jsb

See IRS Notice 2002-45. An HRA is an employee benefit plan subject to COBRA. Since COBRA premiums are paid with after tax dollars, there is no financial advantage to electing COBRA coverage except perhaps to chase an unused balance an existing HRA account. Because 2018 will be the first year of the HRA, there is no existing balance, but I suppose you must give the employee the option to fund the HRA as a COBRA benefit.

Husband and wife each sign up for family HDHP coverage, creating a double HDHP coverage situation. Each signs up separately for HSA plan for the individual (not family) limit. So far so good, it seems, as neither has coverage that is not a Qualified HDHP. The wrinkle: carrier reports coordinating benefits for the double HDHP coverage so that all plan deductibles and/or co-payments are waived, resulting in no-cost medical services being received. This seems a bit problematic in that, while the employees seem to have done everything right, the carrier's action seems to negate the intent of the law. We are wondering how the IRS might view this situation. Your thoughts and opinions would be most appreciated.

Have to disagree with mdm09 on one point. Under 1.125(4)(e), entitlement (enrollment) in Medicaid (or Medicare) would permit a drop of coverage, if the employer's plan permits. If Sooner Care is not the state version of Medicaidl, it is likely an individual plan that would not permit a change in election

Perhaps you are overthinking it. A FORMER employee paid a premium - this is not a tax deferred event. How would you normally handle it with an identically situated departing employee when you do have adequate notice of their termination? Do you withhold balance-of-the month premiums from final pay, pre-tax? If so, I suppose you could have the employee pay back his final pay and reverse the payroll transaction, then re-run the final paycheck to withhold the premium. Puts everyone in the same position as if you had had proper notice of his termination. Seems like way too much trouble unless the former ee is putting up a big stink about the taxability issue. We have lots of situations where employees and former employees write a check to self-pay their health benefits. It's always with their post-tax dollars and will never impact W-2 reporting.

With the initials "HCSA" now in play (Health Care Savings Account?) it brings to mind an HSA tied to a high deductible health plan (so health plan eligibility would be a prerequisite), as opposed to the more standard "Flexible Spending Account" (FSA) arrangement.

Appreciate the great discussion. The original question could be restated as: "Does the mid-year addition of a dependent (qualifying status change event) permit an employee to change health plans mid-year even when adding said dependent does not change the cost of existing coverage to the employee?" What is an election? The pre-tax withholding of a specific dollar amount to pay premiums. Does the status change allow an election change? Yes Is the requested election change consistent with the status change? Does the requested election change correspond with the status change event? Yes, if you're talking about proximity in time. Maybe not if you're looking for the status change to be causing some sort of impact on the employee requesting the change. Is the requested election change on account of with the status change event? Maybe yes, if you consider that the birth is prompting the employee to want to change plans. No, if you're looking for there to be some financial or other impact on the current enrollment as the result of the birth. No, if you're considering that the employee will enroll in family coverage under the new plan when they were already enrolled in family coverage before the addition of the new dependent. On one hand, I'd side with GMK and don't think I'd allow it due to lack of consistency. On the other, I think that 125.4©3(i) is open to interpretation. According to a chart in the EBIA's 125 manual, the change could be permitted. But like many posts to this forum, EBIA qualifies that their manual is informational, not legal guidance. The Plan Administrator sides with the EBIA chart, so that's what we'll do.

Thanks for the input. We are a big plan (10,000+ primary lives) and there will not be a problem with the carrier. The plan doc is permissive with what's allowed under applicable law. It's the applicable law that is confounding as it does not specifically address this scenario. A similar situation is covered in one of the Q&As, but it concerns a change from PPO to HMO along with a coverage level change from individual to family. The coverage level change (at least to me) is a pretty clear "change in cost" that one could argue satisfies consistency (higher cost is consistent with changing to a lower cost health plan option). But unfortunately I have been unable to find an example on point of a plan change being permissible when the triggering birth does not result in a cost change to the participant. Given that we seek to be as permissible as the law would allow, would you allow this change?

Employee elects family HMO coverage. Has a new child mid-year. Cost of plan to the employee does not change as he already has family coverage. As a result of the birth, now wants to change to High Deductible plan because premium is lower. Some here say changing plans in this case is not consistent since there is no change in cost or coverage. Others say birth is a "free pass" for whatever you want to do. Plan document is generally ambiguous, thus providing no specific guidance. What's your take on this request? Any cites appreciated. Thanks for your input!

Thanks for the speedy reply. Yes, 1A does not apply to this employee. My colleague had been reading the instructions and grouping words as indicated by the inserted parentheses: "Employee enrolled in coverage offered. Enter code 2C for any month in which the employee enrolled in health coverage (offered by the employer for each day of the month), regardless..."; She has since changed her tune. Almost all employees (except 10-20 out of 6,000) qualify 2H.

Need a 1095-C Reporting wizard... -- Code 2C, employee enrolled in coverage. Code 1E, MEC offer to Ee+spouse+kids. Have bi-weekly enrollment and eligibility for our plans. Employee eligible for coverage on 6/29/15 but didn't enroll until 7/13. Colleague suggests July reporting should be 1E/2C, because employee was offered coverage for whole month, even though no coverage effective until 7/13. I think July reporting should be 1E/2H because employee's coverage was not effective for every day of the month. 2H definitely applies. Would appreciate any thoughts, and especially a point to any IRS authority or specific example on this bit of minutia.

QDROphile, thanks for the quick response. Yes, they are still a governmental entity in their own right, and have been for about 14 years.

Entity "B" separated from entity "A" about 14 years ago. Employees B continued participating in the 457 plan of entity A for the past 14 years and B is named as a participating entity in A's plan docs. A has also been providing payroll services to B, which facilitated 457 participation. Effective 1/1/16, B is getting its own payroll system, which seems like an opportune time for them to get their own 457 plan as well. B represents about 7% of A's total employee count at present. I've never faced this type of situation and am hoping for some guidance from the group, either Code based or experiential. Should B form a new plan starting at "$0" or can B's current employees (and their assets) be split off to form a new plan? If "splitting" out B's participants and assets, dealing with current employees seems pretty straightforward. But what about B's former employees? Do they stay with A's plan, move to B's new plan, or does it matter? (B's current and former employees represent roughly $30M in total assets.) Looking for info on what's usual and customary ... and legal, of course. Thanks!

Employee is in a full-time, benefits eligible position, employer pays 80% of cost of coverage (separate medical, dental & vision plans) for Ee-only or Ee plus dependents (spouse and/or children). Ee changes to a Part-Time variable hour position mid-year. Not expected to work 30+ hours on average after change. Ee compensation rate is unchanged, but hours are significantly reduced. As a PT Ee, the Ee is eligible for same medical plans but no dental or vision coverage if enough hours are worked. Employer pays 80% of Ee coverage, but $0 toward dependent (minors only, no spouse) coverage. Employer offers benefits to variable hour employees who work 30+ hours on average over 12 month look-back period. Ee, as a long-time full-time Ee is in month 1 of a stability period. 1) Because of the employment status change, has Ee experienced a 125 qualifying event? 2) If yes, what changes is the Ee permitted to make? Does status change only apply to dependents due to increased cost or can Ee drop coverage as well? 3) Does the "Special Rule" apply to this situation that would allow the Employer to begin monthly look-back after 3 months in order to allow the Ee to drop coverage? Thoughts and comments appreciated. P.S. - The employee does not want to continue coverage.

The plan should operate consistently with its own plan documents. It may require proof of dependent status, if it chooses. Should also require dependent's SSN as it must be reported to the IRS next year. If the plan requests documentation, and the employee doesn't provide the proof, the dependent isn't eligible and should be removed from the plan, or not added as a new enrollment. An employee knowingly adding, trying to add, or retaining an ineligible dependent would be committing fraud against the employer, a terminal offense at most employers.

Employer A changes insurance providers mid-year and transfers ALL enrollees to a new plan. Old health plan is a multi-provider standard HMO, new health plan is a closed panel HMO HDHP. They do not offer a special enrollment window for their employees to make an election change. If we had made a similar change, we would have allowed an open enrollment window based on a significant change in coverage. My employee's spouse works for Employer A, and would like to make an election change to add his wife to his plan. His cost of adding her to his non-HDHP HMO coverage with the same carrier would be much less than the upcoming Dr. visit and maintenance prescriptions costs she will incur under her new HDHP. Has a "loss of other employer's coverage" occurred which would constitute a Qualifying Event as respects our plan? While the spouse had an involuntary change of health plans, she did not actually lose employer sponsored coverage, it just changed dramatically. Your thought appreciated.