Medicare supplement Insurance

[Guest ConnieLawson]

We have a client with a FSA and POP cafeteria plan, the sponsor writes and asked me this question "We have an employee who is covered by Medicare and has a Medicare Supplement Policy thru the Kentucky Teachers Retirement. His deceased wife was a teacher. The only payment method for the premiums is bank draft from his checking account. The question is can we payroll deduct the premiums in the cafeteria plan and then write him a check for the premiums since we cannot pay Ky Teachers Retirement directly." Can anyone tell where to find the answer for him?

[LRDG]

Assuming the Medicare Supplement policy qualifies, w/no bundled benefits that would otherwise disqualify the policy under Sec. 125, it appears the pre-tax premium deduction and check to reimburse the premium would qualify if reimbursement is properly substantiated.

One 'kink' to considered is that the bank draft for the policy premium payment must be substantiated prior to issuing the premium reimbursement check to the EE. Also, how the automated payroll deduction for pre-tax premium will interface w/manual processes involved, one for substantiating the monthly? bank draft payment for the policy; second, manual reimbursement of the bank draft premium payment.

It is not sufficient substantiation to establish that the policy exist and monthly? bank draft payment arrangement exists. Each monthly? bank draft payment would have to be presented as a 'claim' in order to properly substantiate payment in order for the manual check to be issued to the EE. Substantiating the bank draft premium payment on a payment frequency basis would avoid the potential of paying premiums in the event of a policy termination or mid-year coverage change involving premiums or ineligible coverage.

Will the monthly premium bank draft be deducted on payroll system as monthly deduction or payroll frequency basis deduction?

Ammending the Plan Doc., and updating Sec. 125 enrollment material for all eligible EE participants in the Teacher's Medicare Supplemental policy?

Potential backlash from those opposed to teachers' union or unions in general, for example? or other EEs w/individual policies not included?

If premium reimbursement for all individually owned policies is opened up to all EEs/participants, it will need to be determined that none provide ineligible benefits, for example 'bundled' benefits such as education benefits for those who become disabled or for a surviving spouse? There was a trend in supplemental policy product development to include 'bundled' benefits that do not necessarily qualify under Sec. 125, regardless if there is premium that could be segregated for the ineligible coverage or rider premium segregated and paid after tax for the ineligible coverage.

[Guest PEMAQUID95]

I thought I read recently that employers are "... prohibited from offering, subsidizing or being involved in an arrangement of a Medicare supplement policy where Medicare would normally be the secondary payer"? See June 21, 2022 post by Mary C. The benefit to the employee is the tax savings, isn't that a contradiction? Just sayin.....