|Premium Only Plan FAQ|
1. What types of benefits can be offered under a Premium-only Flexible Benefit Plan?Generally, the types of benefits which may be offered under a Premium-only Flexible Benefit Plan include medical, dental, and vision insurance; accidental death and dismemberment insurance; short-and long-term disability insurance; vacation buy and sell options.
2. What legal documents are employers required to keep?
3. Is there tax reporting required of an employee who participates in a premium-only flexible benefit plan?If an employee participates by having pre-tax withholdings for his or her portion of group insurance premiums, there is no additional tax reporting. The W-2 will reflect a lesser amount as ‘taxable wages’ than if she or he had not participated in either or both plans.
4. What are “Change in Status” events?As the Plan Administrator, you are not obligated to allow participants to change their elections other than once a year at open enrollment. However, the IRS has defined the circumstances under which you may permit premium-only flexible benefit plan participants to change their elections mid-plan year. Requests for changes due to the following “Change in Status” events are subject to the terms and limitations of your underlying group benefit plans.
The Final Regulations also provide a ‘safe harbor rule’ in the case of an employee who terminates and then resumes employment within 30 days. In such a case, the plan can allow the employee to “step back” into the same coverage. If the individual resumes employment more than 30 days following termination, the plan may permit the employee to step back into the same coverage, or to make a new election or may prohibit the individual from participating for the remainder of the plan year.
5. Am I required to allow an employee to change his/her election if a qualified change in status occurs?No. You may restrict your employees’ opportunities to change their elections as long as you do so on a consistent basis throughout your plan year. In addition, be sure that your plan documents reflect your actual practice. An election change may be made only if it is consistent with, and on account of, any of the change in status events listed in the Election Change Matrix. If an employee requests termination of a benefit under the plan, they must have a qualifying status change. If not, they cannot terminate the benefit at that time.
6. Can an election change be applied retroactively?No. For example, if an employee gets married and subsequently raises her medical insurance contribution, the additional amount withheld for the account is only available for services received after the effective date of the new election.
7. What nondiscrimination tests are applicable to my organization’s premium-only flexible benefit plan?Premium-only flexible benefit plans may not discriminate in favor of Key employees in regard to eligibility or in regard to contributions allowed and the benefits provided.
A Plan is considered nondiscriminatory if:
8. If the nondiscrimination testing is performed annually, when do I receive my worksheet and test information?You will receive nondiscrimination annual testing materials electronically within 10 business days after the start of your new plan year.
9. How often does GDI invoice me for the administration of our Plan?Group Dynamic, Inc. will invoice you annually within 30 days of your plan renewal.
11. Does GDI offer any other services?Yes. GDI provides administrative services for Medical and Dependent Care Flexible Spending Accounts (which are “added” to your current premium-only plan), Health Reimbursement Arrangements (HRAs) under IRS Code Section 105; Transportation Fringe benefits plans (Section 132) as well as COBRA administration services. Please contact your Account Manager for more information.