Flexible Benefit Plan

[J.R.]

I have a potential client (Smith) who has a current BCBS plan administered through his work via a Flexible Benefit Plan (FBP). Apparently, the employer pays $1 towards this account for every hour worked and Smith puts in $2 for every hour worked. He has a total amount of $480 that he can use to purchase his current insurance plan (currently $420) plus he sets aside $60 for copays, prescriptions, etc. I'm under the impression the plan he has is an individual plan given the name of the BCBS plan, but after mentioning the FBP I'm thinking he is on a group plan and has to pick from a select number of plans if I understand the basic of an FBP.

He wants to know if he can switch plans and still have his employer pitch in funds, as well as his own funds to utilize the pre-tax incentive
if he switches to an individual GR or Assurant Plan. My first "guess" is no, but I want to check with the group experts on the forum.

1) Will he have to use post-tax dollars to pay for the insurance plan.
2) Can he continue doing what he has been doing regarding his contributions?
3) What are the consequences if he elects to cancel his current coverage through the arrangement he has now and buy a different individual plan.
3) Anything else I'm missing would be greatly appreciated.

Thanks....

 

[somarco]

"Hour bank" contributions are usually found in the blue collar (union) sector but there is no reason why you can't have them anywhere. A true flex ben plan falls under section 125 of the IRC. Employee contributions are pre-tax via salary reduction. Money deposited in the flex account is "use it or lose it".

If this truly is 125 compliant he may not be able to opt out of the plan (or make any other changes) off anniversary.

On the other hand, this could just be a hodge-podge plan and he can do anything he wants with the money.

You need to find out more about the plan before jumping to conclusions.

 

[J.R.]

"Hour bank" contributions are usually found in the blue collar (union) sector but there is no reason why you can't have them anywhere. A true flex ben plan falls under section 125 of the IRC. Employee contributions are pre-tax via salary reduction. Money deposited in the flex account is "use it or lose it".

If this truly is 125 compliant he may not be able to opt out of the plan (or make any other changes) off anniversary.

On the other hand, this could just be a hodge-podge plan and he can do anything he wants with the money.

You need to find out more about the plan before jumping to conclusions.

What do I need to find out specifically? He is a blue collar worker so you nailed that right on the head.

 

[SME]

An easy way to find out if you can move him is to ask if he sends BCBS a check and then gets reimbursed or if his employer sends the check. If the employer is sending the check then it is a group plan and he probably can only choose from thier plans. However if he is mailing the check and getting reimbursed then he should be able to select any plan and still pay with pre-tax contributions.
Even if he can choose his plan he may not be able to make a change to his section 125 contributions until the Section 125 anniversary.
Be careful of plans with Golden Rule or Assurant Section 125's can have limitations for association plans and association fees. Have him ask his plan admin if the plans will qualify and get EVERYTHING in writing.

 

[J.R.]

An easy way to find out if you can move him is to ask if he sends BCBS a check and then gets reimbursed or if his employer sends the check. If the employer is sending the check then it is a group plan and he probably can only choose from thier plans. However if he is mailing the check and getting reimbursed then he should be able to select any plan and still pay with pre-tax contributions.
Even if he can choose his plan he may not be able to make a change to his section 125 contributions until the Section 125 anniversary.
Be careful of plans with Golden Rule or Assurant Section 125's can have limitations for association plans and association fees. Have him ask his plan admin if the plans will qualify and get EVERYTHING in writing.

Thanks Steph, glad to see your back!

 

[SME]

I was on vacation last week. It's good to be back.
Nice new picture.

 

[J.R.]

I was on vacation last week. It's good to be back.
Nice new picture.

Borat's out, J.R.'s in!

Next month I'll put a picture of John P. up