Plan Assets of Health & Welfare Plans

[Guest TCherie]

We are a plan in which the employer and employee contributes. We recently terminated our VEBA trust. Currently, we have opened a bank account in which we deposit both the employer and employee contributions. We pay the premium payments out of the bank account. We have an ASO agreement with our carrier in which funds needed to pay claims our automatically withdrawn out of this account, and we are reimbursed for anything above our stop-loss agreement. Since termination of the trust we have been having difficulty in determing what are plan assets for our financial statement presentation.

For example, if we have $1,000,000 in expenses which includes claims and premiums, and the employer contributed $700,000 and we withheld $400,000 from employee wages which were both deposited into the bank account we opened, my question simply speaking is:

If there was an assumed $100,000 left in this bank account, which represents a commingling of employer and employee contributions in this account, is this cash considered to be a plan asset of $100,000 when preparing our financial statements of the plan and when preparing our 5500?

[Guest jims]

I presume you are trying say less than the $100,000 account balance is plan assets. It probably may depend on what was communicated to participants and the frequency of deposits. Are employees contributing each pay period? Is the employer also in regular amounts? Was the employee told an amount the employer contributes each pay period? If all these, then you probably recognize the full $100,000 as plan asset. If employer contributions are different frequency or less communicated, you could claim you were spending more employee contributions and less employer contributions. If only communicated employee portion, you could claim only employee portion is plan assets. Then claim more of the $100,000 is employer contributions and less of balance is plan assets. Since your bank account is no longer the trust, it would be subject to some less obvious interpretations than in the past when trust balance was plan assets.

[Guest Leo the Lion]

Participant contributions are always ‘plan assets’ under ERISA. Historically, the DOL has granted some relief with respect to whether participant contributions collected via pre-tax salary reduction under a Section 125 cafeteria plan must be held in trust, but that relief from the trust requirement doesn’t alter the status of participant contributions as plan assets.

It sounds as if self-insured claims are paid from the bank account, where participant and employer funds are comingled. There are court cases indicating that the consistent practice of segregating and labeling a separate bank account to hold funds for a designated plan, while not a trust, nevertheless cause the funds to be considered plan assets under ERISA.

It also sounds as if stop-loss premiums may be paid from the same bank account. If so, the stop-loss proceeds belong to the plan (not the sponsoring employer) because the premiums were paid for with plan assets. If, instead, the employer paid stop-loss premiums directly from the employer’s general assets, then the proceeds could rightly be paid to the employer (which is the more conventional practice). But if the dollars in the bank account are used top pay stop-loss premium, then some or all of the stop-loss premium is being paid from ‘plan assets’ - - and the DOL would tell you that the stop-loss proceeds belong to the plan, not the sponsoring employer.

[Guest chelsy.houston]

Health & Welfare

Benefit Plans

UMLifeOptions Provides long-term disability and life insurance plans to eligible lay employees and supplemental life insurance plans for eligible clergy.

HealthFlex Provides medical, dental and flexible spending benefits to more than 27,000 participants and their families. View HealthFlex-related regulatory notices.

Comprehensive Protection Plan (CPP) Provides disability, death and other supplemental benefits to approximately 22,000 participating clergy and their families.

Long-Term Care Insurance Provides supplementary benefits for extended care for persons with chronic illnesses or injuries that health plans and Medicare are not typically designed to cover.

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Roller Blinds

Blinds

[QDROphile]

Once you figure out your counting problem, you should turn you attention to compliance with the ERISA rules that require plan assets to be held in trust. What you describe does not appear to comply.