bcspace

2010 is the date of the law's enactment. I was studying the EBIA Cafeteria Plans manual I receive for help on this issue and I am referring to some interesting statements such as: "Most of these mandates do not apply to group health plans that are “excepted benefits.”71 Most health FSAs will qualify as excepted benefits; beginning in 2014, health FSAs generally must qualify as excepted benefits in order to comply with health care reform.72 See subsection K for the requirements that must be met for health FSAs to qualify as excepted benefits. In addition, health care reform includes a rule for “grandfathered health plans,” under which some of these mandates do not apply to certain plans that were in existence on the law’s date of enactment (March 23, 2010).73 Note also that guidance is still needed on the application of some aspects of health care reform (e.g., automatic enrollment; see Section XVII)." "Caution Regarding Changes to Code. Health care reform also made changes to the Code that apply to all health FSAs, whether or not they are excepted benefits or grandfathered health plans. These changes include restrictions on over-the-counter (OTC) medicine and drug reimbursements, Form W-2 reporting of the cost of employer sponsored health coverage, a $2,500 limit (indexed for inflation) on annual salary reduction contributions to health FSAs offered under cafeteria plans, and a tax on highcost health coverage, all of which are discussed throughout this manual." "Under the health care reform law, group health plans that had at least one participant on March 23, 2010 and meet certain requirements are “grandfathered health plans” and are not subject to some of the law’s requirements. PPACA, Pub. L. No. 111-148, § 1251 (2010);Treas. Reg § 54.9815-1251T; DOL Reg § 2590.715-1251; HHS Reg. § 147.140."

Can someone discuss what may or may not be required for Cafeteria Plan to qualify as a Grandfathered Plan relative to a Health FSA within the Plan having to qualify as an Excepted Benefit; specifically the Availability Condition (requirement to offer Major Medical in addition to a Health FSA)? What more might be needed than to document that the Cafeteria Plan was in existence on March 23, 2010 and make that clear to the participants? Have come across several small employers who have offered a Cafeteria Plan for many years but cannot afford to offer Group Health and of course the Excepted Benefit requirement and Availability Condition now currently in effect. Thanks

Can an employer change HSA contribution amounts mid-year?

An employer has to offer it (and should offer it every enrollment period) but an employee does not have to elect it. Eligibility for it must not be more strict than the eligibility requirements for the Health FSA. However, I have further questions: I'm under the impression that employers with under 50 employees are exempt from this 'Availability Condition' (to offer group coverage for a Health FSA to be an 'excepted benefit') or at least not required to do so until 2015 or 2016. Is either the case? Also, could someone help me understand the Maximum Benefit Condition? Under what circumstances would someone exceed 2 times the annual salary reduction much less 1 time (except for carry over of course)?

Depends on the software. We already had a CarryOver amount field available when entering elections so we just activate it for this particular benefit.

Supposed to only be integrated with employer group health now(?) Does this apply only to employer contributions such as in employers offering it as a "stand alone" or can employees only contribute to a PRA without the employer offering group health? Not sure I quite understand DOL Tech. Rel. 2013-03 and IRS Notice 2013-54.

I understand that a Cafeteria Plan cannot offer an HRA yet there can be some meshing with say, a limited purpose HRA, and Cafeteria Plan benefits in terms of which benefit handles a claim first etc. How would one go about writing a plan document for an HRA whether or not there also a Cafeteria Plan? Can/Should it be included in the Cafeteria Plan document when there is one? Thanks

A company is considering terminating a Cafeteria Plan a the end of the year because "participation is low". Despite the obvious fact that more should be done to communicate the plan because it is such a great benefit to the ee's and employer let's say they decide to go through with it. Election frustration and pain over the new $2500 max is driving this one so there is not much I can do to alleviate the insanity at the moment. Is it as simple as amending the plan document, communicating it to the employees, making sure a 5500 is filed (if required in this case), and distributing any left over funds? What are the ramifications if their new plan year begins 1/1? They are certainly outside the 60 day guideline for communications of this type.

It turns out that the employer's insurance company is instituting a premium free month so it's not any type of employer contribution which seemed to be the communication as I understood it. It was known before the plan year that this would be the case but the month it would occur was not initially known; the total elections aren't effected. So it seems to be merely an accounting problem which I think can be easily handled.

My understanding is that if based on a percentage of salary, this could run into discrimination problems. I think the problem with this particular company is that everyone who has employer provided insurance will receive this benefit/contribution, but those who do not have such insurance will not be getting a similar contribution. Can an employer therefore, simply decide to pay for everyone's premium for one month and not similarly benefit other employees who don't have the insurance? My thinking is no and that the other participants must also get the same but applied to their non insurance benefits like Health or Dependent Care FSAs.

An employer wants to pay ee portion of employer sponsored insurance premiums for one month. Can this be considered to be a non elective employer contribution and therefore not taxable income?

In order to be considered "available" under the uniform coverage rule, reimbursements must be done at least monthly or when some reasonable minimum amount of claims have been accumulated (e.g., $50). Prop. Treas. Reg. § 1.125-5(d)(2).

I am having a similar situation now; a client company is being dissolved Oct 16th but the plan year normally ended Dec 31st. What actually happens with regards to the end of the plan year? Is it now the date of dissolution? What about employees with unused funds? For example, an employee was scheduled to incur a Medical FSA expense after the date of company dissolution. The EE's were given very short notice the company was closing down. Are they pretty much out of luck in terms of use-it or lose-it?

A company can also now adopt the Grace Period to further minimize an ee's risk. But during enrollment, making a conservative well-planned election should be stressed. Consider also the tax savings. At $800 tax free vs. $200 left in the election, it's likely the ee has at least broke even. The employer is also not without risk. An employee could elect $1000, claim it all and be fully reimbursed in the first month, and then terminate and the company may not collect the remaining contributions. Employer risk is minimized via eligibility requirements and max elections that make sense. The employer is also saving on payroll taxes which typically cancels this type of risk. In well-run and well-communicated plans, the risk for either ee or er is virtually zero. With an average of 10,000 employees per year over multiple client companies over more than 20 years, we estimate only one person lost money and we personally traveled to visit with him near the end of of the plan year to urge him to spend it. He had elected money for dental work, was in constant pain because the work was not done, yet he feared going to the dentist so much that he would rather lose a couple of grand. Not much one can do about a person like that. We have our companies save any unused employee funds to use as employer contributions. Because the unused amounts are very small (usually a few dollars or cents for the few ee's who don't reach their election; most go over), it takes many years and a large employer before enough funds accumulate to do a reasonable one-time employer contribution for one plan year. The bottom line is that FSA's are no racket, but one of the best employee benefits an employer can offer. Insurance pays out MUCH less than a dollar for every dollar put into it, AD&D is even worse. FSA's pay out perhaps $1.20 or more for every dollar put into them. No offense to insurance as it serves an important purpose, but insurance is over promoted and far more expensive as it dips down into covering less than catastrophic issues.

23 cents per mile for 2012: http://www.irs.gov/newsroom/article/0,,id=250882,00.html

Used to be. Seems that "child under 27" is more important now, hence my question.

EE is married but spouse lives apart due to work circumstances. No divorce/separation involved. Child is 14 and lives with spouse. Spouse is biological parent, EE is not. EE and spouse file separate returns. Ordinarily, it would seem that the EE cannot make claims for the child. But what about the new legislation for children under the age of 27 that allows children to qualify even if they do not meet the other tests? Can the EE claim for child in this case?

Thanks much. Is this a link that will be updated when mileage for 2012 comes out and we can just watch for it here?

I'll probably be embarrassed when I learn how obvious it is, but I always end up finding this out third hand and late. When and where can I find out what the mileage reimbursement rates (Medical FSA) are for 2012?

Have a client who's CPA is recommending they change from C-Corp to S-Corp and do it through some sort of "late filing" process. The question is how to handle the Cafeteria Plan in the current plan year. My gut feeling is that more than 2% shareholders will have to terminate their elections immediately as they will be S-Corp ineligible for at least one day out of the plan year. But does this necessarily have to be the case? Via a "late filing" process, can they look like a C-Corp for the rest of the plan year and maintain their elections intact? Is immediate termination of elections for more than 2% shareholders the proper way to handle this? Thanks

Employee is terminating soon and is pregnant. She has incurred some expenses related to the pregnancy such as doctor visits but the doctor wants to bill all at once after the birth and apparently is refusing to separate out a small portion of the bill so this employee can make a claim. The baby is due after the claims grace period of this plan. Is there any rule that the doctor has to abide by to get him to bill (provide evidence for) for incurred expenses? Any other method or recourse whereby the employee can recoup some of the money she already contributed besides COBRA? Thanks

Bump just in case someone has an answer as I am still looking for it. Any document or notice you can point me to would be appreciated. I use the EBIA manuals but they seem to be unclear on the matter. thanks

Having a hard time distinguishing between them. What about an Employee's Child (EC) who is under 27 and married? I assume because no support by the employee is required under this category, it doesn't matter if the child is married and out on their own or not and the employee can submit claims for this person. Is that true?

Perhaps I could simplify this. Is there anything wrong with providing a benefit that covers only a spouse or dependent and not the employee? One might look at claims for a Medical FSA. All the claims could be for a spouse or dependent only, but there's the implication of coverage for the ee if the ee wanted to submit a claim for himself. In the cases I'm referring to, insurance or PRA, there would be no such implications. Okay, here's another thought. What if a company offers a PRA but the employee privately buys his own insurance and the spouse buys her own separate insurance from another provider. Could both premiums be rolled into the same PRA election?

Can an employee elect coverage for their spouse and/or dependents but not themselves? I'm specifically referring to a Premium Reimbursement Account. The employee would like to go on a Medicare Advantage plan but that leaves the spouse, a nonemployee, to buy her own insurance and that privately purchased insurance for her is what is desired to be covered under the PRA. A slightly different angle on the same case and second question: What if the company's insurance provider is willing to write a policy for the spouse only. Can this premium be covered pretax through the employee's paycheck?