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Benefits in the News > By Subject >

Cafeteria plans (125, flexible spending)

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That Section 125 Cafeteria Plan Needs a Second Look
"An increase in [DOL] audits warrants a much closer look at Section 125 Cafeteria Plans to ensure compliance and proper administration.... [1] Understand which health & welfare benefits should be pre-taxed ... [2] Test for nondiscrimination early rather than later ... [3] [D]ependent domestic partners prompt tax confusion." (Corporate Synergies)
What is a Limited Purpose FSA, and How Can Account Holders Use It?
"A limited purpose FSA (LPFSA) is a healthcare spending account that can only be used for eligible vision and dental expenses. Unlike a healthcare FSA, however, an LPFSA can be held at the same time as [an HSA]. When coordinated with an HSA, the LPFSA can further reduce your taxes while allowing you to allocate HSA funds to other purposes -- including retirement." (DataPath)
Cash Allowances for Employees to Select from Benefits Suite?
"Generally, if an employer wants to pay its employees a cash allowance that is earmarked for certain benefits, the arrangement has to qualify under one of the plans the IRS has established (e.g. HRA, FSA, HSA, cafeteria plan).... [T]he cafeteria plan rules were set up to accommodate a 'bucket' approach, but employers must comply with the IRS's requirements when setting up such a plan. The money in a full flex plan, that allows employees to choose and trade off among different benefits, can come from employer or employee contributions." (HR Daily Advisor)
[Opinion] U.S. Chamber of Commerce Statement on Cafeteria Plans, for House Subcommittee on Economic Growth, Tax and Capital Access
"[W]hen it comes to cafeteria plans, small business owners are at a significant disadvantage and, therefore, it discourages them from implementing cafeteria plans for their employees. Consequently, we urge Congress to allow small business owners to participate in cafeteria plans and, thereby, encourage the expanded implementation of cafeteria plans by small businesses." (U.S. Chamber of Commerce)
[Guidance Overview] IRS Clarifies Rules for Disposal of Cafeteria Plan Forfeitures upon Discontinuance of Business Operations
"In Information Letter 2016-0077, the IRS responds to a taxpayer's inquiry by confirming that the unused funds will not revert to the U.S. Treasury but are instead disposed of in accordance with the plan document." (The Wagner Law Group)
FSA Reimbursement: Nine Qualified Expenses You May Not Know About
"Guide dogs/service animals.... Braille reading material.... Auto adaptation expenses.... Television closed captioning.... Special telephone equipment.... Wigs ... Smoking cessation programs.... Lead-based paint removal.... Transportation." (DataPath)
IRS Information Letter Addresses Cafeteria Plan Forfeitures
"The letter responds to a question about whether unused funds in a cafeteria plan are paid to the U.S. Treasury when the employer ceases operations and the plan terminates ... [T]he disposition of unused funds when a cafeteria plan terminates depends on the plan document's provisions regarding plan termination and the facts and circumstances at the time.... [P]roposed regulations under Code Section 125 provide ... [that] forfeitures may be used to defray plan expenses, allocated among participants on a reasonable and uniform basis (but not based on claims experience), or retained by the employer." (Thomson Reuters / EBIA)
Are Your 'Voluntary' Benefit Plans Subject to ERISA?
"[T]here are four requirements of the voluntary plan safe harbor.... The benefit plan must be completely voluntary and employee paid, with no employer contributions made in any form for any employees.... [T]he employer must not endorse the plan. In simple terms if you endorse it, you own it (for purposes of ERISA) ... Finally, under the safe harbor, employers are prohibited from receiving any compensation that exceeds reasonable reimbursement for collecting and remitting premium payments." (Graydon Head & Ritchey LLP)
Healthcare Benefits in 2017: What Employers Have to Say
"2016 marked a milestone for healthcare consumerism, with the amount of organizations offering HDHPs jumping from 28% four years ago to 39% in last year's survey to 53% in this year's survey.... With this rise in HDHPs came an increase in the number of employees being enrolled in a Health Savings Account [HSA], Healthcare Reimbursement Arrangement [HRA], or Flexible Spending Account [FSA] ... 51.5% of respondents' employees are enrolled in one or more of these plans/arrangements." (Healthcare Trends Institute)
[Official Guidance] Text of IRS Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans, for Use in Preparing 2016 Returns (PDF)
22 pages; Feb. 10, 2017. "An HSA may receive contributions from an eligible individual or any other person, including an employer or a family member, on behalf of an eligible individual.... An Archer MSA may receive contributions from an eligible individual and his or her employer, but not both in the same year... A Medicare Advantage MSA is an Archer MSA designated by Medicare to be used solely to pay the qualified medical expenses of the account holder who is enrolled in Medicare.... A health FSA may receive contributions from an eligible individual. Employers may also contribute.... An HRA must receive contributions from the employer only. Employees may not contribute." (Internal Revenue Service [IRS])
[Guidance Overview] Supplemental and Wellness Benefits Received May be Taxable
"Many employers offer their employees various 'supplemental benefits,' such as accident insurance, cancer insurance, or critical disease insurance. [In CCM 201703013, the IRS] ruled that, to the extent the employer pays the cost of these benefits (or the employee contribution is made 'pre-tax' through a cafeteria plan), the benefits received are taxable income to the employee." (Barrett McNagny LLP)
Comparison Chart: Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and Health Reimbursement Accounts (HRAs) (PDF)
Chart addresses contribution limits, portability, eligible expenses, substantiation, and other requirements. (Acclaris)
[Guidance Overview] IRS Issues Key Memorandum on Tax Treatment of Fixed Indemnity Health Plans
"According to [CCM 201703013], when a fixed indemnity health plan is employer-paid or purchased on a pre-tax basis, the usual tax free treatment of benefits paid under Internal Revenue Code section 105 is not available because the amount paid is not a reimbursement of medical care under Code section 213(d). Because the amount paid is not entitled to tax free treatment, any amounts paid under the fixed indemnity health plan are included in the employee's gross income and wages." (Morgan Lewis)
[Guidance Overview] Certain Small Employers Now May Offer Special Health Reimbursement Arrangements (PDF)
"QSEHRAs are only for 'small employers.' ... The employer cannot offer any other group health plan (such as medical, dental, vision and health flexible spending account plans).... Only the employer may fund the QSEHRA ... The employer must offer the QSEHRA to all eligible employees.... QSEHRAs must be offered on the same terms to all eligible employees.... A QSEHRA may reimburse an eligible employee for eligible medical expenses ... [Here are some other] QSEHRA considerations ... Small employer requirements [also apply]." (Fox Rothschild LLP)
[Official Guidance] Text of IRS Chief Counsel Memo 201703013: Tax Treatment of Benefits Paid by Fixed-Indemnity Health Plans (PDF)
"An employer may not exclude from an employee's gross income payments under an employer-provided fixed indemnity health plan if the value of the coverage was excluded from the employee's gross income and wages. An employer may not exclude from an employee's gross income payments under an employer-provided fixed indemnity health plan if the premiums for the fixed indemnity health plan were originally made by salary reduction through a Section 125 cafeteria plan." [Dec. 12, 2016; released Jan. 20, 2017] (Internal Revenue Service [IRS])
[Guidance Overview] Proposed Amendments to the Cafeteria Plan Provisions of the Puerto Rico Internal Revenue Code
"These proposed amendments are intended to reactivate in Puerto Rico cafeteria plans and make the adoption of these plans more attractive to Puerto Rico employers by expanding the list of 'qualified benefits' that they may be provided to Puerto Rico employees. However, as more fully explained [in this article], unless HR 453 is further amended to correct or eliminate certain deficiencies existing in Section 1032.06 of the 2011 PR Code, it will be very difficult to accomplish its intended goal." (McConnell Valdes)
It's That Time of Year: Use It or Lose It!
"For participants that have more than expected left in their FSA accounts at this time of year, it's not too late to remind them of some of the ways they can spend their money. But remember, not all FSAs are created equal -- the IRS has rules for what expenses are considered qualified depending on what type of FSA account(s) your employee has in place." (Frenkel Benefits)
HSA vs FSA: Which is Better?
"The Health Savings Account is like an IRA. You get to fund it with pre-tax dollars and it's typically administered by a financial institution. But unlike an IRA, you get to use the funds when you need them (not just in retirement) towards qualifying medical costs.... The Flexible Spending Account is a pre-tax dollars savings account your company administers where you're allowed to save up a year's worth of health care costs. Most people use it to pay for deductibles, co-pays, and household health care items." [A comparison chart is included.] (PTMoney)
Quick Guide: 2017 Contribution Limits for FSAs and HSAs
"In 2017, the annual FSA contribution limit is increasing by $50 from the previous year. Employees with this employer-sponsored benefit account can contribute a maximum of $2,600. FSA carryover limits remain the same at $500. Dependent Care FSA, also known as Dependent Care Assistance Plan (DCAP), limits remain at $5,000 for single, head of household, or married filing jointly, or $2,500 each for married filing separately." (DataPath)
How Do Health FSA Carryovers Affect HSA Eligibility?
"Carryovers in a general-purpose health FSA will make an employee ineligible to contribute to an HSA for the entire subsequent plan year, even after the carryover is exhausted and even if the employee does not make or receive new health FSA contributions for that plan year. HSA eligibility should not be adversely affected, however, if the plan permits carryovers but the participant actually has a $0 balance at year-end." (Thomson Reuters / EBIA)
Important Spending Account Reminders for Open Enrollment
"Employers can reduce the complexity and the confusion for employees during open enrollment by consistently communicating the following information: Plan extensions and deadlines (Carryover or Grace Period).... Contribution limits.... How to track expenses.... What's eligible.... How to eliminate paperwork with an FSA or HSA debit card." (FSA Store)
[Guidance Overview] New ACA Rules for HRAs, Flex Credits and Opt-Out Payments
"Although the rules in Notice 2015-87 generally apply for plan years beginning on or after December 16, 2015, under transition relief, many of the new rules will take effect for plan years beginning on or after January 1, 2017. Final regulations regarding opt-out payments will likely be issued later this year ... In planning for next year, employers and plan sponsors that include any of these features in their health plans should review plan documents and operations for compliance with the new requirements, several of which are explained in this article." (Hanson Bridgett LLP)
[Guidance Overview] Can We Allow Laid-Off Employees to Spend Down Their Health FSAs Without Electing COBRA?
"No. Under the cafeteria plan rules, health FSA participants can only be reimbursed for eligible medical expenses incurred while their health FSA coverage is in effect, and coverage stops when the participant stops making contributions. Furthermore, any amounts remaining when coverage stops are subject to the 'use-or-lose' rule, which generally requires forfeiture of health FSA contributions not used to reimburse expenses incurred during the coverage period." (Thomson Reuters / EBIA)
[Official Guidance] Text of IRS Rev. Proc. 2016-28: Inflation Adjusted Amounts for Health Savings Accounts (HSAs) (PDF)
"For calendar year 2017, the annual limitation on deductions ... for an individual with self-only coverage under a high deductible health plan is $3,400. For calendar year 2017, the annual limitation on deductions ... for an individual with family coverage under a high deductible health plan is $6,750.... For calendar year 2017, a 'high deductible health plan' is ... a health plan with an annual deductible that is not less than $1,300 for self-only coverage or $2,600 for family coverage, and the annual out-of-pocket expenses ... do not exceed $6,550 for self-only coverage or $13,100 for family coverage." (Internal Revenue Service [IRS])
Top Five Ways HR Can Bolster Workers' FSA Participation
"To help employees get the most out of their FSAs, make sure they're aware of ... [1] The most up-to-date eligibility list ... [2] Allowable changes.... [3] Planning tips.... [4] FSA debit cards.... [5] Additional spending options." (HR Benefits Alert)
What's a 'Limited Purpose' FSA?
"A general purpose FSA allows account holders to pay for a long list of IRS-approved expenses, including prescription medications, copays, most dental treatments, and other medical related needs. If a person has an HSA, they are not eligible to also have a general purpose FSA. An LPFSA allows account holders to receive reimbursement for eligible dental and vision expenses. A person with a high deductible health plan with an HSA is eligible for an LPFSA." (DataPath)
Is Healthcare FSA COBRA Continuation Really Required?
"[T]here are specific circumstances where employers may either have the option to limit the timeframe for coverage, or may even not be required to offer the option at all. For example, if the employee has 'overspent' their FSA account by the time the qualifying event has occurred (in this case, termination of employment), the employer is not required to continue coverage in the Healthcare FSA account." (Frenkel Benefits)
Do You Have a Proper Cafeteria Plan?
"[A] recent Ninth Circuit decision ... focused on the circumstances under which the value of certain non-cash-wage benefits (such as those provided under 'cash-in-lieu' programs or cafeteria plans) must be included in the determination of FLSA overtime wages.... In order to avoid the risk that the IRS might take the position that your cafeteria plan does not have the required 'written plan' and that, as a result, your employees are taxable on the amounts that they could have received as wages (even if they selected nontaxable benefits), you should have a cafeteria plan document that satisfies [certain specific] requirements[.]" (Chang Ruthenberg & Long PC)
[Opinion] House Shouldn't Repeal Limits on Tax-Advantaged Health Accounts
"The House is expected to consider legislation this week ... to repeal health reform's limit on ... [FSAs and HSAs] to buy over-the-counter medicines. The limit, in effect now for more than five years, is both sound tax and health policy and should be retained." (Center on Budget and Policy Priorities)
[Official Guidance] Text of IRS Chief Counsel Advice 201622031: Tax Treatment of Wellness Program Benefits and Employer Reimbursement of Premiums Provided Pre-Tax Under a Section 125 Cafeteria Plan (PDF)
"An employer may not exclude from an employee's gross income payments of cash rewards for participating in a wellness program. [Further, an] employer may not exclude from an employee's gross income reimbursements of premiums for participating in a wellness program if the premiums for the wellness program were originally made by salary reduction through a section 125 cafeteria plan." (Internal Revenue Service [IRS])
[Guidance Overview] Interaction of HSAs and Medicare Addressed in IRS Information Letters
"[T]hese proration principles also apply to individuals who do not apply for Social Security, continue working past age 65, and delay their enrollment in age-based Medicare because they are covered by a group health plan based on their current employment.... When their employment or group health coverage ends, whichever occurs first, they will also have an eight-month special enrollment period to sign up for Medicare Part A. Application of the proration rules in that situation is more complicated, however, because the first month of Medicare entitlement may be retroactive." (Thomson Reuters / EBIA)
[Guidance Overview] FSAs and Mid Year HDHP/HSA Implementation (PDF)
"Employees who have coverage under a traditional or 'full-service' FSA (one that reimburses more than just dental, vision and preventive care expenses) are ineligible to make, or even accrue the right to make, HSA contributions for any month they begin while enrolled under the traditional FSA.... The best answer: Avoid these midyear HDHP/HSA implementations, if at all possible. This means getting way out in front of the issue, maybe 6-12 months early." (Lockton)
[Guidance Overview] IRS Information Letters Confirm Cafeteria Plan Reimbursement Fundamentals
"The IRS has issued three information letters confirming and calling attention to fundamental principles of cafeteria plan design and administration.... Health FSAs cannot reimburse insurance premiums [2016-001] ... No income exclusion for reimbursement of spouse's pre-tax premiums [2016-009] ... Documentation required before reimbursing expenses [2016-013]." (Thomson Reuters / EBIA)
[Guidance Overview] ACA Potluck: IRS Notice 2015-87 Provides Full Serving of New ACA Guidance (PDF)
29 presentation slides. Topics include: [1] More HRA integration guidance for ACA compliance; [2] Even more clarity on prohibition of individual policy reimbursement (again!); [3] ACA affordability rule clarifications (opt-out credits and flex credits, and inflation adjustments applied to affordability safe harbors); [4] New ACA pay or play penalty amounts (Section 4980H) adjusted for inflation; [5] Special HSA eligibility rules clarified for veterans with service-connected disability; [6] COBRA rights to the health FSA carryover finally explained. (ABD Insurance & Financial Services)
[Guidance Overview] IRS Clarifies FSA Carryover and HRA Coverage Issues
"Notice 2015-87 gives employers two tools to address concerns over keeping an employee on the FSA plan books when that employee isn't otherwise an active FSA participant ... [1] Employers can limit the carryover feature to only those employees who elect to make their own contributions for the following plan year. [2] The employer can limit the carryover to only one plan year." (Society for Human Resource Management [SHRM])
[Guidance Overview] Text of IRS Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans (PDF)
21 pages, dated Jan. 13, 2016. "An HSA may receive contributions from an eligible individual or any other person, including an employer or a family member, on behalf of an eligible individual.... An Archer MSA may receive contributions from an eligible individual and his or her employer, but not both in the same year.... A health FSA may receive contributions from an eligible individual. Employers may also contribute.... An HRA must receive contributions from the employer only. Employees may not contribute." (Internal Revenue Service [IRS])
[Guidance Overview] Health FSAs and COBRA Continuation
"[Notice 2015-87] states that the carryover amount must be included in determining the amount of the benefit that a qualified beneficiary is entitled to receive.... The Notice clarifies that this does not include any unused carry-over amounts carried over from the previous plan year.... [H]ealth FSAs must allow carryovers by similarly situated COBRA beneficiaries, on the same basis as non-COBRA beneficiaries. However, the FSA is not required to allow a COBRA beneficiary to elect additional salary reduction amounts for the carryover period, or to have access to any employer contributions to the health FSA made during the carryover period." (Compliance Dashboard)
[Guidance Overview] Employer Flex Credits: You May Need to Redesign Your Cafeteria Plan
"Notice 2015-87 provided guidance and clarification on employer flex credits and whether they count for purposes of affordability.... In order for the employer flex credits to be counted as a reduction of what the employee must pay for health plan coverage, the employee must be able to use the contributions solely to pay for health plan coverage. If the employer flex credits can be used by employees for non-health care benefits (such as life insurance or dependent care spending accounts), the flex credits will not be seen as reducing the employee's required contribution (even though the employee is paying less for the coverage). Also, flex contributions that can be used for a taxable benefit, such as cash, will not operate to reduce an employee's required contribution towards the cost of coverage." (Graydon Head & Ritchey LLP)
[Guidance Overview] Potential Year-End Amendment Required for Cafeteria Plans
"[IRS Notice 2015-86] confirms that Obergefell has minimal or no impact on most types of plans because of previously required same-sex marriage plan changes resulting from the United States v. Windsor decision. However, the IRS identified and provided guidance on a situation unique to cafeteria plans ... Employers who, in response to Obergefell, began providing coverage midyear under their cafeteria plan to the same-sex spouses of their employees, may need to amend their cafeteria plans by December 31, 2015." (Choate Hall & Stewart LLP)
FSA Rollover to Retirement Plan Proposal Introduced
"Under the measure, H.R. 4067, introduced by Rep. Ron Kind, D-Wis., employees could shift unused FSA funds -- $250 or the account balance, whichever is less -- to a retirement plan." (Business Insurance; free registration required)
[Guidance Overview] Why Employees Should Plan Now to Use Health Flexible Spending Arrangements in 2016
"FSAs provide employees a way to use tax-free dollars to pay medical expenses not covered by other health plans. Because eligible employees need to decide how much to contribute through payroll deductions before the plan year begins, many employers this fall are offering their employees the option to participate during the 2016 plan year. Interested employees wishing to contribute during the new year must make this choice again for 2016, even if they contributed in 2015. Self-employed individuals are not eligible." (Internal Revenue Service [IRS])
[Guidance Overview] IRS Releases 2016 COLAs for Health FSAs, Sponsors Should Check Documents
"Sponsors and administrators of benefits with limits that are changing (e.g., adoption assistance plans) will need to determine whether their plans automatically apply the latest limits or must be amended (if desired) to recognize the changes. Any changes in limits should also be communicated to employees." (Thomson Reuters / EBIA)
[Opinion] Policymakers Shouldn't Repeal Limit on Tax-Advantaged Health Accounts
"The limit on the use of FSAs and other tax-advantaged accounts remains a sound way to help pay for helping to extend health coverage to 25 million more Americans while lowering the deficit. Lawmakers should reject the proposal to repeal it." (Center on Budget and Policy Priorities)
Most Employers Implemented FSA Rollover Rule
"Sixty-eight percent of employers that implemented the FSA rollover rule said they did so to encourage participation by those employees that were reluctant due to the fear of losing money they put into the account. More than one-quarter of employers (27.6%) indicated they adopted the rollover rule because employees' year-end balances tend to be lower than $500 ... Slightly more than 4% of employers said employees requested the rollover option." (PLANSPONSOR)
How Many Employers Could Be Affected by the Cadillac Tax?
"Looking first at the expected costs for just plan premiums plus employer contribution to HSAs and HRAs, we estimate that about 16 percent of employers offering health benefits would have at least one health plan that would exceed the $10,200 HCPT self-only threshold in 2018, the first year that plans are subject to the tax. The percentage would increase to 22 percent in 2023 and to 36 percent in 2028.... These percentages rise significantly when we consider the impact that FSA options can have: up to 26 percent in 2018, 30 percent in 2023 and 42 percent in 2028[.]" (Henry J. Kaiser Family Foundation)
HSA vs. FSA: What's the Difference, and Which Should I Use?
"Both accounts have benefits that can make managing your out-of-pocket medical expenses easier throughout the year. But you should opt for an HSA if you qualify, if for no other reason than the limits are higher and you can carry over your contributions from year to year. If you don't qualify, sign up for the FSA." (Forbes)
[Guidance Overview] What Can an Employer Do with Health FSA Forfeitures?
"Under proposed IRS regulations ... these forfeitures may be: [1] retained by the company; [2] used to reduce required salary reduction amounts for the immediately following plan year, on a reasonable and uniform basis; [3] returned to employees on a reasonable and uniform basis; [4] used to increase the annual coverage amount; or [5] used to defray administrative expenses. Under the proposal, the forfeitures can never be allocated among employees based on their individual claims experience." (Wolters Kluwer Law & Business)
Impact of Carryover Rule on FSA Enrollment
"[A]bout 73% reported that they saw an increase in FSA participation after employers switched to the carryover, while 27% did not notice a change.... About 91% of members either agreed or strongly agreed that employers saw the carryover as increasing the value of offering an FSA, and 83% agreed or strongly agreed that employees who were offered the carryover viewed the change as adding value to participating in an FSA." (Employers Council on Flexible Compensation [ECFC])
[Guidance Overview] HRAs, FSAs and Employer Reimbursements for Health Insurance: Navigating the ACA
"By design, HRAs, Health FSAs and Employer Payment Plans, standing alone, cannot satisfy certain requirements of the ACA.... These arrangements may be structured, however, to be exempt from the ACA requirements. The following exceptions may apply. HRA Integrated with Group Health Plan.... Arrangement that Provides Excepted Benefits (Including an EAP and Limited Wraparound Coverage)... Health FSA.... Payroll Practice.... Retiree-Only or Single Employee Health Plan.... Medicare Premium Reimbursement Arrangement.... TRICARE-Related HRA." (von Briesen & Roper, s.c.)
[Guidance Overview] FSA, HRA, HSA Comparison Chart
"The minimum deductible for an HSA compatible HDHP plan remains at $1,300 for self-only coverage and $2,600 for family coverage. The 2016 HDHP out-of-pocket maximums will be $6,550 for single coverage and $13,100 for family coverage, an increase of $100 and $200 respectively. Also new for 2016, is the requirement that all plans limit the maximum out-of-pocket incurred by any one person to the single out-of-pocket limit of the plan, even if the individual is enrolled in family coverage." (Marsh Consulting Group)
More Employers Adopt FSA Carryover Option
"In 2015, 60 percent of U.S. employers that offer employees health care flexible spending accounts (FSAs) stated that they opted to also provide a carryover option for employee contributions, up from 49 percent a year ago and more than double the number from 2013 ... At the same time, the number of employers offering FSAs that instead incorporate a grace period feature has fallen from 57 percent in 2013 down to 32 percent in 2014 and to just 23 percent this year." (Society for Human Resource Management [SHRM])
[Guidance Overview] Who Can Incur Qualified Eligible Medical Expenses in an FSA, HRA, or HSA?
"[A] child that files his or her own taxes and has not turned 27 by December 31st may still incur qualified medical expenses against the employee's FSA or HRA for that child. Whether the child is enrolled in college, or is actually enrolled in the employer's group health plan does not have any effect on whether they may incur qualified medical expenses against the employee's FSA or HRA.... For HSA purposes, unlike an FSA or HRA, the rules remain as they were prior to 2010 to exclude a child who is not a tax dependent from having their expenses reimbursed from the HSA." (Kushner & Company)
[Guidance Overview] IRS Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans (PDF)
22 pages. "This publication explains the following programs: Health savings accounts (HSAs); Medical savings accounts (Archer MSAs and Medicare Advantage MSAs); Health flexible spending arrangements (FSAs); Health reimbursement arrangements (HRAs)." (Internal Revenue Service [IRS])
Is It Time to Update Your Cafeteria Plan?
"The IRS has recently issued Notice 2014-55 which expands the circumstances under which a participant may make a mid-year revocation of his election to participate in an employer sponsored health plan and elect coverage under a plan offered on the Health Insurance Exchange.... The expansion of the modification rules does not apply to elections under flexible spending accounts.... For plan years beginning in 2015, the cap on salary reduction contributions has increased to $2,550.... All cafeteria plans should be reviewed to reflect the Federal recognition of same sex-marriages.... Finally, employers should consider allowing a $500 carry over for a health FSA for contributions that are not reimbursed in the plan year in which deducted (and any applicable grace period)." (Clifton Budd & DeMaria, LLP)
Health FSAs, HRAs and HSAs: Similarities and Differences (PDF)
"[This] chart provides a general overview of the structure and operation of health flexible spending arrangements, health reimbursement arrangements, and health savings accounts, respectively. The chart highlights both the similarities as well as the key differences among these arrangements." (Buck Consultants at Xerox)
[Guidance Overview] Allowing Part-Time Employees to Make Health FSA Contributions May Trigger ACA Penalties
"Under the second condition, an employer may not offer only a health FSA, with no comprehensive medical plan.... [T]his condition applies on an employee-by-employee basis. Therefore, even if an employer offers medical coverage to substantially all of its employees (such as those meeting a 'full-time' definition), it would fail to satisfy this condition with respect to any employees who are not eligible for medical coverage (but who are nonetheless allowed to make health FSA contributions). The penalty for such an ACA violation would be $100 per day for each employee in this group." (Spencer Fane)
[Official Guidance] Text of IRS Final Regs: Minimum Essential Coverage and Other Rules Regarding the Shared Responsibility Payment for Individuals
"This document contains final regulations ... relating to the individual shared responsibility provision.... As described in this preamble, after consideration of the comments received, the final regulations provide that, for purposes of determining the affordability of coverage, the required contribution is reduced by any contributions made by an employer under a section 125 cafeteria plan that [1] may not be taken as a taxable benefit, [2] may be used to pay for minimum essential coverage, and [3] may be used only to pay for medical care within the meaning of section 213 (such contributions are referred to in this preamble as health flex contributions).... [T]he final regulations provide that health flex contributions made available for the current plan year are taken into account for purposes of determining an individual's required contribution. As a result, health flex contributions reduce an employee's, or related individual's, required contribution for employer-sponsored coverage.... [T]he final regulations clarify that employer contributions to an HRA count towards an employee's required contribution only to the extent the amount of the annual contribution is required under the terms of the plan or is otherwise determinable within a reasonable time before the employee must decide whether to enroll.... [T]he final regulations retain the rules in the proposed regulations that wellness incentives unrelated to tobacco use are treated as unearned and wellness incentives related to tobacco use are treated as earned in determining affordability." (Internal Revenue Service [IRS])
[Official Guidance] Text of IRS Publication 15-B: Employer's Tax Guide to Fringe Benefits for Use in 2015 (PDF)
31 pages. "What's New: Cents-per-mile rule.... Qualified parking exclusion and commuter transportation benefit.... Qualified parking exclusion and commuter transportation benefit.... Contribution limit on a health flexible spending arrangement (FSA) ... Additional permitted election changes for health coverage under a cafeteria plan ... Reminders: Same-sex Marriage ... 'Use-or-lose' rule for health FSAs ... Additional Medicare Tax withholding." (Internal Revenue Service [IRS])
[Guidance Overview] Section 125 Plans: Amendments Required by December 31, 2014
"The $2,500 cap on salary reductions for health FSAs, which went into effect for 2013, must be documented by December 31, 2014 in the FSA plan documents. Employers that permitted carryovers of health FSA amounts up to $500 in 2013 or 2014 must document the carryover by December 31, 2014.... Plans may need to be amended ... to allow same-sex married participants to pay health insurance and other premiums on a pretax basis for spousal coverage ... The IRS also recently issued new rules allowing mid-year Section 125 plan changes for major medical coverage for an employee who changes employment status[.]" (Frost Brown Todd LLC)
[Guidance Overview] Cafeteria Plan Amendments and the Employer Mandate
"While much has been written on the employer mandate, and information on cafeteria plans and ERISA wrap documents can also be easily located, very little addresses what changes need to be made to cafeteria plans and wrap documents in light of the employer mandate. This is probably because employers have significant flexibility in drafting their cafeteria plans and wrap documents ... [A chart provides] highlights of the employer mandate provisions and some considerations on how it might affect your cafeteria plan and/or wrap document:" (GrayRobinson, P.A.)

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