NUTS AND BOLTS

DataPath Sponsored Events

Other Events

Newsletters Posted on Web

Sales/Support Phone Numbers / Email Addresses

DataPath Sponsored Events

April 30, 2002
Max105 Impact Seminar
Chicago, IL
DataPath-sponsored event featuring Success Stories told by Max105 users themselves. The Max105 System is a small group solution to ever-increasing health insurance premiums, designed for the selling PPGA (Personally Producing General Agent) and their supporting PSP (Plan Service Provider or TPA).

June 6-7, 2002
DPI-125 Beginning Users Seminar
Little Rock, AR
Training seminar on Version 2 for new users.

June 12-13, 2002
Defined Contribution (Max105, MERP105, Flex105)
Radisson Hotel Memphis, TN
Learn the regulatory issues, successful marketing approaches, and your competition. John Hickman will speak on 6/12.

June 19-21, 2002
DPI-COBRA Education / Training Seminar
Little Rock, AR
Education on COBRA rules and regs and hands-on DPI-COBRA Training

September 24-26, 2002
Annual DataPath Advanced Seminar
Memphis, TN
Subjects will include COBRA, Defined Contribution, DataPath's Plastic Solution, Internet Administration. John Hickman will be speaking one day on changes in regs. Come exchange ideas with other users over the country.

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Other Events

April 28-May 1, 2002
NIPA Conference, Scottsdale, AZ
Subject: The Changing Future of Pension Administration
DataPath will have Trade Show Booth to announce general release of MERP 105 and DataPath COBRA.

April 29, 2002
NAABC Conference, Chicago, IL
DataPath will have Trade Show Booth.

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Newsletters Posted on Web

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Sales and Support
Phone Numbers and Email Addresses

Telephone Numbers:
Sales: 1-800-633-3841
Tech Support: 1-501-296-9993
Regs Support: 1-501-296-9990 x212

Email Addresses:
Sales: sales@dpath.com
Tech Support: support@dpath.com
Regs Support: regs@dpath.com

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ARTICLES

       Changes in Filing Requirements for 5500 and Schedule F

       Letter from John Robbins, Sr. on POP Administration

       DOL OKs Electronic Delivery of ERISA Title I Disclosures

Changes in Filing Requirements for 5500 and Schedule F

IRS Notice 2002-24 (released April 4, 2002) has suspended the 6039D requirements for filing a Form 5500 or Schedule F for your fringe benefit plans, including cafeteria plans.

Until now, Code Section 6039D required all cafeteria plans to file annual information returns with the IRS. This requirement was satisfied by completing a few items on Form 5500 and attaching a Schedule F.

This suspension applies to all plan years, including years prior to 2001. The IRS has asked that plan sponsors who did not file in prior years not to request relief for failure to file from the Department of Labor or IRS.

This has no effect on ERISA Title I Form 5500 requirements for any employee benefit plan subject to ERISA (unless the plan falls under an ERISA exemption). These plans will continue to file Form 5500s (without a Schedule F). As of now, a requirement to file a Schedule F for any cafeteria plan does not exist.

Cafeteria Plans themselves are not subject to ERISA; however, component plans under a cafeteria plan (such as health insurance, Health FSAs) are subject to ERISA, and a 5500 must be filed unless it falls under one of ERISA's exemptions.

What are the exemptions?

ERISA exempts small plans meeting certain conditions. First of all, let's look at how ERISA defines a small plan.

• A small plan has less than 100 covered participants at the beginning of the plan year. Only participants (employees or former employees) actually covered under the plan are counted. This includes any COBRA participants.

Now that we know what a small plan is, let's look at which small plans are exempt.

• Small unfunded plans. An unfunded plan is a plan where the benefits are paid from the employer's general assets.
• Small insured plans. An insured plan is a plan where the benefits are paid through insurance policies (POP plans).
• Small combination plans. A combination plan is a plan where the benefits are paid through a combination of general assets and insurance.

You can find the Press release at http://www.irs.gov/pub/irs-news/ir-02-43.pdf, and Notice 2002-24 at http://www.irs.gov/pub/irs-drop/n-02-24.pdf.

Form 5500 instructions may be viewed at http://www.irs.gov/pub/irs-pdf/i5500.pdf/

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Letter from John Robbins, Sr., on POP Administration

Letter to Cafeteria Plan Administrators:

As you can see above, most POP plans don't require 5500s any longer! But now you may be trying to figure out how to replace any lost revenue stream. How do we charge for POPs now?

For starters, let's differentiate between levels of service for POPs offered in the market place. There is a very significant difference between "POP Kits" or "Document Only Services" and true on-going Administrative Services for Premium Only Plans.

Typically, POP Kit Services include Specimen Plan Documents, SPDs, forms, an Administrator's Guide of administrative procedures, check lists, and other how-to items covering the 25% test, Key-Employee and other important definitions. They come with a Service Agreement delineating responsibilities of the employer and Plan Service Provider and possibly newsletter and support phone number. All this was provided without charge. Since the IRS required an annual report on all Cafeteria Plans, the Plan Service Provider charged a fee for preparing the signature-ready 5500 Form derived from the employer's payroll reports showing the amount of qualified pre-tax premium benefits. The costs of administering the Plan was included in the 5500 fee.

Now that IRS does not provide the 5500 hook for the fee, the Employer Plan Sponsor may believe he is off the hook. We have to explain to him that POP plans are Cafeteria Plans subject to all the same Section 125 rules and regulations as any "full-blown" Cafeteria Plan. While there is a lot one has to know to render professional POP Administrative Services, there does not seem to be a lot to do. It is time to educate the Sponsor on all the services being provided in the background.

The Employer Plan Sponsor is responsible for plan administration during the year, including ensuring that all elections and changes of elections are properly executed and consistent with the IRC Section 1.125-4 regulations. Employers have to make sure the benefit/policies being offered under their Cafeteria Plan are appropriate, free from any disabling deferred compensation provisions or problem return-of-premium clauses.

Someone has to be able to reconcile the difference between the employer's annual compensation as reported on the employer's gross payroll reports to the taxable compensation as reported on the W-2 summary report filed with the IRS. This single number should drill down to detailed transactions supported by properly executed election forms and documented change of elections, which have to be reviewed to ensure consistency with the IRS change of status rules and regulations. If this process is done with reckless abandonment (or not done at all), the IRS has grounds to disallow the plan with grave financial consequences to the employees and ultimately to the employer.

If POP Plans appear simple to employers, it is the result of the way some of us (or our competitors) have communicated and sold these plans. But what appears simple is not always simple, and that is the case with POPs. Some TPAs have been providing all the above services, but have not itemized them when charging.

Our job has not changed! It is the same as it has always been, education and service. The Employer needs to know what is involved with Quality POP Administrative Services and be presented with an opportunity to have you perform them.

Service Differentiation is the calling card for all Quality Plan Service Providers!

John J. Robbins, Sr.
President

Note: We are in the process of making a table listing many of the tasks that need to be performed to make a POP plan audit-compliant. It will be posted soon to our web site, and referenced in the next newsletter.

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DOL OKs Electronic Delivery of ERISA Title I Disclosures

The DOL released final regulations April 9 to expand the circumstances where ERISA Title I information can be electronically delivered. This regulation becomes effective October 9, 2002, regardless of plan year.

The regulation on electronically delivering ERISA Title I info covers the following:

• The regulation is a safe harbor, which means that you do not have to deliver the info electronically. However, any info delivered in compliance with this regulation will satisfy the general requirement of delivering documents by a method "reasonably calculated to ensure actual receipt."
• The regulation covers all ERISA Title I disclosures (COBRA, HIPAA, etc.), but does not extend to disclosures required under Parts 2 and 3 of ERISA. (The Treasury Department governs these.)
• Employees.  Electronic Delivery may be used for employees both inside and outside the workplace if the employee has ready access to employer's computer system from a place where the employee is expected to perform assigned duties (including employees working from a home office). The access must be an integral part of employee's duties, thus eliminating providing access to electronic documents at a computer kiosk or common area.
• Non-Employees. Documents may be delivered to non-employees under the following conditions:
• The individual must be provided with an explanation of how the electronic delivery system works and what hardware / software the individual needs to use it.
• After that, the individual needs to provide an address for delivery and consent to the electronic delivery in a manner that reasonably demonstrates the individual is capable of accessing the information.
• If the system requirements change, the individual must be given an explanation of the changes and renew the individual's consent.
• The plan administrator still must take steps to ensure that the documents are received. This can include using return-receipt notice of undelivered mail, or surveying periodically to confirm receipt.
• Individuals must be provided notice that the documents are being electronically transmitted and that they have the right to ask for paper copies. This notice must be provided at the time the document is electronically transmitted. An annual notice will not suffice.
• If a disclosure contains personal information, appropriate safeguards must be taken to ensure confidentiality.
• The requirement under the proposed regs that the individual must be able to print the info has been deleted in the final regs since the individual nust receive a paper copy on request.

DOL Reg. Part 2520, 67 Fed. Reg. 17263 (Apr. 9, 2002). To get a copy of the regulation, go to http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2002_register&docid=02-8499-filed.pdf

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