans of the sponsoring employer at open enrollment. The final regulations do not distinguish between types of plans for purposes of the general rule giving QB the right to change coverage at open enrollment (Treas. Reg. 54.4980B-5, Q/A-4©). Although one could infer that the IRS anticipated only switching between plans of the same type (i.e. one medical plan for another - Treas. Reg. 54.4980B-5, Q/A-4(d), Example 1), the wiser conclusion is to apply the general rule without limiting it based on the types of plans involved." I'm not sure how "wise" this conclusion is - after all, you open the plan up to additional liability for those who previously waived medical coverage selecting against the plan at open enrollment if they have costly health issues arise. But perhaps one could argue that it is "prudent" given the ambiguity of the regs. on this particular point.

I'm resurrecting this post because I'm looking for feedback on a twist to this situation. An employee and his spouse were in the process of getting a divorce. At open enrollment time, they were still married and he enrolled her in the medical plan, but not dental or vision. Now the divorce is finalized and she's just discovered that he never enrolled her in the other coverages. My understanding is that for the purpose of her intial COBRA notification, we only need to offer her the chance to continue her medical coverage. However, at open enrollment next fall, does my company need to offer her the option of electing dental and vision coverage in addition to selecting her medical coverage option? She certainly believes she should be able to, since she had no say in whether she had the coverage last time around. Thoughts?

Our plan currently applies the "tag-along" rule when there are status changes, for exactly the reason you mentioned: If the status change entitles you to what your employer classifies as “family” coverage (payroll deductions can get no greater for more dependents) you may as well cover all your eligible dependents since the payroll deduction would be the same. In other words, the premium is the same, so from a purely pre-tax (though obviously not claim liability) standpoint, there's no change. We are self-insured, but I have a sense that a fully insured plan would not be so liberal. In any event, it would seem that since we are applying the minimum standard required under HIPAA, the fact that we are more generous does not (currently) pose a problem with the Section 125 regs given the ambiguity of the IRS on this point. Now I'm just not sure how we address it in the SPD, or, indeed, whether we need to address it beyond the standard Special Enrollment language required by HIPAA.

I've been reading EBIA's Cafeteria Plans manual. In the Participant Elections section, the manual makes reference to the IRS "tag-along rule" which would seemingly allow an employee to enroll eligible but previously unenrolled preexisting dependents in a cafeteria plan when there are certain qualifying status changes. This seems to be a direct contrast to HIPAA's Special Enrollment Rule, which would not allow you to enroll eligible but previously unenrolled preexisting dependents. So, which rule governs in the SPD and administration of the plan?

That thought had occurred to me. However, I've not seen anything about the Government declaring an unborn child or fetus a person. Can you cite a reference? Even if this is the case, I'm still not sure whether it would apply without a specific regulation.

OK, this one was just different enough that I thought I'd throw it out there for comment, if anyone is interested. For the record, I searched the Boards and other areas and couldn't find anything quite equivalent. Our employee was pregnant at open enrollment and elected a generous amount in her Health Care Spending Account to cover her medical expenses associated with the birth of her child. She recently miscarried and wants to know if this qualifies as a reason to change the election amount, as she will no longer incur the expenses she had planned on. My opinion is that this change in her medical condition, unfortunate though it may be, does not fit within any of the regulations' exceptions. Thoughts?

The PLR (200204021 - October 22, 2001), which you referenced, states that the IRS finds that employer-paid LTD premiums included in an employee's gross income makes the LTD benefit payments nontaxable. The ruling confirms the IRS's position that premiums do not have to come from an employee's wages on an after-tax basis in order for the benefit payment to be nontaxable to the employee. That is, the employer can pay the premium on behalf of the employee as long as the premium amount is included in taxable (gross) income for that employee. That being the case (employer paying the premium), can this still be set up as a voluntary benefit due to the fact that the employer contribution would be considered taxable gross income? Can the employee waive the coverage if they don't want it? Or will that depend on the carrier?

Thanks Maple 1, I think this might be it, though it doesn't reveal anything regarding the taxibility or non-taxability of this benefit that isn't already out there. GBurns, I am sure that I am not using a very effective method for searching through the PLRs. I don't know what the term "UIL" refers to. Thanks.

Yes, I was hoping someone might have seen a recent (in the last year or so) PLR related to it........I've been searching through the IRS archive which is a tad cumbersome to say the least.

Is anyone aware of a voluntary LTD tax-free benefit option available under new Private Letter Rulings and Treasury regulations?

I concur maverick. In fact, we do have a followup system such as you mention. Naturally, there are always people who are late, whether on vacation, LOA, whatever. However, I did do quite a bit of checking of the regs (which are decidely grey in a lot of these areas) and found it was permissable to allow people in the plan on an after-tax basis prospectively IF you allow people to make after-tax elections at other times, such as open enrollment. BTW, I'm a Badger myself.

I mistyped when I used the terms "waived coverage". The lack of any election action on the part of the employee defaults them to a catastrophic plan, which is paid entirely by the employer. The appeals in these cases were situations in which the employees claimed either to have faxed something in, which we have no record of, or some other type of extenuating circumstance. Certainly "I forgot to send in my form" isn't going to cut it. Suffice to say, after examining phone logs and the date that they appealed (i.e. immediately), the decision was made to allow them in the plan, albiet outside of section 125. If anything, I think we need to tighten up the process of HOW employees enroll..........but I think you never get away from these kinds of things completely. The message in these situations was, we're going to give you the benefit of the doubt, but we won't jepordize the qualified status of the plan in doing so.

I don't believe there is anything in Section 125 that address how cafeteria plans are treated in the event of a merger or acquisition. I think part of the answer will depend on what the acquiring firm's intentions are relative to the target company. They could arrange for an FSA transfer to the new benefit plan, if they are rolling the target employees into a new plan and assuming the benefit obligations of the target company (as opposed to terminating them). Or they could run the plan out to the end of the normal plan year and offer the new plan. My personal experience in this area was that the acquiring firm let the target firm's plan continue to the end of the plan year, then terminated that plan design and offered all merged employees one plan. I think either option is available, including rolling the FSA balances over, since the regs don't address it.

Actually, the plans are self funded and there is no stoploss. However, I am in agreement with you in principle. Truthfully, these situations don't end up on my desk until they've bounced around on appeal for awhile. The specific situations that prompted my email were first appealed in early January after the employee received their confirmation statements. Anyone coming to me at this late date, outside of a qualified status change, would be denied. I considered the case closed until payroll appeared out of left field. Thanks for your input.

The credit is dispursed evenly throughout the payroll year and the credit is dollar for dollar, though the amounts are not that large. These are not qualified events, thus they are being handled as after-tax prospective elections. The situations typically are of the unsubstantiated "sent my form in, it was not processed", "form was mailed to a wrong address" variety. The company has historically given these people the benefit of the doubt, though not to the extent that they are allowed retroactive pre-tax election changes. In other words, it wasn't the company's fault. Because this precedent was already in place when I started here, the policy has continued.

Thanks for your input mbozek. Based on your responses, I suppose it is not possible to set this up as an ERISA welfare plan so that we could avoid taxes on the value of the services.

My company offers flex credits that employees may apply either to reduce their cost of benefits or receive as a cash-out option, if they waive coverage. I've had a couple of employees, who originally waived coverage, and consequently received a taxable cash payment, request mid-year after-tax election changes so that they can participate in one or more benefit programs. Payroll seems to think that the monies these employees have been paid thus far in the plan year (through the cash-out) should be recouped before they can participate in the benefit plans on an after-tax basis. I can find no regulatory precedent for such an action. Any opinions?

Does ERISA or any other regulation require a company to explain in the SPDs that the retirement benefits are "different" from the benefits employees receive as actives? Specifically, does there need to be a statement to the effect that the benefits cost more and are more restrictive (cover less, higher deductibles, copays, etc.) than the benefits they received as active employees? If so, is there a specific regulation code someone can point me to - Any input appreciated!