Wrapped Plan and Trust

[sbutler]

A client has a self-funded medical reimbursement plan and trust for rank and file employees. They have wrapped their fully insured benefits for the management classes into the self-funded plan. The question we have is should they now remit the insurance premiums to the trust or can they still remit them directly to the insurer? What are the pros and cons?

[vebaguru]

The "pros" are the people who get paid for what they do.

The "cons" are the people who got caught doing something illegal.

Are they subject to an audit requirement? If so, it would be a lot easier to document transactions for the auditors if all of the funds were initially received by the trust and then transmitted on. If not, the cash flow could go either way, as the direct payment can still be shown in the trust recordkeeping by journal entry.

[sbutler]

The "pros" are the people who get paid for what they do.

The "cons" are the people who got caught doing something illegal.

Are they subject to an audit requirement? If so, it would be a lot easier to document transactions for the auditors if all of the funds were initially received by the trust and then transmitted on. If not, the cash flow could go either way, as the direct payment can still be shown in the trust recordkeeping by journal entry.

They are subject to the audit requirements. The trustee was balking because the trust document will need to be changed. For audit purposes it seems it would be easier to have the trustee account for all of it. It would also seem to clarify for the sponsor just what the "plan" is. Thanks for the response.

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