Linda

How would this result in COBRA?

ERISA Section 602(3) states that an employer cannot require a qualified beneficiary (like a former employee) to pay the first COBRA premium before the 45th day after the qualified beneficiary's COBRA election. And, under ERISA Section 605, a qualified beneficiary has 60 to make his or her COBRA election. So, a qualified beneficiary can have over 3 months before he or she makes the first payment. This is one of the aspects of COBRA that really bothered employers -- way back when COBRA first employers (except possibly your soon-to-be former employer) have accepted it and follow the law.

Did you see the link to the newspaper article on Gloria Moebes, the employee whose group health insurance was cancelled when she attained age 65? I think 42 USC 1395y(b)(1)(A)(i) would prohibit this practice by any employer with 20 or more employees. (I don't think this is mentioned in the article.) For a smaller employer, would there be an issue under the general principles of ADEA?

This one portion of the proposed 125 reg purports to be an interpretation of 105 -- an interpretation I don't see anywhere under 105. I just wonder what the IRS was really intending for non-125 medical spending accounts. So, how much insurance-style risk do you think is needed for 105 to apply to an employer funded medical spending account (i.e., subject to 105 but not 125)?

You have touched on one of my concerns. Although 125 does not apply if there are no employee contributions, Prop. Reg. §1.125-2 Q&A-7(a) states that benefits under a medical spending arrangement will be taxable to participants under Code §105 if the arrangement does not “exhibit the risk-shifting and risk-distribution characteristics of insurance.” Apparently, the IRS intended this principle as an amplification of Code §105 because the paragraph concludes “These rules apply with respect to a health plan without regard to whether the plan is provided through a cafeteria plan.” If the same idea were a final reg. under 105, I think it would be a stumbling block to employer-funded medical spending accounts with carryovers (even if the money could never be used for anything other than health benefits). Since this is a proposed reg. under 125, I’m not sure how much weight to assign it. Any thoughts?

A plan sponsor is considering a medical reimbursement account program where each (non-high paid) employee would get $X credits per month and no employee contributions would be accepted. Credits would carry over year-to-year. At termination of employment, any credit balance would be applied to COBRA or retiree medical premiums (and could not be converted to anything taxable). If for any reason the credit balance could not be used by the participant and his or her family for extended medical coverage, the credit balance would be forfeited. The arrangement would be funded through an existing welfare benefits trust. Since no employee contributions would be accepted, 125 would not apply. So, since 125 does not apply, do you see any problem with carrying over credits year-to-year? Is there a risk that (due to the carry-over) the arrangement might fail to be a group health plan under Code Section 105? How would COBRA apply to a (potentially large) credit balance in the event of a participant’s divorce?

I think in every case where I've pointed out the issue to an insurer, TPA or employer, the provisions have been removed. I have not worked with anyone who has argued that these provisions are permissible under HIPAA.

The IRS/DOL regs do not address this directly but my interpretation of ERISA 702 is that you cannot have a non-confinement rule (or a non-disability rule) for dependents’ coverage. Similarly, you cannot have an active work rule where the absences for non-health reasons are treated as active work. However, I think an active work rule that applies to all days off (e.g., scheduled days off AND absences for illness) is probably still okay.

I am going to the Ali-Aba Health Care Law and Litigation Seminar in D.C. next week and I was wondering if anyone I "know" from the Benefitslink message boards is going too.

I agree with Benefish. In the typical 125 plan, the employee reduces his/her pay under 125 and the employer provides the coverage. That coverage is not taxable to the employee due to 106. In the Mr. 106 Plan, it seems as if you are trying to use 106 a second time for the same coverage. I think the employer's "reimbursement" of the employee would be taxable (not excludable under 106).

Under ERISA Section 701(e), you are supposed to send a certification whenever an individual’s coverage ends. That would include a voluntary termination of coverage.

I think the source of the concern over different eligibility standards for different groups of employees may be Code Section 125(g)(3)(B)(i) which provides that a 125 plan is not discriminatory as to eligibility as long as (among other things) the employment requirement for eligibility for each employee is the same. I think there are ways to support different eligibility standards but I think this is the Code provision that raises the issue.

It is not an issue of restricting cosmetic surgery to the correction of an injury (or a conjenital abnormality). It is a question of limiting the benefit based on whether the person was COVERED AT THE TIME OF THE INJURY (or at birth).

I am seeing post-HIPAA group health insurance policies and plans with the exclusions like -- no coverage for cosmetic surgery unless it is to correct an injury which took place while the person was covered by the plan. I see this as a permanent preexisting condition limitation. How do insurers justify this form of exclusion post-HIPAA? Or is this a pre-HIPAA provision that some insurers and TPAs have inadvertently carried over?

I agree with Hillary P. I didn't see her post before I made my reponse. Hillary's answer addresses the possibility that there might have been two events, the marriage and a loss of other coverage.

I think under ERISA 701(f)(2), you are only required to permit enrollment of the new dependents. However, your plan might be more liberal.

The application of HIPAA depends on whether the dental benefits are offered under a medical plan or a separate dental plan. If the benefit is under a medical plan, HIPAA will apply. If the benefit is under a dental plan, HIPAA probably won't apply (because most dental plans meet the definition of excepted benefits). If HIPAA applies, a permanent exclusion based on a condition arising before coverage took effect sounds like a pre-ex to me. I think some insurers disagree. I'd like to hear support for the contrary position.

It depends on the type of benefits available under the EAP. Most EAPs are subject to COBRA (which is not a sensible result in many situations). I sent a comment on the COBRA regs to the IRS proposing a couple ways to carve out EAPs. If you agree, maybe you can write the IRS too.

I think the first step is to determine whether the dental plan is subject to HIPAA. (Most dental plans aren't.) If the dental plan is subject to HIPAA, I think that sort of exclusion is a form of pre-existing condition limitation and would have to be modified or eliminated.

You should offer COBRA to an employee terminating at or after 65. See 54.4980B-7 Q&A-3. Also, see the discussion of Geissal in the preamble of the regulations, the heading "Qualified Beneficiaries."

But, if recipient sponsors the plans and the leasing organization/PEO issues the W-2s, does it hang together on the entities' tax returns? What is the leasing company's status in, e.g., withholding 401(k) and 125 and forwarding to the recipient? My initial thought was to make the leasing organization a participating employer in the recipient's plans (even if that creates multiple employer plans). Do you think that's overkill?

If a recipient sponsors a plan for or including leased employees, can you reflect participation in the recipient's plan on the W-2s issued by the lessor/PEO?

You make the vision plan an option and give $X to every employee who waives the vision plan. That's just another form of 125 plan.

For health benefits, you can't ask for more than the regular employee share of the cost. There are some rules/options for structuring payment for unpaid leave. For other welfare benefits, I suppose you could ask for the full cost and then drop the benefits if the employee declines to pay. But, before doing that, you will want to make sure you can reinstate all benefits on the employee's return from leave.

Yes but the arrangement falls within Code Section 125. It's a type of cafeteria plan.