HRA and change of status

[Guest eeben01]

The Texas legislature enacted legislation in 2003 providing a Health Reimbursement Account (HRA) for every public school teacher beginning 9/1/2004. The Attorney General just ruled that the legislation was flawed and the HRAs will not be set up this year. Many participants in FSAs in 125 plans enrolling last spring and earlier this school year made their FSA elections assuming that the HRA would be provided.

We are trying to determine if this change in benefits (the withdrawal of the promised HRA) qualifies as a change in status under the final regs 1.125-4. Many teachers now want to increase their FSA deductions.

It appears to us that it would be an allowable change in status since the HRA was a form of employer-provided medical plan, albeit a defined contribution plan rather than a traditional medical plan.

There is also a reference in 1.125-4(d)(5) to a loss of coverage "under any group health coverage sponsored by a governmental or educational institution” including a "State health benefits risk pool" as constituting a valid change of status. We believe that the structure of the trust/HRA program comes close to this definition. The preamble to the regulations also appears to say that the examples under 1.125-4(d)(5) are simply illustrations and that other similar state group health programs could be included.

Please share your view on whether this would be an allowable change. Thanks.

[GBurns]

I was not aware that it was yet in effect. Even if it came into effect, it is enough of a change in cost to qualify.

You might want to run through the questions at www. changeofstatus.com

See what happens when employees and union allow sloppy and questionable bidding and contract issuing.