Brian Gilmore

That's a pretty interesting situation I've never seen come up before. My position would be the spouse could voluntarily agree to cover the child pursuant to the order, which should be fine all around because it achieves the same result for the child. However, because the order applies directly only to the employee, the employer cannot involuntarily enroll the child in the spouse's coverage. If the spouse declines, the employer would therefore have to take the other approach you mentioned--remove the employee from dependent coverage through the spouse, enroll the employee separately in their own coverage, and then cover the child as a dependent through the employee. I'd check the terms of the order first though to be sure this is a reasonable position. You might also consider contacting the issuing agency to confirm. Here's a quick overview of the general rules here in case helpful: https://www.newfront.com/blog/employer-responsibilities-upon-receipt-of-a-nmsn

I think some of the concepts got jumbled in the example. You start here with $100k in forfeitures. That's your gains. Then you reduce those forfeitures by the $95k losses caused by overspent accounts from mid-year terminations. That's your losses. Sometimes you'll have net experience gains (if forfeitures exceed overspent accounts) and sometimes you'll have net experience losses (if overspent accounts exceed forfeitures). So in this example you have $5k in net experience gains ($100k forfeitures - $95k overspent). You have three choices for how to apply that $5k in gains: To reduce required salary reduction amounts for the immediately following plan year, on a reasonable and uniform basis; Returned to employees on a reasonable and uniform basis; or To defray expenses to administer the health FSA. In this case, you have at least $5k of administrative expenses associated with the health FSA TPA. So you use the $5k experience gains on the administrative expenses. That's the end of the story. Here's a post with more discussion: https://www.newfront.com/blog/fsa-experience-gains-from-forfeitures Here's a quick slide summary: 2024 Newfront Section 125 Cafeteria Plans Guide

The PCORI statute/regs specifically include VEBAs. There's an FAQ also addressing where the PCORI fee may (in some unusual cases) be payable from the VEBA itself. Treas. Reg. §46.4376-1(b): (b) Definitions. The following definitions apply for purposes of section 4376 and this section. See §46.4377-1 for additional definitions. (1) Applicable self-insured health plan. (i) In general. Except as provided in paragraph (b)(1)(ii) of this section and §46.4377-1, applicable self-insured health plan means a plan that provides for accident and health coverage (within the meaning of §46.4377-1(a)) if any portion of the coverage is provided other than through an insurance policy and the plan is established or maintained— (A) By one or more employers for the benefit of their employees or former employees; (B) By one or more employee organizations for the benefit of their members or former members; (C) Jointly by one or more employers and one or more employee organizations for the benefit of employees or former employees; (D) By a voluntary employees' beneficiary association, as described in section 501(c)(9); (E) By an organization described in section 501(c)(6); or (F) By a multiple employer welfare arrangement (as defined in section 3(40) of the Employee Retirement Income Security Act of 1974 (ERISA)), a rural electric cooperative (as defined in section 3(40)(B)(iv) of ERISA), or a rural cooperative association (as defined in section 3(40)(B)(v) of ERISA). FAQ: https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/aca-part-xi.pdf There may be rare circumstances where sponsors of employee benefit plans that are not multiemployer plans would also be able to use plan assets to pay the Code section 4376 fee, such as a VEBA that provides retiree-only health benefits where the sponsor is a trustee or board of trustees that exists solely for the purpose of sponsoring and administering the plan and that has no source of funding independent of plan assets. The same conclusion would not necessarily apply, however, to other plan sponsors required to pay the fee under Code section 4376. For example, a group or association of employers that act as a plan sponsor but that also exist for reasons other than solely to sponsor and administer a plan may not use plan assets to pay the fee even if the plan uses a VEBA trust to pay benefits under the plan. The Department of Labor would expect that such an entity or association, like employers that sponsor single employer plans, would have to identify and use some other source of funding to pay the Code section 4376 fee.

It's not clear to me whether there was a termination of employment associated with the move and contract termination. If so, you have a COBRA qualifying event. If not, it's just a loss of eligibility without a triggering event to create a COBRA qualifying event. Enrollment in another group health plan only cuts off COBRA rights if that other enrollment occurs after electing COBRA. More details: https://www.newfront.com/blog/early-termination-of-cobra-upon-enrollment-in-other-group-health-plan-or-medicare Slide summary: 2024 Newfront COBRA for Employers Guide

Yeah I think that's the wrong way to structure the surrogacy program. I agree that direct reimbursement of a surrogate's medical expenses likely creates a MEWA with all the standard MEWA risks (Form M-1 requirements/penalties, state prohibitions on self-insured MEWAs, other state mandates not preempted by ERISA, etc.). On the other hand, a more typical surrogacy program generally provides a flat, taxable amount for an employee’s surrogacy costs. In that approach, any amount that the employee uses to assist in the cost of the surrogate’s medical expenses does not create a GHP for the employer because the payment was not tied in any way to the amount of the surrogate's medical expenses. With that appropriate approach, the argument there is that you can't have a MEWA if you don't have an ERISA plan in the first place. Those surrogacy benefits are taxable, non-medical (not 213(d)) expenses. In other words, the benefit is not one of the listed welfare plan benefits in ERISA §3. So you can't create a MEWA through the benefit. Here's my position with the standard surrogacy benefit approach-- https://www.newfront.com/blog/common-infertility-hra-expenses Common Expenses that are NOT HRA-Eligible Expenses Available IRS guidance suggest that common fertility-related expenses that are not §213(d) medical expenses include: Surrogacy Non-temporary sperm/egg freezing (generally cryopreservation beyond one year) Egg or sperm donor expenses where neither the donor nor the carrier is the employee or spouse Same-sex couples with IUI, IVF, or similar expenses but no medical diagnosis of infertility Important Note: Many employers still provide reimbursement for these types of expenses on a taxable basis through a broadly defined infertility program that includes coverage for non-medical expenses outside the HRA. Therefore, although these expenses cannot be reimbursed tax-free by an infertility HRA, the employer may still cover all or a portion of these costs through a broadly defined infertility program. Consult the program materials to determine which non-medical expenses are covered on a taxable basis. ... Morrissey v. United States, 119 AFTR 2d 2017-401 (M.D. Fla. 2016) Section 213 does not permit any taxpayer, regardless of sex, sexual orientation, or gender to deduct the kinds of IVF expenditures Plaintiff claims here. The parties have stipulated that the IRS has interpreted § 213 to deny taxpayers deductions for the kinds of costs associated with surrogacy, without respect to a taxpayer’s sexual orientation. As Defendant correctly points out, a single, heterosexual female who was medically infertile and incapable of carrying a child to term, or who simply chose to have children in the same way as Plaintiff — albeit with the additional need for a third-party sperm donor — would not be able to deduct IVF expenses she paid for treatment of a donor and/or gestational surrogate who was neither her spouse, or her dependent. Likewise, a heterosexual couple in which the wife was medically infertile and medically incapable of carrying a child to term, or who chose not to carry the child herself, who used a similar method as Plaintiff, would not be entitled to deduct the expenses of contracting with and having the necessary procedures for a third-party gestational carrier, or any egg donor if the donated egg is not implanted in the taxpayer, spouse, or dependent. The same result would hold for a lesbian couple in which neither partner could, or wanted to, carry a child to term and who utilized a third-party surrogate to carry their child. IRS information Letter 2002-0291: https://www.irs.gov/pub/irs-wd/02-0291.pdf A surrogate mother is, of course, neither the taxpayer nor the taxpayer’s spouse, and typically is not a dependent of the taxpayers. Nor is an unborn child a dependent. Cassman v. United States, 31 Fed. Cl. 121 (1994). Thus, medical expenses paid for a surrogate mother and her unborn child would not qualify for deduction under § 213(a). IRS Information Letter 2004-0187: https://www.irs.gov/pub/irs-wd/04-0187.pdf A surrogate mother is not the taxpayer or the taxpayer’s spouse, and typically is not the type of relative listed in § 152(a). The surrogate mother usually is neither a member of the taxpayer’s household for the entire taxable year, nor receives over half her support from the taxpayer for that year, and thus does not qualify as a non-relative dependent. Nor is an unborn child a dependent. Cassman v. United States, 31 Fed. Cl. 121 (1994). Thus, medical expenses paid for a surrogate mother and her unborn child generally would not qualify for deduction under §213(a). Slide summary: 2024 Newfront Fringe Benefits for Employers Guide

I'm sorry to hear about your situation @foggyjack. Thanks for sharing to help others avoid the same predicament. The small sliver of good news is the DOL's model COBRA election notice was updated recently to incorporate this information. Here's the new language: https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra If you are enrolled in both COBRA continuation coverage and Medicare, Medicare will generally pay first (primary payer) and COBRA will pay second. Certain COBRA continuation coverage plans may pay as if secondary to Medicare, even if you are not enrolled in Medicare. For more information visit https://www.medicare.gov/medicare-and-you. Here's the summary I recently shared on this topic: https://www.newfront.com/blog/the-medicare-form-cms-l564-for-employers Medicare Pays Primary (COBRA Assumes Primary Medicare Payment—Even If Not Enrolled!) Perhaps the most significant reason a post-65 retiree should avoid relying solely on COBRA for any period is that COBRA will likely provide only secondary coverage. In general, the MSP rules require that the employer-sponsored group health plan always pay primary to Medicare for individuals in “current employment status,” which applies to active coverage. However, retirees enrolled in COBRA are not receiving employer-sponsored coverage based on “current employment status.” In other words, they are not enrolled in active coverage. This means that Medicare pays primary for anyone enrolled in COBRA. In the COBRA context where the MSP rules do not apply and Medicare is primary, the plan can assume the Medicare payment rate and pay only as secondary coverage for any individual who is eligible for COBRA. This is true regardless of whether the individual is actually enrolled in Medicare. For example, if an individual’s services would have been covered primary by Medicare if the participant were enrolled in Part B, COBRA coverage can pay only the amount that a secondary plan would pay. For individuals not enrolled in Part B, that leaves the amount that would have been paid by Part B as a coverage gap for which the participant is responsible. Medicare-eligible retirees will therefore never want to be in a position where they fail to enroll in Medicare while enrolled in COBRA under a plan that assumes the Medicare primary payment rate regardless of actual Medicare enrollment. Here's a quick slide summary: 2024 Newfront Medicare for Employers Guide

Yes, the PCORI fee applies to retiree-only HRAs. Although other excepted benefits are exempt from PCORI, retiree-only plans do not enjoy the exemption. https://www.federalregister.gov/documents/2012/12/06/2012-29325/fees-on-health-insurance-policies-and-self-insured-plans-for-the-patient-centered-outcomes-research II. Retiree Coverage and Retiree-Only Plans As noted in the preamble to the proposed regulations, sections 4375 and 4376 may apply to a retiree-only plan because, although group health plans that have fewer than two participants who are current employees (such as retiree-only plans) are excluded from the requirements of chapter 100 (setting forth requirements applicable to group health plans such as portability, nondiscrimination, and market reform requirements), this exclusion does not apply to sections 4375 and 4376 because these sections are in chapter 34. In addition, section 4376(c)(2)(A) states explicitly that an applicable self-insured health plan includes a plan established or maintained by one or more employers for the benefit of their employees or former employees. Some commentators requested that the final regulations exempt from the PCORI fee retiree coverage on public policy grounds, but generally agreed that a retiree-only insured plan or retiree coverage under an applicable self-insured health plan may be subject to the PCORI fee. Consistent with the statutory language, the final regulations apply the PCORI fee to specified health insurance policies or applicable self-insured health plans that provide accident and health coverage to retirees, including retiree-only policies and plans.

Yeah I think that's a valid argument, just not the best argument. I think it's more likely the IRS wants to track the statute on this one--despite the inartful articulation in that notice. But it's definitely a gray area. The approach you're suggesting could theoretically result health FSA benefits for the plan year far in excess of $3,200. In some ways that could make sense because, for example employer contributions generally don't count toward the salary reduction limit. So it wouldn't be the only scenario where that could occur. Still seems like a bit of a stretch here, though. If I were advising a client, I'd recommend they stick to the amount elected as the basis for the reduction.

My understanding here is that the seller's health FSA did not terminate prior to closing. So there was an overlap period from March-June in which the entities were part of the same controlled group. The best way to handle would have been to continue health FSA coverage through the end of the plan year either through the seller's FSA or by rolling elections/balances to the buyer's health FSA. That approach is outlined by the IRS in Revenue Ruling 2002-32. Here's an overview of the rules that apply in that approach: https://www.newfront.com/blog/merger-acquisition-rules-health-fsa-2 2024 Newfront M&A for H&W Employee Benefits Guide However, it does not appear that's going to be the approach here. Instead, the seller health FSA will simply terminate mid-year. In that case, because there was a period in which the seller health FSA was sponsored by an entity in the buyer's controlled group, the salary reduction contribution limit is going to be applied across both plans combined for the plan year. I think the only viable way to interpret that restriction is that the employee's election with the buyer health FSA will have to be reduced by the amount of the employee's election under the seller's health FSA. So, for example, an employee who elected $1,000 with the seller's health FSA will be restricted to a contribution limit of $2,200 under the buyer's health FSA. The other options would be to base the reduction on YTD contributions (doesn't make sense to me because it's not tied to actual benefit received), or YTD utilization (seems overly complex and not closely related to the salary reduction contribution limit that's governing here). This approach is consistent with the statutory change to §125 made by the ACA which says that an employee "may not elect" to have contributions in excess of the limit. Here's the relevant cites: IRC §125(i)(1): (i) Limitation on health flexible spending arrangements. (1) In general. For purposes of this section , if a benefit is provided under a cafeteria plan through employer contributions to a health flexible spending arrangement, such benefit shall not be treated as a qualified benefit unless the cafeteria plan provides that an employee may not elect for any taxable year to have salary reduction contributions in excess of $2,500 made to such arrangement. IRS Notice 2012-40: https://www.irs.gov/irb/2012-26_IRB#NOT-2012-40 All employers that are treated as a single employer under § 414(b), (c), or (m), relating to controlled groups and affiliated service groups, are treated as a single employer for purposes of the $2,500 limit. If an employee participates in multiple cafeteria plans offering health FSAs maintained by members of a controlled group or affiliated service group, the employee’s total health FSA salary reduction contributions under all of the cafeteria plans are limited to $2,500 (as indexed for inflation). Section 125(g)(4). However, an employee employed by two or more employers that are not members of the same controlled group may elect up to $2,500 (as indexed for inflation) under each employer’s health FSA.

Any choice between (taxable) cash and (non-taxable) qualified benefits needs to be run through the Section 125 cafeteria plan to avoid constructive receipt. In other words, to avoid all retirees being taxed on the opt-out cash option regardless of whether they enroll in the retiree plan. More details: https://www.newfront.com/blog/the-section-125-safe-harbor-from-constructive-receipt So the simple answer is to address this retiree opt-out credit election in the Section 125 cafeteria plan.

I think you're saying an expat is moving from an international assignment back to the U.S., and the expat plan is maintained in the U.S. so it's subject to ERISA/COBRA. If that's right, the loss of coverage caused by the termination of employment will be a COBRA QE for the expat plan. The employee still needs to be offered COBRA for that expat plan even if it doesn't provide any coverage in the U.S. The employee will likely not elect to enroll, but you still need to make the offer with the standard COBRA election notice/rights. However, if any entity in the controlled group offers a plan that does provide coverage in the U.S. the employee could elect COBRA and rely on the region-specific coverage rule to request that other U.S. coverage. The plan would have to make that U.S. coverage available through COBRA. Normally that rule is for local regional HMOs, but it would also apply here. Quick summary: https://www.newfront.com/blog/which-plan-options-must-be-offered-under-cobra-2 Cite: Treas. Reg. §54.4980B-5: Q-4. Can a qualified beneficiary who elects COBRA continuation coverage ever change from the coverage received by that individual immediately before the qualifying event? ... (b) If a qualified beneficiary participates in a region-specific benefit package (such as an HMO or an on-site clinic) that will not service her or his health needs in the area to which she or he is relocating (regardless of the reason for the relocation), the qualified beneficiary must be given, within a reasonable period after requesting other coverage, an opportunity to elect alternative coverage that the employer or employee organization makes available to active employees. If the employer or employee organization makes group health plan coverage available to similarly situated nonCOBRA beneficiaries that can be extended in the area to which the qualified beneficiary is relocating, then that coverage is the alternative coverage that must be made available to the relocating qualified beneficiary. If the employer or employee organization does not make group health plan coverage available to similarly situated nonCOBRA beneficiaries that can be extended in the area to which the qualified beneficiary is relocating but makes coverage available to other employees that can be extended in that area, then the coverage made available to those other employees must be made available to the relocating qualified beneficiary. The effective date of the alternative coverage must be not later than the date of the qualified beneficiary's relocation, or, if later, the first day of the month following the month in which the qualified beneficiary requests the alternative coverage. However, the employer or employee organization is not required to make any other coverage available to the relocating qualified beneficiary if the only coverage the employer or employee organization makes available to active employees is not available in the area to which the qualified beneficiary relocates (because all such coverage is region-specific and does not service individuals in that area). Slide summary: 2024 Newfront COBRA for Employers Guide

Agreed, here's the cite-- IRS Notice 2002-45: https://www.irs.gov/pub/irs-drop/n-02-45.pdf III. Coverage under an HRA Medical care expense reimbursements under an HRA are excludable under § 105(b) to the extent the reimbursements are provided to the following individuals: current and former employees (including retired employees), their spouses and dependents (as defined in § 152 as modified by the last sentence of § 105(b)), and the spouses and dependents of deceased employees. The term “employee” does not include a self-employed individual as defined in § 401(c). See § 105(g).

I find that aspect of the COBRA regs to be way more technical than it needs to be because it's so common to have coverage run through the end of the month, with the 18-month maximum coverage period beginning as of the first of the following month. The rules say you can measure from the date of loss of coverage (rather than the date of the triggering event) if the plan states that the 30-day notice period to notify the plan administrator (who then has 14 days to notify the employee) and that the maximum coverage period is measured from that loss of coverage date (instead of the date of termination of employment or other triggering event). I find this somewhat misaligned with the real world because: From my brief experience at the DOL, they enforce this based solely on the date of loss of coverage; They also didn't care about he 30/14 day distinction since it's usually the same entity anyway, they just enforced as a combined 44 day limit from loss of coverage; Most employers are using template documents, and it's unlikely those documents are customized for something as intricate as this; and The rules are clear that it's fine to have a longer maximum coverage period than is required by law. So are they really going to punish an employer for being more generous without perfectly clarifying in the plan terms? Our template doc does try to address this issue with some generic language: "(If coverage is lost at a date later than the date of the qualifying event and the Plan measures the maximum coverage period and notice period from the date of health coverage loss, then the maximum continuation period will be 18 months from the date of health coverage loss.)" Not perfectly customized, but at least it tackles the issue. Here's the regs: Treas. Reg. §54.4980B-7: Q-4. When does the maximum coverage period end? A-4. (a) Except as otherwise provided in this Q&A-4, the maximum coverage period ends 36 months after the qualifying event. The maximum coverage period for a qualified beneficiary who is a child born to or placed for adoption with a covered employee during a period of COBRA continuation coverage is the maximum coverage period for the qualifying event giving rise to the period of COBRA continuation coverage during which the child was born or placed for adoption. Paragraph (b) of this Q&A-4 describes the starting point from which the end of the maximum coverage period is measured. The date that the maximum coverage period ends is described in paragraph (c) of this Q&A-4 in a case where the qualifying event is a termination of employment or reduction of hours of employment, in paragraph (d) of this Q&A-4 in a case where a covered employee becomes entitled to Medicare benefits under Title XVIII of the Social Security Act (42 U.S.C. 1395-1395ggg) before experiencing a qualifying event that is a termination of employment or reduction of hours of employment, and in paragraph (e) of this Q&A-4 in the case of a qualifying event that is the bankruptcy of the employer. See Q&A-8 of §54.4980B-2 for limitations that apply to certain health flexible spending arrangements. See also Q&A-6 of this section in the case of multiple qualifying events. Nothing in §§54.4980B-1 through 54.4980B-10 prohibits a group health plan from providing coverage that continues beyond the end of the maximum coverage period. (b)(1) The end of the maximum coverage period is measured from the date of the qualifying event even if the qualifying event does not result in a loss of coverage under the plan until a later date. If, however, coverage under the plan is lost at a later date and the plan provides for the extension of the required periods, then the maximum coverage period is measured from the date when coverage is lost. A plan provides for the extension of the required periods if it provides both— (i) That the 30-day notice period (during which the employer is required to notify the plan administrator of the occurrence of certain qualifying events such as the death of the covered employee or the termination of employment or reduction of hours of employment of the covered employee) begins on the date of the loss of coverage rather than on the date of the qualifying event; and (ii) That the end of the maximum coverage period is measured from the date of the loss of coverage rather than from the date of the qualifying event. (2) In the case of a plan that provides for the extension of the required periods, whenever the rules of §§54.4980B-1 through 54.4980B-10 refer to the measurement of a period from the date of the qualifying event, those rules apply in such a case by measuring the period instead from the date of the loss of coverage.

Ha, let's hope that practitioner weighs in to set us all straight, Kenneth. Agreed, the distributions already made will just be recharacterized as taxable income. Here's an overview of the approaches that I've posted: https://www.newfront.com/blog/the-dependent-care-fsa-average-benefits-test Correcting an ABT Failure Where HCEs Have Already Exceeded the Reduced Limit In some situations, employers will not discover an ABT failure in time to impose a reduced HCE contribution limit prior to HCEs contributing to the dependent care FSA in excess of that limit. For example, suppose the ABT pre-test results show that HCE elections must be reduced by 20%, resulting in HCEs who elected the $5,000 maximum having to drop to $4,000. If those HCEs have already contributed $4,375, there is a $375 excess that must be made taxable income before the last day of the plan year. There are two basic approaches to converting excess HCE dependent care FSA contributions to taxable income: Refund/Return: The employer can distribute the excess contributions back to the HCEs through payroll as taxable income subject to withholding and payroll taxes by the end of the year, thereby reducing the amount available in the HCEs’ dependent care FSA account balance. Note that this approach will not work for HCEs that have already received reimbursement of the excess amount. Recharacterize: The employer can recharacterize the excess contributions as taxable income subject to withholding and payroll taxes without directly refunding the excess to HCEs. The downsides of this approach are that the employer will need to a) take the withholding and payroll taxes from other income, and b) inform the HCEs that they may take a distribution of the excess contributions (which no longer have pre-tax status) from the FSA without the need to submit qualifying dependent care expenses. With either approach, the employer will need to coordinate with the FSA TPA to ensure proper administration of the correction. As always, the employer will need to take action before the end of the year to ensure a passing result as of the last day of the plan year.

Unfortunately, the impending termination of the plan is not a mid-year permitted election change event. Those elections remain irrevocable (absent another permitted election change event) under the Section 125 cafeteria plan through the remainder of the (short/final) plan year. There are ways to address this issue with moving elections/balances to the new plan (or retaining the existing plan) post-close. You might inquire as to whether they have considered that option. Here's an overview: https://www.newfront.com/blog/merger-acquisition-rules-health-fsa-2 Here's a quick slide summary: 2024 Newfront M&A for H&W Employee Benefits Guide

I'd suggest consulting with a personal tax adviser on this one because the issues spans back multiple years and therefore there are potential excise taxes spanning multiple years. In general-- The spouse's general purpose health FSA was unfortunately disqualifying coverage for both the spouse and you. I've copied the relevant cite below for reference. Here's an overview: https://www.newfront.com/blog/hsa-interaction-health-fsa-2 For 2024 contributions, you will need to have the HSA custodian process a corrective distribution. That will avoid a 6% excise tax that would otherwise apply for the excess contributions. For 2023 contributions, you may be able to take advantage of a special rule outlined in the IRS Form 8889 Instructions providing individuals the opportunity to take a corrective distribution up to six months after the due date of the return, including extensions. Under that special rule, you can work with your personal tax advisor to file an amended return with the statement “Filed pursuant to section 301.9100-2” entered at the top. For contributions prior to 2023, you will still need a corrective distribution, but a 6% excise tax will apply on those ineligible contributions. The 6% excise tax reported on IRS Form 5329. Here's an overview: https://www.newfront.com/blog/correcting-excess-hsa-contributions IRS Notice 2005-86: https://www.irs.gov/pub/irs-drop/n-05-86.pdf Interaction Between HSAs and Health FSAs Section 223(a) allows a deduction for contributions to an HSA for an “eligible individual” for any month during the taxable year. An “eligible individual” is defined in § 223(c)(1)(A) and means, in general, with respect to any month, any individual who is covered under an HDHP on the first day of such month and is not, while covered under an HDHP, “covered under any health plan which is not a high-deductible health plan, and which provides coverage for any benefit which is covered under the high-deductible health plan.” In addition to coverage under an HDHP, § 223(c)(1)(B) provides that an eligible individual may have disregarded coverage, including “permitted insurance” and “permitted coverage.” Section 223(c)(2)(C) also provides a safe harbor for the absence of a preventive care deductible. See Notice 2004-23, 2004-1 C.B. 725. Therefore, under § 223, an individual who is eligible to contribute to an HSA must be covered by a health plan that is an HDHP, and may also have permitted insurance, permitted coverage and preventive care, but no other coverage. A health FSA that reimburses all qualified § 213(d) medical expenses without other restrictions is a health plan that constitutes other coverage. Consequently, an individual who is covered by a health FSA that pays or reimburses all qualified medical expenses is not an eligible individual for purposes of making contributions to an HSA. This result is the same even if the individual is covered by a health FSA sponsored by a spouse’s employer. Slide summary: 2024 Newfront Go All the Way with HSA Guide

I read it as having to be an actual dollar amount-- IRS Notice 2002-45: https://www.irs.gov/pub/irs-drop/n-02-45.pdf An HRA is an arrangement that: (1) is paid for solely by the employer and not provided pursuant to salary reduction election or otherwise under a § 125 cafeteria plan; (2) reimburses the employee for medical care expenses (as defined by § 213(d) of the Internal Revenue Code) incurred by the employee and the employee’s spouse and dependents (as defined in § 152); and (3) provides reimbursements up to a maximum dollar amount for a coverage period and any unused portion of the maximum dollar amount at the end of a coverage period is carried forward to increase the maximum reimbursement amount in subsequent coverage periods.

Yeah I think it's borderline and could reasonably be interpreted as a change in residence each time depending on the specific facts and circumstances. Here's my thoughts I've posted on this issue: https://www.newfront.com/blog/spouse-relocates-outside-u-s-moves-u-s-2 Spouse Moves Into Country In this example, the employee’s spouse is moving into the country from an area where the plan does not provide full coverage. The employee’s spouse therefore will have a change in residence affecting eligibility for the plan. This means that the employee may change his or her election to cover the spouse upon the spouse’s change in residence to the U.S. Spouse Moves Out of Country In this example, the employee’s spouse is moving out of the country to an area where the plan does not provide full coverage. The employee’s spouse therefore will have a change in residence affecting eligibility for the plan. This means that the employee may change his or her election to revoke coverage for the spouse upon the spouse’s change in residence outside the U.S. What is a Change in Residence? There’s no formal definition or exact timeframe to determine “residence” that applies here. The analysis is based on all facts and circumstances. In other words, if the spouse is going somewhere on vacation, there’s no permitted election change event. If the spouse is changing residence for some period to the foreign country, then relocating to reside back in the U.S., there will be permitted election change event upon each event. This isn’t very precise, but it’s also generally not an issue in practice. The employee will certify to the change in residence in most cases, and there is no reason for the employer to question that certification unless the employer suspects fraud. Fraud would likely only be an issue if the employer had reason to believe that the dropping/re-enrolling request was really a based on the spouse’s short vacation.

As long as there aren't any actives in there to blow the excepted benefit status, I don't see any issues with combining the pre-65/post-65 retirees into one ERISA plan. I assume pre-65 it's a cost-sharing HRA for expenses under the group plan, which is of course very different than a Medicare Advantage premium HRA, so those distinctions will have to be very clear. You'd also want to be clear if If there are any different eligibility terms other the age status for each component.

I don't see any way to address the potential past labilities here under §4980D. Any attempt to modify the terms at this point can't change how it was documented/administered in the past. Ultimately, I think the only thing you can do it correct the situation going forward and hope that the skeletons in the closet remain there. At least you've cut off the exposure prospectively.

I'm guessing you're driving at the "significant benefits in the nature of medical care" component, and particularly with respect to the upper limit of sessions. Is it 6? Or 12? Or....? That one is an enduring mystery with no good answer I've come across. I'm not aware of any enforcement activity that might shed light on the matter. Here's my general thoughts if you're interested: https://www.newfront.com/blog/aca-and-hipaa-excepted-benefits Common Excepted Benefit #4: EAP EAPs must satisfy all of the following conditions to qualify as an excepted benefit: Not Significant Medical Benefits: The EAP cannot provide significant benefits in the nature of medical care; No Coordination with Group Health Plan: The EAP cannot be coordinated with benefits under another group health plan by meeting the following two requirements:- No Exhaustion: Participants in the other group health plan cannot be required to use and exhaust benefits under the EAP (i.e., the EAP cannot act as a gatekeeper) before becoming eligible for benefits under the other group health plan; and- No Participation Link: Participant eligibility for benefits under the EAP cannot be dependent on participation in another group health plan; No Premiums: The EAP cannot have an employee-share of the premium (i.e., it must be fully employer-paid); and No Cost-Sharing: The EAP cannot have any cost-sharing for its services (i.e., no deductibles, copays, or coinsurance). The most difficult element to interpret is the first requirement that the EAP not provide “significant benefits in the nature of medical care.” For example, there is no specific limit on the number of counseling sessions that the EAP can offer and still remain within this definition. The only guidance in the regulations is a generic statement that employers are to take into account “the amount, scope, and duration of covered services.” The best description of this “significant medical benefits” condition comes from the preamble to the excepted benefits regulations, which provides as follows: The first requirement of…these final regulations is that the EAP does not provide significant benefits in the nature of medical care. For this purpose, the amount, scope, and duration of covered services are taken into account. For example, an EAP that provides only limited, short-term outpatient counseling for substance use disorder services (without covering inpatient, residential, partial residential or intensive outpatient care) without requiring prior authorization or review for medical necessity does not provide significant benefits in the nature of medical care. At the same time, a program that provides disease management services (such as laboratory testing, counseling, and prescription drugs) for individuals with chronic conditions, such as diabetes, does provide significant benefits in the nature of medical care." The preamble subsequently notes that the Departments (DOL/IRS/HHS) may provide additional guidance in the future to better clarify when a program provides significant benefits in the nature of medical care.

There's an additional integration rule in Notice 2015-17, Question 3, but that applies only to Part B and Part D. So I think you're going to need to just break out the retiree-only piece into a separate ERISA plan to take advantage of the retiree-only exception. That's the easy workaround everyone uses for retiree HRAs. You don't want to be having to argue the retiree piece is operating as a separate plan even though it's wrapped into the main 501 with actives--that would be a tough sell. Especially since there's not much guidance there and it's easy to establish/maintain a separate retiree-only plan to avoid the issue.

You cannot have an HSA with Employer #2 because your general purpose health FSA with Employer #1 is disqualifying coverage that prevents you from being HSA-eligible. That means you cannot make or receive HSA contributions for as long as your general purpose health FSA coverage remains in effect. You can have another health FSA with Employer #2. The health FSA limit is purely a plan year limit specific to each particular employer's plan. It's not an individual limit and it has nothing to do with each employee, the calendar year, etc. So employees could have two or more different (unrelated) employers and elect $3,200 with each in the same calendar year and have no problems. The only time the health FSA contribution limit would have to be combined is if the employee was moving between entities within the employer. Where the two employers are unrelated (as is almost always the case), the employee will have a full new limit. So as long as the two employers are unrelated, you can make a full $3,200 election under each health FSA. (Note that the $5k dependent care FSA limit is a global calendar year limit aggregated over all employers combined. This is different from the health FSA limit, which is tied to each employer plan.) More details: https://www.newfront.com/blog/health-fsa-salary-reduction-contribution-limit-2 https://www.newfront.com/blog/dependent-care-fsa-limit-challenges IRS Notice 2012-40: https://www.irs.gov/irb/2012-26_IRB/ar09.html All employers that are treated as a single employer under § 414(b), (c), or (m), relating to controlled groups and affiliated service groups, are treated as a single employer for purposes of the $2,500 limit. If an employee participates in multiple cafeteria plans offering health FSAs maintained by members of a controlled group or affiliated service group, the employee’s total health FSA salary reduction contributions under all of the cafeteria plans are limited to $2,500 (as indexed for inflation). Section 125(g)(4). However, an employee employed by two or more employers that are not members of the same controlled group may elect up to $2,500 (as indexed for inflation) under each employer’s health FSA.

Assuming they're QBs, I think that can be unilaterally done at any point because it would be one QB independently ending their coverage, while the other QBs maintain their independent election rights. That was my point above. As to how it practically occurs, that will probably vary from plan to plan (or more realistically, TPA to TPA). The formal QB notice requirements in the COBRA regs surround the requirements upon divorce/legal separation, loss of dependent status, second qualifying events, disability determinations, etc. Notice of voluntarily dropping mid-maximum coverage period doesn't seem to be addressed. Any reasonable requirement that the QB notify the plan of the change in coverage I would think suffice. Clearly there will have to be some form of notice for the plan to know that a) it's not just a premium shortfall situation, and b) which QBs are maintaining coverage.

Yes, you can drop COBRA at any point by simply not making the required premium payment.