MARYMM

Could those invoices be paid again from the forfeitures and then you could refund the original payment (from company assets) to the client

The "silent members" can read a summary and anyone who is interested in more info can click on a link to your full article. This rule is common on other boards and is quite reasonable IMHO. Another board I participate in has a 4 paragraph limit for "reprints" - enough to get the gist of most ideas across.

Just curious about why you think it may not survive. I need to write to my congresscritters about the disconnect between HSA eligiblity rules for dependents and the new coverage rules for dependents under PPACA. We only offer HDHP/HSA here . I like it, it works for me. I 've contributed the max each year and take advantage of the investment options our provider offers. And I've been fortunate to have good health - knock wood. But a single parent who covers their 24 year old kid gets bumped from a $1500 deductible to $3000 then can't use any of the money in their HSA to pay for the kid's expenses. That is a hardship for some employees.

I would discuss with ERISA counsel and/or recordkeeper but here is what the correction process appears to be: Internal Revenue Bulletin: 2008-35 September 2, 2008 Rev. Proc. 2008-50 5) Failure to implement an employee election. (a) Missed opportunity for elective deferrals. For eligible employees who filed elections to make elective deferrals under the Plan which the Plan Sponsor failed to implement on a timely basis, the Plan Sponsor must make a QNEC to the plan on behalf of the employee to replace the “missed deferral opportunity.” The missed deferral opportunity is equal to 50% of the employee’s “missed deferral.” The missed deferral is determined by multiplying the employee’s elected deferral percentage by the employee’s compensation. If the employee elected a dollar amount for an elective deferral, the missed deferral would be the specified dollar amount. The employee’s missed deferral amount is reduced further to the extent necessary to ensure that the missed deferral does not exceed applicable plan limits, including the annual deferral limit under § 402(g) for the calendar year in which the failure occurred. http://www.irs.gov/irb/2008-35_IRB/ar10.html#d0e951

The payroll service should perform the calculations - although if I were the employer, I would spot-check them. They should also prepare a draft communication to the affected employees explaining what happened and how it will be fixed (the employer 50% QNEC and match method as outlined by BG5150). They have until their tax return for 2010 is filed to fund the contributions - which the payroll sevice should be paying part of, IMO. While they are working on these items , I'd be looking for a new payroll service.

Why can't it be re-deposited to the HSA ? I just checked our provider's website and they have a Mistaken Distribution Form for participants to use in this type of situation. Here's an excerpt: <snip>I certify that the above distribution was the result of a mistake of fact and I authorize xxxHSA to redeposit the distribution as a mistaken distribution. I understand xxxHSA is not required to accept the mistaken distribution and I am responsible for any tax consequences that may result from the distribution <snip>

The employer is not allowed to accept a check for the withholding. See page 17 of Pub. 15 (2011 edition). The estimated tax payment is the only option for paying the taxes now.

Leveena- this respsonse assumes that the employer has a Sec. 125 Plan that includes the HSA contributions. We amended our Sec 125 Plan and deduct the HSA contributions pre-tax and deposit them into the HSA accounts each pay period

CT mandated overage dependent (OA Dep) coverage a couple of years ago. Based on our research at that time and what our state govt was doing with their employees (it was posted on the State Comptroller website under State Employee Benefits) and advice from counsel, we imputed taxable income for the single premium coverage cost for EACH overage dependent. This was done regardless of any change or lack thereof in contributions charged to the employee. For example, Joe Schmoe has family coverage for wife and the 3 Schmoe offspring. He pays $100 per pay period for this coverage thru a Sec 125 Plan. Joe Schmoe Jr. was an OA Dependent according to Federal guidelines at the time. Our single premium rate was $400 per month. We imputed $400 of taxable income to Joe each month for the value of the coverage for Joe Jr. Joe Sr's Sec 125 Plan contributions did not change. If he had 2 OA Dep kids, we imputed $800 of taxable income each month. As you can imagine, our employees were quite happy with "Obamacare" when we told them we no longer had to tax them (Federal and State since CT follows Federal) on that coverage. Another option that we discussed was to use the single COBRA premium as the basis for the imputed income since it could be argued that is Fair Market Value - what the coverage would have cost each OA dependent if they had to elect it thru COBRA.

After PPACA was passed I found these two analyses that discussed HSA's for adult dependents. Both take the position that their expenses cannot be reimbursed from their parent's HSA. I believe that they can open and fund their own HSA though. I don't see anything in my file to back that up, however. http://www.seyfarth.com/index.cfm/fuseacti...ultChildren.cfm http://www.buckconsultants.com/buckconsult...-Reform-Law.pdf

Many, if not most, payroll systems impute this income every pay period. If we waited until year end we would be unable to withhold FICA/Medicare taxes on some of this income (terminated employees) and have to pay the full 15.3%

A chart like this will be a very useful tool, IMO. PA and NJ do not follow Federal tax code for 401(k) and Sec 125 respectively - those are 2 state you might want to look at. Other areas where there will be discrepancies are those states who have different age limits for coverage. IIRC, NY mandates coverage to age 30. (Don't quote me on that - I am rusty. The last time I was reading up on this topic was almost 6 months ago, and I was only concerned about CT. ) edited to add: A google search turned up this chart on the National Conf of State Legislatures website. It lists the maximum age for mandated coverage by state but hasn't been updated since Aug 2009 http://www.ncsl.org/default.aspx?tabid=14497

A chart like this will be a very useful tool, IMO. PA and NJ do not follow Federal tax code for 401(k) and Sec 125 respectively - those are 2 state you might want to look at. Other areas where there will be discrepancies are those states who have different age limits for coverage. IIRC, NY mandates coverage to age 30. (Don't quote me on that - I am rusty. The last time I was reading up on this topic was almost 6 months ago, and I was only concerned about CT. )

In our case, the employer is imposing the higher contribution amount on the employee. ER pays about 80% , EE pays about 20%. of medical insurance premiums. If the Health Risk assessment is not done, the ee pays more - a flat $20 per pay check. For ease of implementation, we called it a surcharge and assess it separately in payroll. Once the ee completes the assessment, we remove that deduction.

What about a "surcharge" for employees who don't submit to a Health Risk Assessment requirement by the employer? They're still electing the same medical coverage, but are paying a higher premium. If they complete the requirement during the plan year, their premium is reduced. Are you saying that we can't do this thru Sec 125 at all ? Or that we have to have 2 sets of employee contribution tables ? Thanks for your comments on this topic. Cites would be appreciated.

Why is a surcharge not eligible under Sec 125 ?

It is my understanding that the "Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010" reversed expected cuts in Medicare payments. Have I missed something? I think it was a temporary reprieve thru this November

It would depend on the contract you have with the carriers. I think most carriers would not allow it unless evidence of insurability is provided.

Its the fair market value of the coverage that is taxable, not the incremental cost. As I understand it, the IRS has not issued guidance on how to value it. We had to deal with this issue last year when we had to impute income for covering overage dependents. Some suggestions rec'd from our counsel were to use the single premium or the single COBRA premium.

For Federal tax purposes, the fair market value of the coverage provided to the DP would be taxable income for the employee. State taxes would depend on state tax laws.

Thanks all for the responses. The Group is Fully Insured. I thought of the idea of establishing that employees with "x" amount of years receive dependent coverage s a perk. The problem is, 40% or so of their employees have only been with the company for two years or less. They've actually been growing in this economy! That means theoretically that they could only "protect" themselves from the additional dependent coverage costs for a period of two years given that they do not want to take away anyones existing benefits, and they want a permanent solution. See my predicament? Thanks again for the response! Why can't they just change their policy so that anyone hired after say 1/1/11 has to contribute the cost of the premium for dependent coverage? We did that many years ago at the law firm I where I worked at the time (which had an ERISA practice) and that worked well for us. We continued to pay 100% of the ee coverage and ee's paid 25% - 75% of dependent coverage depending on their employment class (staff or associate) and FT/PT status We also specified that any current employee who did not have benefits with us who later wanted to enroll during open enrollment or due to a QA was also subject to this new policy.

IRS Notice 10-38 has been published and confirms that benefits for currently covered dependents to age 26 are not taxable as of 3/30/10 http://www.irs.gov/newsroom/article/0,,id=222193,00.html We're still trying to figure out if this applies to HSA funds. And we'll have to look at that age 26 - age 27 issue, too, GMK. In the meantime, our employees are very happy with their increased take home pay.

We got a different version. The IRS says we never filed 945 for 2008. We don't do any 945 filings. Our recordkeepers handle all withholdings and filings for our QP's.

Thanks to the daily BenefitsLink H&W Newsletters I've found several advisories published by law firms that confirm that imputing taxable income on employees who cover overage dependents is no longer necessary effective as of 4/1/10. We forwarded the 1st one I found to our lawyers who agreed with that interpretation and we've stopped inputing income. They're still looking into what effect, if any, this has on employees using HSA funds for expenses incurred by overage dependents.

I think that refers to having to cover the "adult dependents" on the health insurance plan. There appears to be more to this, though. This is from the Journal of Accountancy's website : Adult Dependent The Reconciliation Act changes the definition of “dependent” for purposes of IRC § 105(b) (excluding from income amounts received under a health insurance plan) to include amounts expended for the medical care of any child of the taxpayer who has not yet reached age 27. The same change is made in section 162(l)(1) for purposes of the self-employed health insurance deduction, in section 501©(9) for purposes of benefits provided to members of a VEBA, and in section 401(h) for benefits for retirees.