DTH

We cover retirees under plan A, which is the same for active employees, until age 65. At age 65 retirees receive a fixed amount towards coverage in Plan B. Under the deferred event rule, we know that COBRA will apply to Plan A when the employee loses coverage but only for the time remaining in the 18-month COBRA coverage period (i.e., the COBRA period is measured at the original event, termination). My question is does COBRA apply to plan B? I assume not since the qualified beneficiares could have elected COBRA under plan A and still have gotten the subsidy under plan B. Thanks!

An employer sponsors a medical plan and requires that a participant's spouse, who is eligible for coverage under his/her employer's plan, must be covered under that plan as primary coverage. The participant may also enroll a spouse under the participant's plan, but that will be secondary coverage. Any issues with this?

The retroactive annuity regulations were effective July 16, 2003 and apply to plan years beginning on or after January 1, 2004. Under the proposed and final regulations, a retroactive annuity starting date may be used only if the plan provides for it. Under Notice 2004-84, released 12/14/04, plan provisions relating to a retroactive annuity starting date are designated as disqualifying provisions and plan sponsors may adopt retroactive annuity starting date amendments in the 2005 plan year. Does this mean that a plan may use the retroactive annuity starting date provision without a plan provision and then retroactively amend the plan back to the date that the provision was first put into effect?

We concluded that there are two methods to correct this scenario: 1. The plan sponsor of Plan A corrects via a QNEC. The Plan A will need to transfer the QNEC dollars to Plan B for those affected NHECs who participated in Plan A and were transferred to Plan B. 2. Request Plan B to transfer the ADP excess and interest back to Plan A. Plan A will distribute and tax report the APD excess. Moral of the story ... make sure that nondiscrimination testing and corrective distributions are done before the transfer (same goes for minimum requried distributions).

I have a portion of Plan A that spun off mid-2004 to an unrealted employer. Employee's assets were transferred to the new Plan B. The Plan A did not do the 2003 ADP test before the spin off. Plan A failed the 2003 test and there was one HCE in that group whose assets were transferred to Plan B in 2004. How does the HCE's ADP excess from Plan A get corrected? Does the Plan A plan adminstrator request the plan adminsitrator from Plan B to do the distribution OR is Plan A stuck with doing a QNEC to correct? Thanks!

Our cafeteria plan has a health FSA. What are the impacts on the FSA if an employee's spouse has a HSA? Are there any impacts on the spouse's HSA? I assume that an eligible expense cannot be paid by both the FSA and HSA.

I have a 9/1 plan year. For the 2003 calendar year, I have an HCE that had a $2,000 excess deferral that never got paid (now an operational defect). That HCE had an ADP excess contribution for the 9/1/03 - 8/31/04 plan year of $3,000. The $3,000 was paid on 10/1/04 (before 2-1/2 deadline). Can I offset the ADP excess to satisfy the excess deferral that never got paid? I assume this can be done in accordance with 1.401(k)-1(f)(5)(i)(B). I see the tax reporting as: $2,000 excess deferral taxable in current tax year (2004) and $1,000 ADP excess taxable in the prior tax year (2003). Thanks.

Thanks Steve. There are two service providers on-site who are paid by the employer on an annual retainer. There is one service provider on-site that is paid by the employer per hour while on site no matter if any employee is seen. The off-site nutritionist is paid directly by employer only when the employer sends an employee to the nutritionist. If the employee goes to the nutritionist on his/her own, the health plan pays through the normal claims process. Based on your e-mail it appears that the services provided on-site could be treated as an on-site medical clinic, thus not subject to ERISA or HIPAA. I thought that the ERISA exception for on-site medical clinics is only where it was for emergencies, flu shots etc.???

We have certain employees that may need some physical therapy to remain healthy to do their job. The employer pays for and provides the services of a chiropractor and physical therapist on site and a nutritionist off site. Any employee in the department may utilize these services. Is this an ERISA plan? What type of plan would you consider this? Does HIPAA Privacy apply?

I thought it was odd too, but I think it could work if used as the "Important Information" section of the Election Notice. The plan administrator would attach a cover page with the reason why plan coverage ended, who is eligible for COBRA, when COBRA begins, etc. and attach a COBRA election form. Of course the one notice would need to include information required for both notices.

Has anyone ever heard of a plan administrator using a combined COBRA General and Election Notice? I assume this is okay as long as the notices contain both sets of notification content requirements and is provided within the applicable time frame for each notice. Thanks!

If a DB plan has a COLA tied to CPI and terminates does the calculation of a lump sum distribution have to reflect the COLA?

A church plan has Medicare as the primary payor for active employees age 65 and over. Apparentley, Medicare had a special rule allowing Medicare to be the primary payor for Diocese/Religeous organizations with active employees 65 or older. My question is: Was there legislation last year or this year that changed this rule? If yes, could you please let me know which Act changed it. Also, were employees using Medicare as the primary payor gandfathered under the old rule? I have tried to find information on this issue from various sources and have come up blank. Thanks.

I have a DB plan that is restuctured into 4 component plans for testing purposes. Each component has a safe harbor design. Each component failed the ratio % test. Each component passed the classification test. Each component failed the average benefit % test; however, if aggregated it passes. Must each component pass the average % test on its own or is it okay that they passed together? If they must pass each on their own, what are my next steps? Rate groups? Thanks.

Do you need to file any Form 5500 schedules for a large unfunded welfare plan (e.g., Schedule C or G)? For a large fully insured (combination of unfunded/insured), Schedule A needs to be filed. Do you need to file any other schedules (e.g., Schedule C, D, or G)? Also, please confirm there is no audit report needed for these plans, but the SAR does need to be provided to covered individuals. Thanks!

An employee is married and elected single medical coverage. If the employee is transferred from one company of a controlled group to another company can the employee change his medical election from single to family coverage? Thanks.

ERISA requires the administrator to provide an annual SAR to each participant and to beneficiaries receiving benefits under the plan. ERISA section 3(7) defines participant as any employee or former employee of an employer ... who is or may become eligible to receive a benefit of any type from an employer benefit plan ... So active participants and term deferred participants will receive the SAR. If a former participant is terminated and receiving a benefit paid from the plan's trust, does that individual get a SAR? Thanks.

I have a fully-funded health plan that covers NCEs, Key-EEs, and NHCEs. There are no employee contributions made to this health plan. Going forward new employees will need to pay for a portion of the premium with pre-tax dollars through a cafeteria plan. Are we subject to nondiscrimination testing? I assume yes. If we limit the cafeteria plan to just NHCEs are we subject to nondiscrimination testing? Thanks.

I have a U.S. plan that has a foreign company as part of their controlled group. The plan does not exclude foreign individuals as a class. If a foreign national from the foreign company transfers to the U.S. company, do you need to count the service with the foreign company for eligibility and vesting. Example: Foreign individual worked for foreign company for 6 years and transfers to the U.S. company for 3 years. The plan has a 5-year vesting schedule. Do you count the 3 years service in the U.S. or 9 years combined U.S. and foreign service for vesting? It appears you would count the foreign service according to Labor reg. 2530.210(d) & IRC 1563(a) [1563(b) carves out foreign nationals; 1563(a) does not]. Additionally, if a U.S. individual transfers to the foreign company, can you count the foreign service for benefit accruals under the U.S. plan? I appreciate your thoughts. Thanks.

Thanks for the answers, however, this does not answer my question. Demosthenes - This just tells me what to do with multiple benes. Appleby - The designated bene. is the last "person" standing on 9/30 after the year the participant died (i.e., 9/30/05). MRDs must begin to the benes on or before 12/31 of the year after death (i.e., 12/31/05). Because there are non-spouse designated benes, the benes will use their age in the year after death for the life expectancy factor, then reduced by one for subsequent years. My question is who gets the 2004 MRD? The participant's estate or the benes. Thanks.

A participant has been receiving minimum required distributions (MRD) for years. The participant has two designated beneficiaries (his son & daughter). The participant dies in 2004 before taking his MRD for the year. The participants daughter wants to take her portion in 2004; his son wants to defer until 2005. My question is: The 2004 MRD still needs to be distributed. Who gets the MRD? His estate; Can it be satisfied by the daughter taking her portion of the benefit; or Does the MRD need to be prorated between the son & daughter. Thanks.

Thanks for your answer FormsRmylife. It is clear in the regulations that an employer that does not receive PHI (only get summary health or enrollment / disenrollment info) is not subject to the special requirements that apply to employers. An employer can request a HIPAA PHI authorization form from a participant for ad hoc PHI uses and disclosures and still not be subject to these requirements. My question is not about the employer it is about the group health plan. All group health plans are covered entities. If the group health plan is fully insured and has an insurance contact with an insurance carrier or HMO, and only receives summary health information, enrollment and disenrollment information it is not subject to the HIPAA administration requirements. However, because it is a covered entity, in this case, the group health plan must only comply with HIPAA Privacy's non-intimidation or retaliatory acts and waiver of HIPAA rights rules. If the group health plan receives PHI, it will be subject to full-blown HIPAA. I'm trying to get around that by having participants sign a PHI authorization form. Can the group health plan do this or once they receive PHI (with or without a PHI authorization form) be subject to full-blown HIPAA? Thanks.

I have a fully insured group health plan. The group health plan currently only receives summary health information, enrollment and disenrollment information. With this arrangement HIPAA Privacy rules exempt a group health plan from administration requirements. If an employee comes to the plan administrator requesting help with a claims issue and the plan administrator receives protected health information, the group health plan will be subject to the administration requirements. Can the group health plan get out of these requirements by requesting the employee to sign an authorization form to use and disclose the employee's PHI to resolve the claims issue? Thanks.

I inherited a plan that has a 10-year certain and life as the normal form. The QJSA for a married participant is 50% J&S and the QJSA for an unmarried participant is a "10 year certain and life". There is no life annuity available under the plan. It is my understanding that a QJSA for an unmarried participant must be a single life annuity (Treasury reg. 1.401(a)-20 Q&A 20). Am I correct that the plan must offer a single life annuity for unmarried participants as the QJSA? The 10-year certain an life can be an optional form of benefit offered under the plan. Thanks.

Can you explain to me why HIPAA Privacy rules apply? I don't think that participant claim forms coming in via a fax machine to the FSA administrator is PHI since the health information was not created by the plan (i.e., it is created by the participant and received by the plan). If the FSA administrator is only talking to the participant about their claim, I don't see where HIPAA Privacy applies. Thanks for your insight.