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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3901
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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During my employers open enrollment for health insurance in

Resolved Question:

During my employer's open enrollment for health insurance in Nov last year I selected for health benefits for myself and my domestic partner for 2013. In Jan 2013 I was informed via phone that because I did not have the necessary paperwork my partner could not be added to my health insurance and was not eligible to receive health benefits. Because of this conversation I did not complete my employer's required DP application or submit any documents, steps I was told are necessary for a DP to be approved.

In February my work schedule was reduced and I became ineligible for any benefits. Throughout the transition I spoke with HR and the benefits office to confirm that I would no longer be receiving benefits.

I recently reviewed my paystub and noticed a DP imputed tax for the health insurance since the beginning of the year. As I was told my partner is not eligible for benefits and I myself am not eligible for benefits at all, I am confused about the tax and upset about the negative impact this is having on my tax liability. By the end of the year the DP imputed tax will be more than $5,000.

I contacted my employer and they refused to remove the tax stating, sometimes they approve domestic partners without documentation. And because they approved the DP, they stated that they needed notification back in February that my employment status was changing and my DP was no longer eligible for benefits. Only then could they have removed the tax.

This all seems a little suspect to me. Are they able to do this? What are my options if they won't remove the imputed tax? Do I have to sue them to get the correct information so I wont be penalized by the IRS?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor :

Please don't shoot the messenger here, but I bet that in your plan documentation it states that you are required to notify (and typically under ERISA as long as they get that summary plan document out there, they've nsatisfied their notification requirements) ... What might work is getting an attorney to write a cease and desist letter

NPVAdvisor :

once per year, and 30 days before any changes is their requirement

NPVAdvisor :

Your best case here will a lawsuit (or threat thereof) for something called "Detrimental Reliance," a tort action

NPVAdvisor :

You relied on their instructions, and advice that covld haverage was no available ... further that an "REASONABLE PERSON" would have expected no charges or tax liability when coverage was denied

NPVAdvisor :

Use of the terms "reasonable person," detrimental reliance," and "I am not a litigeous person but ..." are phrases/terms that will have special meaning to their LEGAL dept.

NPVAdvisor :

could be useful in a conversation with (or letter to) them

NPVAdvisor :

Let me see if I can find something around reporting them to DOL

Customer:

Yes, it does say in the benefits book that we are required to notify them of a change in status. However, it also says that Domestic Partners will not be approved without formal application and document submission. After speaking with the benefits rep on the phone about my documents, I was told my partner would not be approved.

Customer:

When I noticed the tax and called the up about, they said "oh sometimes we approve it anyway"

NPVAdvisor :

Honestly I don't think they have a leg to stand on ..... do you have a way to see if there's an EFFECTIVE date on your partner's conerage?

Customer:

If approved it would have been effective Jan 1 2013.

Customer:

We tried to use card in ER that day but were unable to. Job contacted me Jan 8th to say DP not eligible for benefits until they get the application and documents...which never happened.

NPVAdvisor :

right... I'm just wondering if you can (without showing your hand) find something that would document that they never really added... or only did so after talking to you

Customer:

What would I be looking for?

NPVAdvisor :

is there an online portal where you can check benefits ... or there also have been SOME documentation of coverage such a group coverage certificate ... also ...

NPVAdvisor :

can you go back and look at the old paystubs just to be sure it's been there all along?

NPVAdvisor :

and finall, if you have no coverage at all, why would it be there now?

Customer:

The tax has been on paystubs since Jan and they also took money for the benefits in January. In Feb I became ineligible for benefits and they stopped taking fee for health insurance but the the tax is still there

Customer:

The benefits people are saying they needed separate notification, aside from talking to me about my ending benefits, that DP would no longer be eligible for benefits

NPVAdvisor :

rediculous ... I thin a strongly worded letter from an ERISA attorney might be worth a couple of hundred bucks

NPVAdvisor :

Also, see this:

NPVAdvisor :

especially under:



  • Failing to operate the plan prudently and for the exclusive benefit of participants;

Customer:

So I shouldnt need to sue them. The threat of a suit could be enough to get them to fix this?

NPVAdvisor :

I would certainly start there ... again, if you can find an attorney (should be no problem in PA, who is an ERISA attorney) that person can write an intent to file letter or sometimes called a cease and desist letter (with the rationale that your were misled and that they failed to communicate in good faith)

NPVAdvisor :

And the threat of filing a complaint through the ERISA enforcement division carries a lot of risk for them as well

NPVAdvisor :

If you believe that this may be based on discrimination, you can also threaten them with an employment discrimination suit, (Title VII of the civil rights act)

Customer:

Ok, thanks for replying. Your answer provided a lot of insight and direction. I appreciate it :)

NPVAdvisor :

level one - you ... heightened urgency - attorney writes a cease and desist letter ... higher level, legal action

Customer:

so, it's going to be level two because theyre not responding to me

NPVAdvisor :

You're very welcome ... be proactive on this one... they most certainly have not acted in "good faith."

NPVAdvisor :

That's gut as well

NPVAdvisor :

[my] intuition as well

Customer:

Yeah, I'm glad I finally saw the tax. I hope with some pushing theyll take care of it

NPVAdvisor :

yes, might be stating the obvious, but talk to "different" people, don't stop with the first person you deal with ... but again that letter carries a lot of weight

NPVAdvisor :

Sorry you can rate now....thank you so much!

Customer:

Should I talk to someone outside of the benefits office?

NPVAdvisor :

If you know someone that you can trust, you might try going outside first ... good thought, the higher the better

Customer:

So, should future conversations about it just be through a lawyer?

Customer:

instead of dealing directly with the company who is intent to do nothing

NPVAdvisor :

yes, I WOULD tend to agree that this is how you get thing done these days

Customer:

alrighty. thanks so much for your help. :)

NPVAdvisor :

YW - go get 'em and good luck

NPVAdvisor :

feel free to bookmark and come back for reference if need be

Customer:

thank you!

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3901
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.

Thanks Maria,

Let me know if I can help further.

And if you'd like to ask for me again, just say "For Lane only," at the beginning of your next question.

Thanks again,
Lane

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