Risking a Health Insurance Strategy the I.R.S. May Not Approve

[cadylou]

This has been discussed at length on this forum.

I have one non-profit that decided to use the Zane structure to pay premiums on a pre-tax basis-they have 5 employees and no one obtained a subsidy for their plan.

I also did not act as an rep for Zane during the process, I simply sent the decision maker the website link and had them work directly with Zane.

I can completely understand the Feds not wanting people to get a subsidy in addition to tax free premium reimbursement. At the same time, employees should be able to buy plans Off Exchange (or without subsidy On Exchange) and use the Section 105 structure. That would be fair and hopefully the courts will eventually decide that as well (or the IRS will come out with an update to the ruling).

I had hoped to possibly use defined contribution with some of my small employers, but in light of this guidance, I doubt seriously I'd want to point a client in that direction. I feel it's risky at best. You were smart to let them work directly with Zane & take yourself out of it.

 

[taterpeeler]

I don't give a flying rats arse if sam directed it at me or not... hes a wet behind the ears little youngin.... no one that young has the skill set to this....

of course that just my thought... what do I know? I only got 21 years in this market

 

[HealthGuy]

Zane pimps questionable strategies. Enough said. I have wasted hours on their snakeoil.

 

[Ann H]

Rick from Zane Benefits certainly has great intelligence, not to mention creativity, ingenuity, and perserverence. No doubt he will be a very successful man. However, his risk-taking is what concerns me, and his youth confirms what I have long believed - that experience teaches you which risks are worth taking and which risks are, well, too risky.

 

[Post Quartermaster]

One thing I would like to point out in reference to the original article, as it mentions TASC. My TASC sales rep has been adamant about not using pre-tax dollar to fund on exchange purchased IFP plans - with or without a subsidy.

 

[jzp0010]

I have been dealing with this exact situation for the last couple weeks. I work for a very large insurance agency (Top 30 Business Insurance Magazine) and our compliance department is having a field day with it. So trust me when I say, everyone is in the dark here. The law is so loosely defined and does not account for certain technicalities and what we as insurance professionals perceive the definitions to be.

Any client who is currently doing this is taking a huge risk because the IRS can choose to enforce from day 1. It's an awful feeling having to tell a business owner he can no longer help his employees pay for individual health insurance.

My understanding of the regulation states that the ER can still have this arrangement if it satisfies one of the two integration tests mentioned in IRS notice 2013-54.

This is practically impossible since the arrangement does not satisfy minimum value because an ER payment plan is considered to impose an annual dollar limit up to the cost of individual market coverage and therefore fails the integration test.
Simply put, the ER places a dollar limit on coverage by choosing to reimburse the EE $x amount per year for individual health insurance. Thereby placing an annual limit on coverage up to the amount the ER is willing to contribute.

However, my understanding of the law is that if the ER gives all of his EE's the option to choose either cash or contribution towards an individual health insurance policy. If this arrangement is in place, the plan is considered to be integrated and passes the integration test.

Here's the kicker... the IRS considers this to be a self-reporting tax and the ER and EE are surely both unaware. Think about the repercussions from a federal and state standpoint, as well as the individual tax bracket for each effected EE. If our imperial federal government decides to claim willful neglect, which they most likely will.. it's game over and the business will most likely cease to exist.

I have attached a highlighted version of this regulation that I have been using with clients and CPA partners. If anyone has more insight on this please reach out or post on this forum so we can get our head wrapped around this.

 

[AllenChicago]

I have not put anyone with the Zane deal, but Rick knows as much about HCR as anyone in the country. Rick is a very impressive young man, I don't see why his age should bring him derision.

Regarding the new "greeting" video at: http://www.zanebenefits.com/ ...
It's not that Rick Lindquist is young. It's that watching him makes me feel really old, LOL. As long as he isn't a junior version of Bernie Madoff, all the best to Rick!
-ac

 

[maddent21]

Are posters really commenting on Rick L.'s age as a negative?

The employer benefits business has been in need of some new thinking, it was on a crash course for implosion before the ACA and Obamacare has only hastened the descent.

Having new thinking involved is a good thing. I have yet to have anyone show me where in the law is says you cannot provide your employee's a self funded reimbursement plan that can reimburse individual premium and also, simultaneously, comply with the ACA. If that cannot be done, built, plan documents written, and designed then let's have a definitive answer.

Otherwise, from what I have seen from Zane and others, their plans comply with the tax codes as they are written.

Rick L. may be young but so was Steve Jobs, Bill Gates, etc. It can be an advantage to new and outside when dealing with a dinosaur industry.

 

[somarco]

he employer benefits business has been in need of some new thinking, it was on a crash course for implosion before the ACA

I assume you are referring to small group. The large group market was showing no signs of age.

Now that we have Obamacrap, there will be some definite changes in large group but it won't implode. At least not any time soon.

ERISA killed the defined benefit pension market but took 10+ years to do so. The retirement plan market is still alive albeit drastically different from before.

Zane has a lot of sizzle but not much substance in an Obamacrap world.