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.

Our plan has a provision which allows a member to use the 3-year catch-up to make additional contributions based on missed contributions under our plan or any other 457 plan in our state. Historically, we have only provided the catch-up based on contributions missed from our own plan, as this requires verification of those missed contribution. Because of turnover at upper management levels, we have been requested to allow a member to catch-up their missed contributions from another plan, but have no mechanism to verify missed contributions under another employer's plan. Is anyone able to provide a copy of or link to a form that can be sent to another plan for that plan to certify the level of missed contributions? Thanks in advance.

Yes, I would consider the first-time acquisition of Medicare (that is, "entitled to" or "enrolled in" as evidenced by receipt of a Medicare card) to be a qualifying event that would allow the employee to drop coverage mid-year, provided, however, that the employee made the request to drop their coverage within the time frame specified by your plan. In Benefits world, we tend to consider "entitled to coverage" to mean "eligible for coverage", but someone is not actually enrolled until they fill out the forms and enroll. In Medicare world, "entitled to coverage" means "enrolled", not just eligible; that is, you've taken the steps, filled out the papers, and CMS sent you your Medicare card, so now you are "entitled" to have Medicare pay some of your medical bills.

Sure, why not? Once the money is paid to the employee as taxable income it's just income; the employee is free to do whatever they choose with it including purchasing hockey tickets ... or a sofa ... or exchange coverage ...

Thanks for the clarification.

The recently released Rev. Proc. 2014-61 announced many cost of living adjustments for various tax provisions. Buried in Item 26. appears to be a new definition for High Deductible Health Plan featuring significantly higher minimum required deductibles effective in 2015. This is compared to the amounts previously announced in Rev. Proc. 2014-30 back in April. The change is raising the minimum deductible from $1,300 to $2.200 and from $2,600 to $4,450 for individual and family coverage, respectively. Am I reading this correctly? It's making me nervous that I have seen no coverage of this issue.

Looking for info regarding "typical" internal costs to administer employee benefits programs, perhaps expressed as a percentage of total premium expense or on a PEPM basis. After years of severe cuts, I'm hoping to justify additional staff or consulting resources, but the first question from above is always "How do our costs compare with others?" Of course there are way too many variables to take into account for a detailed analysis or response, but even a general idea would be helpful. Say you had 5,000 employees with +/- $100 million in annual premiums for medical, dental, life, disability, eap, voluntary programs, etc... What would you expect your internal costs for benefits admin - staff, communication, consultants, etc... - to run? Has there been any coverage of admin costs in any of the big national surveys that you could point me to? Any thoughts would be appreciated.

?? Why would you do this? Isn't the purpose of an opt out incentive is to get people to make prudent financial decisions, both for you and them? If you want to reward longevity, do it elsewhere. Doesn't my longevity have added value to the org, even though I need insurance? Just a thought...

Yes, the question is regarding the cafeteria plan election. Unfortunately, this is not specifically addressed in the section 125 rules. Change of residence alone is not necessarily a qualifying event; it must affect plan coverage. All of our plans are managed care plans that require direction of care by a PCP. An incarcerated individual would not be able to access their PCP for treatment or referral, and the prison docs are not on our plans. Ergo, no care could be provided or referred by the PCP, thus the individual has effectively lost coverage under our plan. Because the incarcerated individual has had a change of residence affecting his/her access to coverage under the plan (just as if he/she had moved outside of an HMO service area), we have a qualifying event. Similarly, the end of incarceration would be a qualifying event that would allow the individual to be added back onto the plan. I suppose we could have a different result if we had some other plan type. A plan with an out-of-network benefit could still provide some level of coverage, even in prison. And I understand that prisons may be becoming more sophisticated in their efforts to tap 3rd party payors. But even in that circumstance, the individual (or our employee, the parent) could seek coverage under an exchange (CA in this case). With no income, the individual would qualify for medicaid (Medi-Cal in our case), the acquisition of which would be a qualifying event that would allow the election to be changed.

Employee's child is being incarcerated so employee wants to drop child from coverage. Jail is located within plan service area. Would you consider this a qualifying event and allow the employee to drop the dependent's coverage? While sympathetic, I'm not sure I see it...

I suspect a big reason for a non-calendar year cycle is to follow the entity's fiscal year. That's why we do it. Much easier for budgeting purposes when you are not trying to predict what your health plan rates might change to in the middle of your fiscal year. On Bono's other point, there really shouldn't be much challenge with changing mid-year to a spouse's plan because of their open enrollment period. Acquiring coverage through a spouse's health plan, even during open enrollment, would be a qualifying event that would permit an election change. As long as the "losing" plan is permissive regarding IRS election change rules, the employee can be allowed to drop their coverage upon gaining coverage under another plan. A non-calendar year 125 FSA plan for Medical and Dependent Care FSAs is no doubt less common, but permissible. You just need to make sure that actual deductions occurring during any calendar year do not exceed the applicable IRS limits.