claims and appeals under cafeteria plan document

[Guest kkesq]

What type of claims and appeals language belongs in a cafeteria plan document that also houses a medical FSA? My understanding is that the recent claims & appeal regulations for group health plans will apply to health FSAs on 1/1/03. However, should the claims & appeals process for the rest of the cafeteria document be the same since the cafeteria document generally wouldn't be subject to the ERISA claims & appeals regulations.

[pjkoehler]

kkesq: This is really a nonissue because the only "benefit" that a cafeteria plan provides is a tax benefit in the form of the Code sec. 125(a) exclusion, i.e. the cafeteria "plan" provides no welfare benefit that could be the subject of an adjudication process. It's chief function is to provide a written expression of the terms under which participants may select among various taxable and nontaxble benefits and to satisfy the principal requirement that there is at least one taxable benefit and one nontaxable benefit from which to choose. See Treas. Reg. Sec. 1.125-1, Q&A-2 and 3. As long as the individual ERISA welfare benefit plans are separately contained, i.e. set forth a claims procedure that meets the ERISA standards, there's no need to put this in the cafeteria plan.

Sometimes cafeteria plans perform double duty and are designed to function as part and parcel of a wraparound welfare benefit plan that might include a uniform claims procedure. It's still a misnomer to think of the cafeteria plan as a employee benefit plan, but I have seen some plans labeled "cafeteria plan" that take this approach. Take a look at DOL Reg. Sec. 2560.503-1 for guidance on the ERISA plan's claim procedures requirements.

[Kirk Maldonado]

Why isn't a claim for reimbursement of medical expenses (out of the participant's flexible spending account) subject to the claims procedure rules?

[GBurns]

Kirk..

Did I miss something or did you mispost to the wrong Board? I do not see where this issue is raised in this post?

An FSA is a benefit that can be either part of or not be part of a Cafeteria Plan. In any case the FSA is not the Cafeteria Plan it is just one of the benefits that might be provided as one of the qualified benefits electable just as is the medical insurance. And just like the medical insurance it carries its own Plan Document, SPD and claims and grievance process separate and apart from any of the other provided qualified benefits.

[pjkoehler]

Gburns: Something tells me there'll be no reply.

[GBurns]

No... Kirk will reply. If he misposted or misread or especially if he thinks that I did, he will. He loves an argument too much.

[Guest kkesq]

Thanks for the responses. My document is serving both as a cafeteria plan document (which doesn't need a claims & appeals provision) and a medical FSA document which does need a claims & appeals section (there is no separate medical FSA document).

My original concern was that there might be a non-ERISA claims & appeals requirement that applied solely to cafeteria plans. And it looks as if there isn't.

[pjkoehler]

Gburns: What argument?

[Kirk Maldonado]

GBurns:

From your response, you seem to indicate that your documentation has separate claim procedure rules for the health FSA.

My documentation, on the other hand, has one claim procedure for all of the claims arising under the plan (whether arising under the health FSA or otherwise).

Thus, my comment was that there must be a claims procedure for resolving any disputed rights to reimbursement under the health FSA. (I wasn't addressing the issue of whether the rules need be stated in the cafeteria plan document or the separate documentation evidencing the health FSA.)

I assume that we are all in concurrence on this point?

[pjkoehler]

Originally posted by kkesq

....hould the claims & appeals process for the rest of the cafeteria document be the same since the cafeteria document generally wouldn't be subject to the ERISA claims & appeals regulations.

We may be in concurrence on many points, but this is the issue that kkesq submitted for comment.

[GBurns]

There is no need and there should be no claims & appeal process in a cafeteria plan document since such an issue cannot apply to a cafeteria plan. There is the inherent danger of misunderstanding and confusion in putting irrelevant items in a document.

However, the underlying plans do need such claims and appeals process.

Since the process should usually be different or have some difference for each of the underlying plans, they should each have their process separated.

This separation also leaves room for change, addition or deletion of any product without affecting the others or the cafeteria plan.

[pjkoehler]

GBurns: I think you can even go further than that to the extent that any of the nontaxable benefits under a cafeteria plan are provided through a group insurance or HMO contract, it's axiomatic that the claims procedure will be tailored to the specific procedural requirements of the carrier performing the initial claims adjudication function. Even in a self-insured context, to the extent claims functions are performed pursuant to an ASO contract with a carrier, the contract will specify the claims procedure. Such terms are rarely subject to negotiation. Other than self-administered FSAs, as a practical matter, the employer's legal counsel cannot anticipate the terms of the individual insurance, HMO or ASO contracts and draft them into a wraparound welflare benefit plan in the form of a uniform claims procedure. Other than for the self-insured and self-administered welfare benefits, e.g. the FSAs and perhaps benefits funded by a VEBA, it makes no sense for a cafeteria plan to impose a claims procedure that could potentially conflict with the claims procedures specified in the insurance, HMO and ASO contracts.

[Guest FAQ]

Everyone seems to agree that the FSA portion of a cafeteria plan needs to have claims procedures (whether in a separate document or included in the cafeteria plan SPD). That being the case, would the post-service group health plan claims procedures be the correct procedures to apply to a health FSA? Is there any exception for FSAs that would avoid the need to include the detailed claims procedures that apply to health plans?

The decisions involved will likely involve interpretation of the Code, regulations and IRS publications rather than medical science, in order to determine if something qualifies as a "medical expense." If a claim constitutes a medical expense under the Code & reg's, then the FSA will reimburse it. Nevertheless, the new claims procedures will require the plan to have a separate fiduciary review the claim if the participant appeals. Labor Reg. 2560.503-1(h)(3)(ii). In addition, an FSA appeal denial communicated to the participant apparently must include the suggestion that participants contact the DOL. 2560.503-1(j)(5)(iii).

Am I missing something?

[Guest carsca]

FAQ,

An argument that the pre-service claims rules apply to FSAs is in a case where a participant is fighting a plan administrator''s determination that the employee is not eligible under the terms of the FSA (e.g., the FSA requires X hours of service; and the administrator determines that the employee did not complete such service).

Accordingly, should FSA SPDs include provisions that provide for 15 day review? If not, what is the appropriate standard?