Summary of Benefit Coverage Requirements for Health FSAs and HRAs

May 1st, 2012 | No Comments |
Category: Compliance and Regulatory, DOL, ERISA, FSA, Flexible Spending, HHS, HIPAA, HRA, Health Reimbursement, IRS, PPACA, Section 125 Plans, Uncategorized

Does an employer have to provide a copy of the Summary of Benefits and Coverage (“SBC”) to enrollees of Health Flexible Spending Accounts (“Health FSA”) or Health Reimbursement Arrangements (“HRA”)?

The SBC requirement applies to group health plans (both insured and self-insured) and insurers (as defined by applicable provisions of the PHSA, ERISA, or the Code) but not to certain “excepted benefits,” PHSA § 2715(a), as added by PPACA, Pub. L. No. 111-148 (2010). Grandfathered group health plans must comply with this mandate, as provided in PPACA, Pub. L. No. 111-148, § 1251(a)(3) (2010), as amended by PPACA, Pub. L. No. 111-148, § 10103(d)(1) (2010).

When is a Health FSA or a HRA considered an excepted benefit?

Health FSA:
A health FSA is considered an excepted benefit for a “class of participants” if the health FSA is a health FSA under Code Section 106(c)(2) and satisfies two conditions:
*Maximum Benefit Condition: The maximum benefit payable under the health FSA to any participant in the class for a year cannot exceed two times the employee’s salary reduction election under the health FSA for the year (or, if greater, the amount of the employee’s salary reduction election for the health FSA for the year, plus $500), as provided in Treasury Regulations Section 54.9831-1(c)(3)(v)(B);DOL Regulations Section 2590.732(c)(3)(v)(B);HHS Regulations Section 146.145(c)(3)(v)(B); and

*Availability Condition: Other nonexcepted group health plan coverage (e.g., major medical coverage) must be made available for the year to the class of participants by reason of their employment, as provided in Treasury Regulations Section 54.9831-1(c)(3)(v)(A);DOL Regulations Section §2590.732(c)(3)(v)(A); HHS Regulations Section146.145(c)(3)(v)(A).

Neither the regulations nor the preamble to the regulations explains what is meant by the term “class of participants.” The term appears to preclude a “participant-by-participant” approach to determining whether benefits under a health FSA are excepted benefits.

Examples of Health FSA Funding That Meet the Maximum Benefit Condition:

* A one-for-one employer match (employer $600, employee $600).
* An employer contribution of $500 or less (employer $500, employee $200).
Examples of Health FSA Funding That Do Not Meet the Maximum Benefit Condition:
* An employer contribution of more than $500, if employee contributes $500 or less (employer $600, employee $400).
* An employer contribution in excess of one-to-one match, if employee contributes more than $500 (employer contributes $700, employee contributes $600).

Remember: Health FSAs funded exclusively by employee salary reduction contributions (with annual coverage capped by the amount of the annual salary reduction election) will, by definition, satisfy the Maximum Benefit Condition.

HRA:

A 100% employer-paid stand-alone HRA with an annual limit less than or equal to $500 and no carryovers will be considered an excepted benefit if the employer makes major medical insurance available to all employees who are eligible for the HRA. This is the same requirements as provided above for Health FSAs. This is because such an HRA may be considered a health FSA and would qualify as an excepted benefit. Likewise, a retiree-only HRA or limited-purpose HRA (i.e., that provides only vision and dental benefits) would also be considered an excepted benefit .

The above HIPAA exceptions will not apply to most HRAs. HRAs that can be used for medical expenses generally and that permit carryovers or that provide an employer-funded benefit of more than $500 will not be considered excepted benefits.

American Benefits can create SBCs for non excepted FSAs and HRAs. Contact your benefits administrator or support@amben.com

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Court Finds Employer Met ERISA’s Voluntary Plan Safe Harbor, Despite Payment of Premiums Through Cafeteria Plan

March 13th, 2012 | No Comments |
Category: Cafeteria Plans, Compliance and Regulatory, DOL, ERISA, Section 125 Plans, Uncategorized

Voluntary benefits that are sold directly to employees may be subject to ERISA as employer-sponsored plans, or may be exempt under the voluntary plan safe harbor, which allows for only minimal involvement by the employer. The plaintiff in this case purchased a short-term disability policy after seeing a presentation by the insurer at his workplace. He later sued under state law after his claim for benefits was denied. The insurer argued that the state-law claims were preempted because the plan was subject to ERISA. The court disagreed, holding that the arrangement met the voluntary plan safe harbor. (As background, a plan falls within the safe harbor if 1) the employer makes no contributions; 2) participation is completely voluntary; 3) the employer’s involvement is limited to permitting the insurer to publicize the program and to collecting and remitting premiums; and 4) the employer receives no consideration for collecting and remitting premiums, other than reasonable compensation.)
The insurer claimed the plan did not meet the safe harbor requirements because the employer’s involvement went beyond that allowed by law. For example, the insurer claimed that the employer endorsed the plan by selecting this particular insurer. But the court found that there was no evidence that this employer went beyond permitting the insurer to publicize the program, distinguishing a case where the employer’s use of a consulting firm when selecting an insurer took the plan outside the safe harbor. Notably, in contrast to other courts, this court held that collecting premiums through the employer’s cafeteria plan did not take the plan out of the safe harbor.
Ballard v. Leone, 2012 WL 665987 (D. Md. 2012)

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HHS Issues Health Care Exchange Rules

March 12th, 2012 | No Comments |
Category: CDHC, Compliance and Regulatory, DOL, HHS, Health Care Reform, IRS, PPACA, State Legislation, Uncategorized

By Joyce Frieden, News Editor, MedPage Today

WASHINGTON — The Department of Health and Human Services has issued the final regulations for implementing the state health insurance exchanges mandated by the Affordable Care Act (ACA).

They allow states more flexibility in determining eligibility for the exchanges than was first given, according to Chiquita Brooks-LaSure, director of coverage policy in HHS’ Office of Health Reform. That change was made after “a lot of input from states and stakeholders,” she told reporters on a Monday afternoon conference call.

The setup of the exchanges “lets consumers easily determine their eligibility for enrollment and easily enroll in coverage that’s right for them,” said Brooks-LaSure. That includes using a single streamlined application so that consumers will get a “consistent eligibility determination” without needing to submit different information for the different plans offered.

Under the ACA, nearly everyone is required to have insurance starting in 2014, and the government will provide financial assistance to those who need it. People who earn less than 133% of the federal poverty level can enroll in Medicaid, and those who are between 133% and 400% of the poverty level will be eligible for tax credits from the federal government in order to buy insurance.

People can use the tax credit to buy health insurance through an exchange in their state. The exchanges will act as “one-stop shops” where people can compare different insurance plans.

For small employers — such as small physician practices — that want to provide health insurance for their employees, the exchanges also will offer a Small Business Health Options Program (SHOP).

SHOP will let small businesses choose among different levels of coverage, depending on what works for them and their budget. SHOP will allow these employers to offer coverage from a number of insurers, but still get one bill and write only one check, according to HHS.

The SHOP program also features tax credits to help make coverage easier for small businesses to afford.

According to HHS, starting in 2014, small employers purchasing coverage through SHOP may be eligible for a tax credit of up to 50% of their premium payments if they:
• Have no more than 25 employees
• Pay employees an average annual wage of less than $50,000
• Offer all full-time employees coverage
• Pay at least 50% of the premium
To view the final regulations, visit:

https://s3.amazonaws.com/public-inspection.federalregister.gov/2012-06125.pdf

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New FAQ’s from DOL for You

February 13th, 2012 | No Comments |
Category: Compliance and Regulatory, DOL, Health Care Reform, IRS, PPACA, State Legislation, Taxes, Uncategorized

It wasn’t all about the Summary of Coverage documents last Thursday. The Departments of Labor, HHS and Treasury also issued new guidance on frequently asked questions by employers and health plans concerning the auto-enrollment, employer requirements and waiting periods in PPACA. The agencies have asked for comments on the new guidance, which is due by April 9. NAHU plans to submit a letter on behalf of the whole association, and we also anticipate that our Employers for Flexibility In Health Care coalition will submit detailed comments as well. 

For those of you who like who prefer the Cliff Notes version rather than reading the seven detailed questions and their answers, here is a run down of some of the key points made in the document.

  • Don’t worry about auto-enrollment any time soon.

 ”The Department of Labor has concluded that its automatic enrollment guidance will not be ready to take effect by 2014.” 

  • What do employers have to do to determining if their coverage is “affordable” or not (a.k.a. whether or not the employee is allowed to drop employer coverage and go seek individual subsidized coverage through a state exchange)? 

The document states that “Treasury and the IRS intend to issue proposed regulations or other guidance permitting employers to use an employee’s Form W-2 wages (as reported in Box 1) as a safe harbor in determining the affordability of employer coverage.”

  •  What about a look-back/stability period safe harbor for employers? 

“It is anticipated that the guidance will allow look-back and stability periods not exceeding 12 months.”
 

  • If you were wondering how and when you are supposed to decide if an employee is full-time or not: 

“Treasury and the IRS intend to propose an approach under which the period of time that an employer will have to determine whether a newly-hired employee is a full-time employee (within the meaning of section 4980H) will depend upon whether, based on the facts and circumstances, (a) the employee is reasonably expected as of the time of hire to work an average of 30 or more hours per week on an annual basis and (b) the employee’s first three months of employment are reasonably viewed, as of the end of that period, as representative of the average hours the employee is expected to work on an annual basis.”
 

  • Employers are not required to offer coverage to part-time employees.
     
  • When does the benefit waiting period clock begin to tick? 

“The 90-day waiting period begins when an employee is otherwise eligible for coverage under the terms of the group health plan.”
  

  • What is the interaction between 90-day wait periods and employer penalties?

“The upcoming guidance is expected to provide that, at least for the first three months following an employee’s date of hire, an employer that sponsors a group health plan will not, by reason of failing to offer coverage to the employee under its plan during that three-month period, be subject to the employer responsibility payment under Code section 4980H

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