California...which entity governs Cafeteria Plans?

[Guest GoldenBear03]

Hi! I'm new to the board, but had a question about Cafeteria Plans...specifically concerning the entity that oversees Cafeteria Plans in the State of California. In most states, the DOI is the chief entity responsible for 125's, but in this case, the DOI reps that I've spoken to in CA are clueless. The last one I spoke with said she had been with the DOI for 30 years and had never heard of a Cafeteria Plan. Extremely discouraging!!!

I'm trying to find out what licenses are required to conduct 125 business in the state. I would really appreciate any and all help you all can provide. Thanks so much!

[GBurns]

A license to do what?

Many states require that Claims Adminstrators and TPAs be licensed to administer the plans. The license is not for Cafeteria Plans it is for claims adjudication and handling of funds etc.

I know of no state where the DOI is responsible for section 125 plans. What do you mean?

[JanetM]

IRC regulates operation of Caf plan not state DOI. Not sure I understand your question. Are you looking to sell fully insured products employers can wrap in caf plan?

Can't help you with the license question.

[Guest GoldenBear03]

We are a Texas TPA firm offering Cafeteria Plans in California through an insurance company. We do not actually hold the funds...just handle the plan administration. We do get involved in the adjudication of claims. Wondering if we need a license to do what we're doing in CA.

[GBurns]

If you are not handling any funds and not adjudicating any claims, What will you be administering?

[Guest GoldenBear03]

We do assist in the adjudication of claims. Provide document services, daily plan admin and recordkeeping, etc. While we don't handle the funds, we do prepare checks for signature by the plan sponsor. Essentially, the only thing we don't involve ourselves in is handling deferrals. Clients open accounts where contributions are held. Debit cards can be linked to this account or receipts can be sent to us the old fashioned way and we can prepare a check. Does that help? Thanks for your consideration.

[GBurns]

I do not know the answer for sure regarding California, but I vaguely remember them as 1 of the states that has no licensing for TPAs for anything.

I have to tell you that calling any DOI can be frustrating and the answer can change with each different person to whom you speak. I once went through the exact same thing here in Florida. Fortunately I was aware that there was a division in our DOI that did issue licenses and knew who was the head even though the person ( a Supervisor no less) on the phone who worked there was not even aware of that division.

Florida licenses TPAs but the definition might/might not include section 125, FSAs etc. The divison head was sure that no license was required but that was based on his own personal opinion and not Department edict. There was nothing definitive but precedent.

I then canvassed a number of TPAs who handled both 125 POP and FSAs to see whether they had a Florida license or not. I think it was slightly more than 50% who did not. Many of those who did, had done so for safety.

The problem in Florida is one of definition. The definition of accident and health plans relates to insured plans and section 125 plans are not insured even though the products that are funded by the 125 salary reductions are.

I hope that a couple of our Florida TPAs who post to this Forum will respond, at least about Florida. With their reasoning about Florida plus your knowledge of Texas, you should be able to put together a better picture regarding CA and how to proceed. Maybe you might be lucky and get some responses from CA TPAs.

You might also want to ask your document provider and software provider for their input.

I have used documents from MHM, in the past, and they were very helpful about many things even beyond what I paid for.

[Guest GoldenBear03]

Thanks so much for your response, Mr. Burns! I really appreciate this site being available to us.