individual health insurance plans

[Guest choclab]

We have a small employer that allows his employees to go out and get individual health plans, which run through the section 125 plan pre taxed. We were always aware these had to be individual plans - but can't really find the definition of "individual plan" A member of the employers went out and got a State Bar plan (in his name) and is calling it an individual plan. When the policy is part of a group trust - doesn't that disqualifiy it from an individual plan? Any comments or revenue ruling on this one would be greatly appreciated!

[J Simmons]

We have a small employer that allows his employees to go out and get individual health plans, which run through the section 125 plan pre taxed. We were always aware these had to be individual plans - but can't really find the definition of "individual plan" A member of the employers went out and got a State Bar plan (in his name) and is calling it an individual plan. When the policy is part of a group trust - doesn't that disqualifiy it from an individual plan? Any comments or revenue ruling on this one would be greatly appreciated!

I would suggest that you look at Rev Rul 61-146 (1961-2 CB 25), Treas Reg § 601.601(d)(2)(ii)(b), Treas Reg § 1.106-1, and Prop Treas Reg § 1.125-1(m).

Generally speaking, you are threading a needle with doing so. Consider also the implications of ERISA (Employee Retirement Income Security Act)

COBRA (Consolidated Omnibus Budget Reconciliation Act)

HIPAA (Health Insurance Portability and Accountability Act)

USERRA (Uniformed Services Employment and Re-employment Rights Act)

FMLA (Family Medical Leave Act)

PDA (Pregnancy Discrimination Act of 1979)

ADEA (Age Discrimination in Employment Act)

ADA (Americans with Disabilities Act)

State health insurance mandates.

All of these present special challenges to running individual policies through a cafeteria plan, despite Prop Treas Reg § 1.125-1(m) specifying that it can be done. I.e., that doing so is not a problem for purposes of IRC § 125 does not mean that the strictures of these other legal provisions are inapplicable.

[Guest JKosciusko]

Many individual plans specifically prohibit premiums being paid by an employer; you might want to check that in the application.

Also, I don't believe that premiums for individual plans may be pre-taxed.

Finally, a definition of an individual plan wouldn't really be found in the IRC because the focus in Sec 219, etc., is on group health benefits and the tax deductibility thereof.

I hope this helps.

We have a small employer that allows his employees to go out and get individual health plans, which run through the section 125 plan pre taxed. We were always aware these had to be individual plans - but can't really find the definition of "individual plan" A member of the employers went out and got a State Bar plan (in his name) and is calling it an individual plan. When the policy is part of a group trust - doesn't that disqualifiy it from an individual plan? Any comments or revenue ruling on this one would be greatly appreciated!

[Don Levit]

Folks:

With the passage of the new legislation, will ERISA lose some of its applications, particularly in regards to this posting?

In addition, does anyone know if a group plan could be split between individual policies on the exchange and traditional group policies?

Don Levit