Trust Requirement for Employee Contributions for Medical Plan

[Locust]

If an employer self-insures a medical plan (such as dental benefits) but charges the employees a cost, which is paid through salary reduction contributions through a cafeteria plan, are the employee contributions "plan assets" that must be held in trust, or are they exempt from the trust requirement under the DOL Technical Release?

The benefits to be provided are just like those under dental insurance - such as orthodonture, exams - and benefits are not limited to the amount of employee contributioins.

[KIP KRAUS]

I don’t know what DOL Technical Release you are referring to. However, it has always been my understanding that if self-insured dental benefits are paid from employee contributions and general assists of the employer there are no trust requirements, especially if the total cost of the benefits exceeds employee contributions, which in most plans I’ve seen is the case.

Typically these plans are money in and money out except for maybe the first year of the plan due to claim lag. In other words, employee monies are not typically sitting around waiting to be used to pay benefits.

On the other hand I have seen multiple employer self-insured union medical and dental plans that set up trust funds for the contributions of the participating employers.