Chaz

What if, for example, there are three family members with family COBRA coverage and are paying one premium for all family members? If they want to drop the child's coverage mid year can the COBRA premium be unilaterally reduced to the level for Employee + Spouse?

Thanks for your thoughts. One thing, though: Wouldn't a business associate typically be an independent contractor, not an agent? If so, wouldn't this apply to when the covered entity's notification obligation starts? "In contrast, if the business associate is an independent contractor of the covered entity (i.e., not an agent), then the covered entity must provide notification based on the time the business associate notifies the covered entity of the breach." (I'll admit to being generally unfamiliar with the tenets of the "federal common law of agency," which is mentioned in the regs.)

Under HIPAA, a business associate must notify a covered entity health plan no later than 60 days from the time it discovered a breach of unsecured protected health information. If a business associate has, say, thousands of covered entity clients and discovers that only a few participants of only a few of the covered entity health plans are affected by a breach (and the business associate does not know which ones until later), when does that 60-day window start? Does it start when it determines which specific covered entities are affected? Or does it start when it discovered the breach (which would require that it notify all of its clients, most of which would ultimately be unaffected)? I could not find any HHS guidance on point. Thanks.

Section 125 permits election changes (other than in the case of certain HIPAA special enrollment events), including upon divorce, to be effective only on a prospective basis. The Code permits an employee to pay for coverage on a pre-tax basis only for certain specified dependents. An ex-spouse is not not one of these specified dependents. ERISA requires plan fiduciaries to administer a health plan in accordance with its terms. Virtually all plans provide that ex-spouses are not eligible for coverage. If an employee notifies the employer on December 1 than he or she was divorced from his or her covered spouse on November 1 (and provides sufficient evidence of such), when can/must the employer remove the spouse from coverage? (Leave COBRA out of the analysis.) If the employer removes the spouse prospectively from December 1, the employer is seemingly complying with Code Section 125 but has it violated its fiduciary obligations under ERISA because it covered the ex-spouse in contradiction with the terms of the plan and must the employee impute income for the payrolls in November in which the employee paid for the ex-spouse's coverage? If the employer removes the spouse retroactively from coverage back to November 1, will it be violating the Section 125 election change rules but be in compliance with ERISA and the other sections of the Code? I know that the ACA's rescission rules generally prohibit retroactively terminating coverage except in the case of fraud and intentional misrepresentation. But that means, doesn't it, that the ACA does contemplate rescissions under certain circumstances while the cafeteria plan rules do not. To me, this is an inherent contradiction between these various laws. I'm sure others have recognized this but I have not seen much discussion of it. Any thoughts are appreciated.

Okay that makes sense but what if the plan design is to pay 100% of the cost of coverage for HCPs and 75% for non-HCPs regardless of the tier of coverage? What would the tax consequences be to those HCPs in that scenario?

For HCEs for whom the employer pays 100% of the cost of coverage, wouldn't that be $0 in extra gross income?

What would the consequences be to the highly compensated participants in the event that the IRS determined that this plan design was "too creative"?

If the employer outsources the fiduciary responsibility to the TPA as a general matter, making this exception (even once) may make it more likely that, if things go south, that the TPA will claim that the ultimate fiduciary responsibility rests with the employer (in this but also in other future circumstances) and the TPA is merely performing ministerial acts. I imagine that the employer can paper this over to minimize this risk but it is still a consideration.

The CAA requires, among other things, that a group health plan attest, by December 31, 2023, that it "will not enter into an agreement, and has not, subsequent to December 27, 2020, entered into an agreement" with a service provider that contains a gag clause. A covered health plan entered into a master services agreement with a carrier (say, Blue Cross) in 2010 that contains an offending gag clause. The master agreement has not been amended since originally executed, except that the financial terms of the agreement change each year (including in 2021, 2022, and 2023), subject to the parties' agreement on such revised terms. The parties have agreed each year to the subsequently changed financial terms Two questions: 1-Do the revised financial terms mean that the services agreement has been amended such that the plan has entered into an agreement after December 27, 2020, so that the plan cannot make the attestation. Or can the plan make the attestation because the original agreement predates the effective date of the gag rule requirement? 2-If the answer to the first question is that the plan cannot make the attestation due to the changes in financial terms, can an amendment retroactively removing the offending clause even fix the situation? (Because the plan has, in effect, "entered in an agreement" that contains a gag clause and amending the agreement, even retroactively, doesn't really change that.) Any thoughts are appreciated. Thanks!

Can a pre-paid legal services plan that an employer makes available to employees fit into the DOL safe harbor for voluntary plans and thus not be subject to ERISA assuming all the requirements of the safe harbor are satisfied?

I advise clients to permit changes in these sort of cases. I believe (off the top of my head, so I might be wrong) that the regs specifically permit an election change when a child reaches age 13 and is no longer a qualified individual. I think a parent would be even more aware of that circumstance.

Employee (in Florida) did not enroll children in employer plan because they were enrolled in Medicaid. Employee lost Medicaid coverage for the children due to income level but the children are instead eligible for the state's "Medically Needy" program, which basically means that Medicaid will kick in once a (rather large) deductible is satisfied. Does this constitute a "loss of Medicaid coverage" giving rise to a HIPAA special enrollment event? Thanks!

During open enrollment, an (childless) employee elects HDHP coverage and therefore (implicitly) to receive the employer's HSA "seed" contribution. Unfortunately, the employee also intended to enroll in the general purpose health FSA but instead enrolled in the dependent care FSA. The employer's systems obviously would not catch this error. Well into the year (the employer's cafeteria plan does not currently provide for a time limit of providing notification) and after the employer HSA "seed" contribution was made, the employee notices the mistake and notifies the employer. Pursuant to IRS guidance, the employer corrects the mistake and converts all of the year's prior and subsequent FSA amounts to the health FSA. The change would certainly make all HSA contributions, including the "seed" amounts, excess contributions. The employee can avoid the tax penalty if he or she takes a timely curative distribution. If the employee does so, the effect would be that he or she would get addition compensation from the employer but only as a result of the employee's mistake. Under these circumstances, can the employer ask the HSA custodian to return the "seed" contribution to it? Under the HSA regulations, there are only limited circumstances when this can be done, most notably when the employer was never HSA-eligible. Here, the conversion means that in effect the employee was "never" HSA-eligible but it was solely as a result of a change made mid-year. Any thoughts are appreciated.

Thanks for the very quick answer. I think your analysis makes sense.

Hypothetical scenario: Employee properly elects to contribute $1,200 ($100 per month) to to her dependent care reimbursement plan (DCAP) account for 2023. Employee incurs $400 of qualified expenses in January and February of which she obtains reimbursement of $200 (because that's all she had contributed at that time). On March 1, 2023, she goes on leave (FMLA or non-FMLA leave; I don't think it matters) and elects to cease DCAP contributions at that time. On July 1, 2023, she returns from leave and elects to restart the DCAP. Can she use the $200 that she contributed in January and February (but was unable to use then) to reimburse expenses incurred in July through the end of the year or is that $200 forfeited? The cafeteria plan regulations discuss this for health FSA contributions (yes, she would be able to) but I have not been able to find anything discussing DCAP contributions. Any help or thoughts is appreciated.

I'm not sure what assets or liabilities that a Section 125 Plan would have. All a section 125 plan does is provide participants with the ability to pay their share of the cost of coverage for certain benefits on a pre-tax basis.

Hypothetical: Employer A's cafeteria plan provides for immediate entry (i.e., no waiting period) into plan. Employer A is acquiring a new company, Seller, whose cafeteria plan provides for a 60-day waiting period. The vast majority of highly compensated employees are employed by Employer A. For a number of reasons, Employer A wants to keep this eligibility structure for a while, say, six months. Assume that Employer A is taking the conservative approach that this violates the eligibility portion of the cafeteria plan nondiscrimination tests. (I recognize that there are those in this forum that take the very reasonable position that this structure would not violate these tests because it is the underlying benefit that has a waiting period, not the cafeteria plan.) My questions are two-fold: 1-What highly compensated employees would be affected (i.e., incur extra taxes) by this nondiscrimination failure? Just ones who are hired by Employer A during the six month period and who can enroll in plan without the waiting period? All highly compensated employees who elected to pay for qualified benefits on a pre-tax basis? All highly compensated employees whether or not they elected to do so? What if no employee is hired at Seller during that period? 2-For those who are affected, for what amount will they be subject to extra taxes? Is it based on their full election for the year or for only the two-month waiting period that they are not subject to? Thanks!

Can a multiemployer health & welfare fund (which, by definition is not an "employer" or an "employee organization") take advantage of the DOL voluntary plan safe harbor contained in DOL Reg. §2510.3-1(j) to avoid application of ERISA (assuming it otherwise satisfies the safe harbor requirements)?

Well, theoretically, one could employ someone who is undocumented. It is my understanding that has been known to happen. Snark aside, I have many clients who bring non-citizens into the US for a time as expat employees under work visas. These expats are paid and are able to enroll in benefits the same way as other employees. A client wondered if there were any legal restrictions on the expats contributing to an HSA (and/or have contributions made on their behalf.

Can a non-citizen/non-green card holder living and working in the US (for example, on a visa) contribute to an HSA if he or she has qualifying HDHP coverage in connection with his or her US employment and no disqualifying coverage? The Code and related IRS guidance state that eligible "individuals" can contribute without any caveat that they be citizens so it appears that non-citizens can do so but I have come across some sort-of-authoritative sources that say the opposite. Any thoughts are appreciated.

You definitely want to run this by counsel.

My two cents is that plans tend to go the route of treating the amount unsubstantiated as taxable income far too often and should be first using other correction methodologies. I must point out that if these other methodologies are unsuccessful, an employer would typically need to recognize the unsubstantiated amounts as income on a Form W-2, NOT a Form 1099. I am not aware of any IRS guidance regarding turning cards back on.

Note that if a plan sponsor is hesitant about reimbursing this or any other expense, it can always exclude it as long as the plan and SPD accurately reflect that exclusion.

Speak to benefits counsel.

What would initiate the pharmacist to add the flavorings? If it was done in the ordinary course, I think it is almost certain that the IRS would permit reimbursement. If it is done by request of the patient, that perhaps is a harder question but I still think it is reimbursable particularly if he or she could provide documentation that his or her provider recommended that they be added.