Flexible Benefits Plan

[Guest Jan C]

Background:

plan document (502 plan number)adopted 7/1/95 to include voluntary options: dental, accident, cancer, intensive care, long-term disability and life insurance

7/1/96 plan amended for affiliate employer

7/1/97 employer removes long-term disability and life insurance (never formalized by amendment)

part-time employees exclusion never added plan but employer never allowed part-timers to enter plan

NOW, we are in the process of amending and restating the plan. Can we amend the plan to add the part-time exclusions and to take off the LT Disability and life insurance? They offer the latter but not on a pre-tax basis anylonger since 7/1/97.

NEXT, the employer stated that the short term disability has been paid 100% by the employer all of this time and should not be in the voluntary plan.

The employer also informed me that he has NOT filed 5500's on this Plan. Thoughts??

[Lisa Hand]

Get the Form 5500s done and filed ASAP. Ask the Service for mercy when they are filed, include an explaination of why the 5500s were not filed and if there is no reason, be prepared for a serious fine. Would not do anything else until the plan is clean as far as the 5500s are concerned.

[Guest Jan C]

Can the plan be amended retroactive to exclude part-timers?

[SLuskin]

I don't think that anything can be done retroactively in a Cafeteria Plan. In the documents that we prepare, we always have a definition of "fulltime" if this is a criteria, ie number of hours generally worked per week. Part time workers may not be eligible for the employer-sponsored heatlh and dental plans, but the employer may still want to have them participate in the voluntary products. It might help in the discrimination testing. We have generally had good luck with getting mercy from the IRS for non or late 5500 filing if we can reconstruct exactly why it wasn't done and promise that the 5500s will be on time as long as we are involved with the plan.

[Guest PMac]

Our plans are section 125 plans. An employee is asking to drop his health insurance due to a change in family status.

His background is that he was married in October, 1998, but was not eligible to enroll in his spouse's plan for two months. When was the qualifying event for a family status change? Was it only when he married or does his enrollment in her medical plan also qualify as a family status change under "significant change to health coverage attributable to his spouse's employment"?