leevena

Yes, the carrier can do this. The law was changed some 20 years ago or so (1984 I think) when the feds were looking for ways to decrease their costs. The carrier is not "electing" to do this, rather, the govt has required it to be done this way. As for you to research, you could go to the federal regs and find it, but as I said earlier, this has been the way for years. As with other changes that occur, I usually keep the materials for a year or so and then toss or forget once we get accustom to it. I also agree with what Kirk said. You may want to do some research into this and find out if it is a self-funded plan on it's own, or if you are part of some mewa. Either way, I believe you will still be in the same situation. Your employee can still enroll in part b, and you should encourage him/her to do so.

No. Deductibility is done for dollars spent, not placed into any type of trust or account. I have a few groups in HRA's and all of them are paying claims as they come due from their company accounts. There is no legal requirement that a trust be set-up or that a group "pre-fund" an account. Some administrators may require some kind of a pre-funding though. Depending on the group, and it's particular issues, it may be worthwhile for the group to pre-fund dollars into the HRA account. A group may keep a miniumum of 1 months expected claims in the account to ease it's administrative function.

Yes, the HRA does appear to be a better alternative. The employer has much more control over the expense side. The employer decides how many dollars to allocate to each enrollee and when they payment is made. For example, the employer could fund $1200 per year, and make it available on a monthly basis, $100 per month. If an employee incurrs a $500 expense in the first month and the fund has only $100, the employee will be reimbursed $100 per month for the next 4 months. Additionally, the employer can decide what expenses are covered. There are 3 options, the first being pay everything that the IRS deems as eligible. The second is to pay only expenses the underlying healthplan deems eligible, and the third is to customize as the employer see fit. Deduction is taken only if the dollars are paid out. For example, if the employer has 20 employees and promises $1000 per year, the total exposure is $20,000. If the employeer pays out $12,000 in claims, then the employer can deduct the $12,000 only. The employer does not have to pre-fund the account either. The employer could fund the account when the claim is presented for payment. Yes, no requirement for a HDHP is needed. However, when you analyze the plans available, it may make sense to use a HDHP.

The HRA rules are fairly clear about payout of funds for ex-enrollees. The funds cannot be paid out. An HRA can allow a retiree to continue with the fund if the plan was set-up for this and is reflected in the plan documents.

The concern about misuse is valid, but there is little the employer can do. Once the HSA dollars are allocated to the employee (weekly, monthly, etc.) the employer has no say in their use. The HSA dollars must be available to the individuals without proof of the claims legitimacy. Based on your comments about the employer being concerned about his significant contributions to the HSA, it seems to me that an HRA would have been the better route to go with this group. I wonder what would happen, legally, if the TPA denied a claim. If a "watchdog" TPA denied my claim, I would be all over it with a lawsuit, naming both the TPA and the employer.

Don't know why someone would want to pay a TPA for work not really needed. When putting together the plan, the employer needs a HDHP and a banking function. Most banks with HSA accounts will provide a check or debit card, and possibly interest bearing accounts. There is no legal requirement that the expenses be "adjudicated" by anyone, except for the enrolled individual who spends them. As a consequence, the employer is not responsible. Could this TPA be talking about an HRA? With an HRA it is advisable to get an administrator to do this work.

I do not know the definitive answer, but have a comments that might help. I am in California and the state does not recognize the HRA side-fund as eligible for state COBRA, which means that the employee can continue their underlying health plan, but not the side-fund. In fact, the fed govt does not even want the ex-employee to have the side fund. The side-fund is an employer owned, self-funded pool of money. That being said I would assume that the cert from the underlying plan should be sufficient, however, I cannot find anything definitive about it.

Lori...sorry, I agree with the dep care. I was thinking about medical.

Lori, I don't believe I agree with you on this one. Why would an employee care if the entire amount was in his/her account. If the employee elects to have 6K sheltered, and has $500 in the account in January, then incurs the expense in Feb, the employer needs to fund the difference. This puts some risk on the employer. Just some thoughts.

I agree with papogi. What strikes me is why someone would want to do this. It is not in the best interest of the employee to have all of the dollars subtracted from their pay upfront. What do the other employees have to say about this? If I were asked to have all of my deductions made in the first 5 months, I would not agree. If you allow only his/her deductions done in 5 months and the other employees over a 12 month period you open yourself to mistakes. Good luck with this.

I agree that the inmate may very well be eligible. At first I thought the same thing Kirk did (are you really concerned about him taking cobra) but then I realized he might have dependents that can continue.

Doubt very much if the IRS would look kindly on someone taking two tax deductions on the same expense.

The answer depends on how the HRA is structured. An HRA is a self-funded account owned and maintained by the employer. The employee can submit expenses for reimbursement. The key is what expenses are defined as eligible. The employer could define expenses as they wish. One option is for the employer to recognize as eligible the expenses the IRS recoginzies as eligible. A second option is to match the carriers definition of eligible. The third is to define a smaller sub-set of expenses. You should obtain a copy of the eligible expenses and review that for your answer. Hope this helps.

GBurns, I don't pretend to be an expert. I was just outlining what I saw happen to a few of them in San Diego where I live. I never said the dollars reverted to the employers...rather to the plan.

I was involved in a Davis-Bacon group for 3 years recently, as the carrier rep. It is ok for the DB dollars to be taken and placed into the plan as you described. Any extra monies left, such as in your situation, the dollars are "swept" out of that persons account and revert back to the benefit of the trust. I cannot comment about the DOL audit, however, the two administrators for the two plans I was involved in were both competent and had a large numbrer of plans being administered. So, long story short, I would be comfortable with the withholding of the dollars. Hope this helps.

Sorry, but you need to file it. IRS requires it for 100+ groups.

Larry M...sorry, I do not. I am a broker and learned about it as a course of my job. I received the notice from a variety of sources, but did not keep it. If you need to see something in writing, try looking at Aetna HSA group products. They have embedded/corridor plans in their portfolio of products. Hope this helps.

I am sorry, but I need to disagree somewhat. There are now two types of deductibles allowed under the law. The original MSA law required that any enrolled subscriber who had any depdendent coverage (ee+sp, or ee+ch, or fam) must meet the "family" deductible. This was required of the HSA plans when they first came out. About a year ago (don't hold me to the exact date) carriers were allowed to offer "corridor deductibles" which would offer an alternative. In this situation, the one of the members of the family could reach the INDIVIDUAL deductible and then go into the next level of benefits. When deciding on which plan you may want to implement, it should be a question you ask of the carrier. My guess is that not many people with dependent coverage will have satisfied the deductible, but it might be your luck that the 1 person in your company that does reach that is the President of you company. Hope this helps.

I agree with GBurns, this is nothing new, in fact many self-funded or experience-rated groups used this strategy with HMO's as the dumping ground for high-risk. The predictive model is relatively new, but should be fairly dependable. I would not be so concerned about signing a confidentiality agreement if that agreement allows you to see what the details of the program are. Good luck.

Oops. I need to amend my earlier answer and apologize. I read the original question as asking about a Health Savings Account, not a FSA. Sorry.

Nothing is impossible, but the solution may be expensive, time consuming, and cause some confusion. I do not know the specifics about your group, the carrier contracts, or the laws that you operate within, but let me make some comments that might help. The first is that I am assuming that you have a Cafeteria Plan, since this is in the Cafeteria Plan section of the board. The second is I doubt that the carrier would allow enrollment changes after 2 months. Third is what would you do if a current HSA enrollee had decided to contribute the full amount towards the HSA and now has a $500 contribution from the employer available. One sure way to do this is to cancel everything (Health carrier, section 125 plan) you have and re-start. You might be able to make the change without this drastic remedy, but I do not know enough to advise you. So I would ask the employer why after less than 2 months into the plan year he/she is considering a change like this. Hope this helps.

The law does allow for use of PHI in situations where it is needed. For example, if you are in possession of PHI becuase you conducted an enrollment and it is part of your job, you are ok. If however, you had that information and did not protect it properly, and someone else who had no reason to view the information came into contact with it, then you have a problem.

GBurns...You might want to consider some tact and consideration for others. I have been a member for a few months now and have noticed that for the most part your responses are usually good and provide some good thoughts for people to consider. But the tone you often take can be offensive, to say the least. Just like Oriecat, I also took your comments to mean that S Craig was their health agent. And for you to ask "I wondered why an employer would want to do this especially a small employer" illustrates to me that you must be clueless about that market and the needs of such groups. Sorry to have to post this, but hey, I'am Jersey born and raised.

Thanks Kirk. I just assumed that I could not find anything about this, so it's nice to know that others found nothing. Again, my point/suggestion would be to enroll the ex-employee as a "EE+SP" unit even though they initially applied for a "family" unit. I go back to the intent of the law, which was to make coverage available to ex-employees. While an ex-employee cannot improve the coverage, i.e., go from single to family, they can decrease the coverage. It just seems to me that if you deny enrollment, you are going against the intent of the law. Why get into a battle over this? Just my thoughts.

The person electing COBRA is entitled to continue coverage for the same dependents that were covered under the group plan, and if they wanted to cover less dependents, they can also do that. I have not had a situation like yours, but I have to believe that you would be required to enroll the ee/sp under COBRA, even thought they elected "family" earlier. The term "inception date of cobra" is confusing. What the ex-employee may be saying is that they want their coverage backdated to the their qualifying date. You are correct though about your idea of effective date being tied to receipt of the premium. However, the effective date will go backdated, not the date the administrator receives the premium check. Hope this helps.