Chaz

As I mentioned in my initial post, the funds were contributed on a pre-tax basis through the employer's cafeteria plan. I agree that, once amounts are deposited in a participant's HSA account, an employer cannot get them back. But, the amounts seemingly did not "go to the HSA" as there was no HSA account to go to. How can funds go into a closed account? The employer is investigating where the money is but, at the end of the day, if the employee did indeed purposively close his account and does not want to open a new one, what should the employer do once it tracks down the funds?

I understand everything that you are saying but the employer did not receive notification until a month or so after the account was closed. There are multiple payroll periods of deductions designated for this employees HSA that are somewhere (the employer says "limbo" but I say they are in someone's account, whether it be in the payroll provider's or the HSA bank's general account) and a home needs to be found for those amounts. From my understanding, the HSA account was definitely closed and liquidated at the employee's request. The employer did not get any notice about this until the employee mentioned it recently. The amounts were deducted under a cafeteria plan and it is true that the employee did not follow the employer's election change procedure. But was is the employer to do? There is no where to deposit the deducted amounts. Are you saying that the employer can simply keep the funds (and any other amounts contributed before the employee follows the correct procedure)? That doesn't sit right with me. The only possibility that I can think of is to treat the employee's request to close and liquidate the account as constructively requesting that the employer cease the pre-tax deductions. That would mean that the subsequent payroll deductions were "prospective" from the date of the election change. The employer would then just add those amounts into the employee's pay in an upcoming payroll cycle, Any other thoughts?

During open enrollment, an employee elected to make HSA contributions on a pre-tax basis through payroll deductions under the employer's cafeteria plan. A month or so ago (i.e., mid-year), the employee requested that her HSA provider liquidate and close her HSA account. The employee never requested that her employer stop the HSA deductions from her pay. The employee remains employed and covered by the qualifying HDHP. The employer has just become aware of this situation. A few payroll periods have passed since the employee closed her HSA account and the employer deducted the elected amount from her pay. (The employer is not sure where the amounts deducted actually are now.) Any idea what the employer should do now with respect to these amounts? Should the employer treat the closure of the account as an election to stop payroll deductions and refund her the withheld amounts even though she did not comply with the plan's election change procedure? Thanks!

It is possible that you can treat the plan as covering former employees of the seller (i.e., a "retiree" plan) rather than as employees of the buyer. In that case, it may not be a MEWA, There are pitfalls to this approach. Talk with ERISA counsel.

I can't speak to the applicability of state insurance laws and you should definitely get advice from counsel but it appears from your facts that the Key Employee is not receiving a benefit from the cafeteria plan and therefore is not a "participant." You may be able to exclude the participant from the testing.

If this is other than a hypothetical question, you should consult with counsel. There are a lot a fact-specific issues involved that don't lend themselves to a generalized answer. As jsb mentions, though, the place to start is to review the plan document and SPD as well as any open enrollment information that the employer distributes and collects from employees.

Well, the 800-318-2596 number for the healthcare.gov website is not referred to anywhere else in the model notice. I think it needs to be in there somewhere. I guess the best place to include the number would be at the end of the "For more information" section ("For more information about health insurance options available through the Health Insurance Marketplace, and to locate an assister in your area who you can talk to about the different options, visit www.HealthCare.gov [OR CALL 800-318-2596.]" Seems to be a reasonable solution but it is astounding to me that the DOL would issue such a sloppy notice.

This is the first sentence of the text of the model COBRA Election Notice as revised by the DOL to incorporate information about the availability of coverage in the Marketplace. I am copying it verbatim from the DOL website: This notice has important information about your right to continue your health care coverage in the [enter name of group health plan] (the Plan), as well as other health coverage options that may be available to you, including coverage through the Health Insurance Marketplace at www.HealthCare.gov or call 1-800-318-2596. (The underscore/underlined text after "call" is as in the original.) It seems to me as if there are words missing after the word "Marketplace" because the sentence does not make grammatical sense as written (although the intent of the sentence is obvious). I have not seen any discussion of this. Has anyone encountered this? If so, what, if any changes did you make to this language when customizing it for actual use? Thanks.

All of our opinions, interpretations, and analyses of this issue are ultimately beside the point. Is it not controvertible that the DOL/HHS/Treasury Department each takes the view that these arrangements are not permissible? In my opinion, to advise clients to take a contrary position without pointing out the significant risks of doing so is, or at least borders on, malpractice.

As a technical matter, you are correct that that there is nothing that states that an employer "may not" reimburse individual health policies. There are simply significant penalties if an employer does so. The same thing applies to most any other requirement under ERISA or the Code. For example, an employer can certainly decline to offer its employees COBRA continuation coverage. If it doesn't offer it, however, it is subject to penalties under ERISA and the Code. I suspect that you are familiar with most if not all of the guidance out there so I will decline to recite the various Notices, etc. that have repeated stated the Departments' position. Is it your position that an employer can institute one of these programs and successfully overcome the inevitable DOL/HHS/Treasury Department challenge in court?

I would hesitate in relying on @zbenefits's position. One should review, among other things, DOL ACA FAQ XXII (emphasis added): Q1: My employer offers employees cash to reimburse the purchase of an individual market policy. Does this arrangement comply with the market reforms? No. If the employer uses an arrangement that provides cash reimbursement for the purchase of an individual market policy, the employer's payment arrangement is part of a plan, fund, or other arrangement established or maintained for the purpose of providing medical care to employees, without regard to whether the employer treats the money as pre-tax or post-tax to the employee. Therefore, the arrangement is group health plan coverage within the meaning of Code section 9832(a), Employee Retirement Income Security Act (ERISA) section 733(a) and PHS Act section 2791(a), and is subject to the market reform provisions of the Affordable Care Act applicable to group health plans. Such employer health care arrangements cannot be integrated with individual market policies to satisfy the market reforms and, therefore, will violate PHS Act sections 2711 and 2713, among other provisions, which can trigger penalties such as excise taxes under section 4980D of the Code. Under the Departments' prior published guidance, the cash arrangement fails to comply with the market reforms because the cash payment cannot be integrated with an individual market policy.

Most of my clients avoid the administrative burden altogether by not giving any employees a choice. These employers generally provide that all participants are taxed on LTD premiums so that any benefits are paid out without being taxed. The reason is likely not to avoid any administrative issues but instead they are just being paternalistic. I would not be so sure that the scenario you envision would pass the benefits portion of the cafeteria plan nondiscrimination tests, particularly if HCEs can elect to receive a benefit pre-tax while the hoi polloi have to receive it post-tax. I have not looked at this, however, and it may not be the case, but it certainly is not a slam dunk. In any event, Leevena raises a good point that the education would not be that onerous. It probably would take just a paragraph or so in the enrollment materials/SPD to adequately explain the choice.

Speak to ERISA counsel on this. These types of document requests and appeals are increasing in number. Perhaps sending the requested documents to the employee him or herself is appropriate. You also need to coordinate with the claims administrator to the extent a valid appeal is included.

You'll definitely want to speak to counsel on this but here are some general thoughts from an EB perspective: 1-ERISA does not prohibit an employer from setting different eligibility requirements for different employees, even if the employees work the same hours. The plan documentation just needs to reflect the proper eligibility requirements. 2-As mentioned above, an insurer may object to this arrangement. This is less likely if the plan actually reflects the eligibility requirements. Similarly, if the plan is self-insured, the employer will likely want to run this design by its stop-loss carrier, if applicable. 3-The employer needs to consider the cafeteria plan and, if self-insured, the 105(h) nondiscrimination tests, in the unlikely event that the 20-hour employees with coverage are HCEs. If the plan is fully insured, the new ACA fully insured nondiscrimination tests (not yet in effect) may limit the ability to have this arrangement. 4-Under HIPAA, an individual cannot be denied eligibility for benefits or charged more for coverage because of a health factor. I presume that is not the basis that the employer will use to determine who is eligible and who is not. 5-The employer will want to run this design by an employment attorney to make it does not run afoul of any employment laws.

I would hesitate in adopting this firm's documents without having an attorney look them over. Church plans are different from plans of other nonprofits. ERISA will not apply and the church would need to consider applicable state law. Also, an HRA is a self-insured plan and the church will need to comply with HIPAA's privacy and securities rules at least to a certain extent with the attendant compliance costs.

Lots of good stuff in this article. Thanks!

This is most definitely a hypothetical which I created to pose a particularly extreme example.

Is the choice of a network by a plan sponsor of a self-insured plan a decision that is subject to ERISA's fiduciary requirements? For example and theoretically, can a employer that has participants primarily living in Florida choose a TPA whose network contains primarily Idaho providers? Or is this a settlor decision?

[Copied and pasted from ABA preemption materials; Google is your friend]: State law claims of employment discrimination may not be preempted if they have a basis independent of the plan in question. Even if they directly implicate plans, such claims may not be preempted if the portion of the state statute at issue tracks a federal employment discrimination statute. Compare Shaw v. Delta Air Lines, 463 U.S. 85, 97 (1983) (ERISA preempts a state law barring pregnancy discrimination because Title VII had not yet been amended to bar such discrimination; state laws play a "significant role" in the enforcement of Title VII and stated that "to the extent that the Human Rights Law provides a means of enforcing Title VII's commands," ERISA preemption would impair Title VII. Consequently, such state laws would not be preempted because of ERISA § 514(d)) with Warner v. Ford Motor Co., 46 F.3d 531 (6th Cir. 1995) (state age discrimination law not preempted); Clark v. Coats & Clark, Inc., 865 F.2d 1237 (11th Cir. 1989) (same); Le v. Applied Biosystems, 886 F.Supp. 717 (N.D.Cal. 1995) (state disability discrimination claim not preempted).

For most employers with 20 or more employees, an HDHP is generally an ERISA health plan subject to COBRA, regardless of whether the employer makes HSA contributions. An HDHP is just a special type of health plan. If the employer has fewer than 20 employees or is otherwise exempt from COBRA, HSA contributions will not change that. I'm not sure how you are connecting HSA contributions to a plan being subject to COBRA.

The employer should speak with counsel. Most likely, it can provide an opt-out as long as it applies to everyone (not just the sick and not just the ones who sign up for Exchange coverage or, god forbid, Medicare) and its cafeteria plan is properly drafted to permit it.. An employer can likely require that employees show evidence of other coverage but that would be more of an employee-relations issue (i.e., the employer doesn't want its employees to go "bare") than a legal one.

Although I do not know the specific circumstances, I would hesitate in providing a "refund". You should consult a tax/benefits attorney before proceeding.

Given the rash of out-of-network providers claiming that self-insured plans are inappropriately calculating U&C amounts payable to these providers, I think we will see more and more anti-assignment provisions. I am advising clients to include them. I'm not sure whether a court has specifically determined yet whether they are enforceable (I haven't looked at the cases that Mr. Simmons cites) but your analysis above seems right to me.

This would have to be run through a cafeteria plan. I have not looked at it before but have you considered whether this design would run afoul of the cafeteria plan nondiscrimination tests?

More facts are needed but your example seems to meet the definition of a MEWA.